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2024-11-05 | Bloomberg | U.S. October ISM Non-Manufacturing Report on Business (Text) | Following is the text of U.S. non- manufacturing conditions from the Institute for Supply Management. NMI at 54.2%; October Non-Manufacturing ISM Report On Business; Business Activity Index at 55.4%; New Orders Index at 54.8%; Employment Index at 54.9% DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report’s information reflects the entire United States , while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of October 2012. Economic activity in the non-manufacturing sector grew in October for the 34th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business. The report was issued today by Anthony Nieves , C.P.M., CFPM, chair of the Institute for Supply Management Non- Manufacturing Business Survey Committee. “The NMI registered 54.2 percent in October, 0.9 percentage point lower than the 55.1 percent registered in September. This indicates continued growth this month at a slightly slower rate in the non- manufacturing sector. The Non-Manufacturing Business Activity Index registered 55.4 percent, which is 4.5 percentage points lower than the 59.9 percent reported in September, reflecting growth for the 39th consecutive month. The New Orders Index decreased by 2.9 percentage points to 54.8 percent. The Employment Index increased by 3.8 percentage points to 54.9 percent, indicating growth in employment for the third consecutive month. The Prices Index decreased 2.5 percentage points to 65.6 percent, indicating prices increased at a slower rate in October when compared to September. According to the NMI, 13 non-manufacturing industries reported growth in October. The majority of the respondents’ comments reflect a positive but guarded outlook on business conditions and the economy.” INDUSTRY PERFORMANCE The 13 non-manufacturing industries reporting growth in October -- listed in order -- are: Agriculture, Forestry, Fishing & Hunting; Construction; Other Services; Management of Companies & Support Services; Finance & Insurance; Professional, Scientific & Technical Services; Accommodation & Food Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Health Care & Social Assistance; Information; Educational Services; and Retail Trade. The five industries reporting contraction in October are: Mining; Arts, Entertainment & Recreation; Wholesale Trade ; Utilities; and Public Administration. WHAT RESPONDENTS ARE SAYING “Business with markets and customers we serve remains strong.” (Management of Companies & Support Services) “Business is steady, with good fourth quarter expected.” (Information) “The sluggish pace of economic recovery coupled with rapid increases in gas prices on the West Coast continue to drag down customer traffic and discretionary spending. Levels remain well below last year.” (Arts, Entertainment & Recreation) “Ongoing concerns about healthcare reform; reluctance to expand or hire.” (Health Care & Social Assistance) “Outlook is positive yet still guarded. Clients have some pent-up demand that they are acting on with short-term contracts.” (Professional, Scientific & Technical Services) “More companies seeking relief from fuel increases.” (Public Administration * Non-Manufacturing ISM Report On Business data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Report On Business data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries. ** Number of months moving in current direction COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY Commodities Up in Price Beef; Chemical Products; Chicken; Computer Products; Copper Products; Corrugated Products; Dairy (2); #1 Diesel Fuel (3); #2 Diesel Fuel* (3); Food Products (2); Fuel (4); Fuel Surcharges; Gasoline* (10); Gasoline Related (2); Medical Supplies*; Oils; Packaging Supplies; Pallets; Paper; Pharmaceuticals; Pharmacy Products; Plastic/Poly Bags (3); Pork; Produce; and Urea. Commodities Down in Price #2 Diesel Fuel*; Gasoline*; Lumber; Medical Supplies*; and Soybean Meal. Commodities in Short Supply Pharmaceuticals; and Pharmacy Products are the only commodities reported in short supply. Note: The number of consecutive months the commodity is listed is indicated after each item. *Reported as both up and down in price. OCTOBER 2012 NON-MANUFACTURING INDEX SUMMARIES NMI In October, the NMI registered 54.2 percent, indicating continued growth in the non-manufacturing sector for the 34th consecutive month. A reading above 50 percent indicates the non- manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting. Business Activity ISM’s Non-Manufacturing Business Activity Index in October registered 55.4 percent, 4.5 percentage points lower than the 59.9 percent registered in September. Ten industries reported increased business activity, and five industries reported decreased activity for the month of October. Comments from respondents include: “Economic outlook appears to be dimmer in 2013. Company implemented spend freeze before the fourth quarter” and “Slight delay in several major capital projects.” The industries reporting growth of business activity in October -- listed in order -- are: Agriculture, Forestry, Fishing & Hunting; Construction; Finance & Insurance; Other Services; Professional, Scientific & Technical Services; Information; Health Care & Social Assistance; Accommodation & Food Services; Management of Companies & Support Services; and Educational Services. The industries reporting decreased business activity in October are: Arts, Entertainment & Recreation; Mining; Wholesale Trade; Utilities; and Public Administration. New Orders ISM’s Non-Manufacturing New Orders Index grew in October for the 39th consecutive month. The index registered 54.8 percent, a decrease of 2.9 percentage points from the 57.7 percent reported in September. Comments from respondents include: “Higher awards due to lower unemployment rate and increased business activity with existing clients” and “End-of- year budget spending.” The 10 industries reporting growth of new orders in October |
2024-03-16 | Bloomberg | Medicare Declines to Issue Rule on Anemia Drug Coverage | The agency that administers Medicare, the U.S. health insurance program, declined to propose a coverage decision for when the government should pay for anemia drugs by Amgen Inc. (AMGN) and Johnson & Johnson. (JNJ) The no-decision , if made final, leaves coverage determination in the hands of regional contractors that Medicare uses to process claims for reimbursement, said Don McLeod, a spokesman for the Centers for Medicare and Medicaid Services. The U.S. Food and Drug Administration currently recommends patients with kidney disease be treated to raise their hemoglobin, an iron-rich element of red-blood cells, when it falls to the level of 10 grams to 12 grams per deciliter of blood. Usage of Amgen’s Aranesp and Epogen and J&J’s Procrit by Medicare patients with kidney disease is unlikely to change because of today’s government decision, said Mark Schoenebaum , an ISI Group analyst in New York. “It appears that Medicare is basically turfing the entire debate and recommending that no recommendation be made right now,” Schoenebaum said in a note to investors. “This would appear to be good for Amgen, since it effectively endorses the current status quo and implies that the agency will not recommend lower hemoglobin targets.” Amgen, based in Thousands Oak, California, rose as high as $1.11, or 2.1 percent, to $53.80 in extended trading on the Nasdaq Stock Market after the ruling was announced. The shares declined 31 cents to $52.69 at the 4 p.m. close of regular trading. To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net. To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net . |
2024-09-15 | Bloomberg | King of Rinds Has 2 Contenders as Hispanic Surge Fattens Sales | To make Baken-ets pork rinds for No. 1 client Frito-Lay, the $13 billion-a-year snack arm of PepsiCo Inc., Rudolph Foods Inc. uses what it calls a secret two-step process at its flagship plant in Lima , Ohio -- “the pork rind capital of the world,” Rudolph claims. Pork skins, removed from slaughtered pigs by mechanical skinners at meat packing companies, arrive at Rudolph’s plants in 20-ton lots aboard refrigerated 18-wheeler trucks. Precut into roughly one-by-three-foot rectangles, they are trundled around in metal bins holding up to 1,800 pounds each and fed into mechanical cutters that dice them into one-inch squares. Other pork rind makers send these squares by conveyor belt into cookers and renderers that wring out most of the fat and water. Rudolph smokes them first -- though exactly what wood or curing spices it uses on what are now called pellets is part of a closely guarded recipe at the family-owned company. “I only have half of it,” deadpans Jim Rudolph, 49, Rudolph’s chief executive officer. “My brother Rich (who serves as president) has the other half.” After smoking and curing, Rudolph’s rinds are rendered at 240 Fahrenheit. They’re inspected by an optical sorter that kicks out misshapen and discolored rinds, or foreign objects such as pig bones. Rudolph then fries pellets for one minute in 400-Fahrenheit lard, where they fluff up like popcorn. Cooled and seasoned on conveyors, they’re bagged six to eight hours after the process began: featherweight, crunchy, hint-of-bacon snacks that are a bright spot in the snack food industry, Bloomberg Businessweek reports in its Sept. 19 issue. Mac’s, LaTonita Frito-Lay sold almost 49 million bags of Baken-ets over a 12-month period ending May 15, up 11 percent from the previous year, according to data from Symphony IRI Group , which tracks snack-food statistics. Not bad in a sputtering economy. Rinds are also the object of an intense rivalry, with Rudolph’s claims to being “largest pork rind manufacturer” hotly contested by Chicago’s Evans Food Group Ltd. “No question, we are the No. 1 pork rind maker in the world,” says Alejandro Silva, Evans’s CEO and principal owner. Privately held Evans sells two of its mainstay brands, Mac’s and LaTonita, to Wal-Mart Stores Inc. and has a brisk business making private label brands for about a dozen well-known snack concerns, including Pennsylvania-based Utz Quality Foods. Last year, Evans processed more than 100 million pounds of raw pork skins, raking in more than $100 million in revenue. Rudolph? Well, it also reports more than $100 million in revenue, on similar volume. Hispanic Demographic If either company is to be the King of Rinds, both agree, it will be because it’s shrewder than the other on distribution and more effective at cultivating the taste of the fast-growing Hispanic market. Hispanics consume more rinds by volume than any other ethnic group in the U.S., and, following an endorsement by George H.W. Bush and the popularity of low-carb diets such as Atkins, constitute the greatest force bringing pork rinds into the mainstream. Silva believes rinds will hit $500 million in retail sales by 2013, better than twice where they were two decades ago. “The Hispanic demographic augurs well for the future,” says Mary Gotaas, a snack food analyst for IBISWorld. “The pork rind business is a very good business to be in.” Mark Singleton agrees. Eight years ago, Rudolph’s Dallas- based vice-president of sales and marketing says he “leapt in with two feet and never regretted it.” While rind sales may seem slim next to the $7.6 billion a year potato chips pull in, he says, “That’s just an opportunity to educate millions of new people around the world to give rinds a chance.” ‘White Grease’ Each year, 100 million to 120 million pigs go to their slaughter in North America , producing roughly 650 million pounds of skins. In 2010, according to the U.S. Agriculture Department, 110.3 million head were killed in the U.S. alone. The gelatin industry buys up about 60 percent of the skins to make products for the drug and cosmetics industries, as well as Jell-O. About 5 to 10 percent go into making leather goods. (Not footballs, though. Early footballs were made from inflated pig bladders and somehow got the name pigskins. Today’s footballs are either synthetic or fashioned from cowhides .) Pork rind makers capture the rest. While raw pigskin prices are at an all-time high of 41 cents a pound, putting pressure on profits, margins in the rinds business typically run better than 20 percent. (A pound of skins can be converted into at least 10 1.5-ounce bags of rinds that retail for 99 cents.) Raw pigskin prices are at historic highs these days, in part because the oil rendered from skins, known as “ choice white grease ,” is sold into the biodiesel market, and pegged to the price of crude oil. Image Issue The growth of the rinds business is all the more phenomenal given its humble roots. In the U.S., rinds were once a food fetish of the South. Hardscrabble farmers, not wanting to waste an ounce of the hog they’d slaughtered, fried up fatty pork skin into a dish they called cracklings. Modern rinds are cracklings (often spelled cracklins) with the fat removed. Southerners still love their cracklings and rinds; blacks migrating from the South to America’s great cities brought this love with them. Spaniards also made cracklings in the Old Country and carried their recipes to the New World, which begins to explain why the Hispanic market in the U.S., Mexico , Central America and parts of South America remain pork rind strongholds. Rinds, however, still have an image issue outside their base. Or as Dawn Jackson Blatner , a registered dietician and nutritional consultant to the Chicago Cubs baseball team, puts it: “I can’t imagine a need to eat fried pigskin anytime soon.” Bush 41 Europe , where neither Rudolph nor Evans has made much headway, illustrates the cultural challenges of developing demand. The Spanish still snack on rinds, as do the Danes, who raise a lot of pigs and like to eat them. Norwegians, too, have a thriving snack food industry and like to experiment. But the Swedes next door? “They won’t touch them,” says Silva. The French? Never. Same with the Italians. Russia , Poland , the Czech Republic , other Eastern Bloc countries? No, no, no, and no. This is why the Bush moment was so crucial in America. “See this man? He did more for pork rinds than anybody can imagine,” says Silva, a gold pig pin enlivening his crisp blue suit jacket. Standing before a bookcase in his cramped, utilitarian office, he points to a photo of the 41st President. In the waning days of the 1988 campaign, Bush declared his love of rinds as he tried to distance himself from his preppy image. He won, of course, and so many gift bags of rinds flowed to the White House that Barbara Bush finally banned them. Rind sales, which had plateaued at about $200 million a year, soared. ‘Good Fats’ It’s also true that, until the Atkins diet phenomenon , rind sales were dampened by concerns that they were high in fat and sodium. These hang-ups still plague rinds, even though Men’s Health called them “genius junk food” in 2008 because they contain no carbohydrates and have “nine times the protein” found in carb-heavy potato chips. While rinds are indeed high in fat, research shows that 43 percent is unsaturated fat, akin to the “good fats” found in olive oil. Rinds are a poor choice, however, for those on sodium-restricted diets: A one-ounce serving has 521 milligrams of salt, nearly a quarter of the daily recommended intake. During the Atkins craze, says Singleton, dieters “who before would have just as soon as kissed a pig” tried rinds and loved the bacony taste. If taste remains a factor, the battle to be King of Rinds is fought over distribution channels. Almost half of all rinds are sold in convenience stores ; supermarkets and mass merchandisers account for most of the rest. The companies jostle in every market in the U.S., which accounts for 65 percent of global sales, and in more than a dozen countries abroad. Rinds’ Mouthfeel “It’s a fight,” says Silva. “How do I get the right channels of distribution, into the convenience stores, the retailers, the dollar stores? Those are trenches.” In a modular temporary office during a remodeling of Rudolph headquarters, Rudolph executives eagerly share their version of the climb to the top of the rind heap. It’s eerily like Evans’s story. Both companies have factories in Ohio , Texas , California , and Mexico. Worldwide, Rudolph has about 400 employees, about 100 fewer than Evans. Before the talk turns to numbers, Jim Rudolph, the trim, enthusiastic son of the founder, John Rudolph, is eager to talk quality -- particularly Rudolph’s proprietary two-step cooking process. At Evans, “they use a one-step process,” says Jim. Adds Chief Financial Officer Mike Harper: “With our rinds, the mouthfeel is different, the color is different. Ours are much better -- better color and mouthfeel.” (Applied to food, mouthfeel, a term often associated with wine, is a measure of crispness and texture.) Mechanical Skinners As their stories unwind, the Evans and Rudolph histories seem more and more parallel, with both companies saying they were founded on “passion.” Both also survived early crises that almost sank them. Rudolph began in 1955 when John, now 86 and retired, bought a tiny specialty nut snack maker and “almost by accident” stumbled into making rinds. For the first two years, Jim relates, pork skins arrived at Rudolph having been smoked by the meat processing plants. Smoking made pigs easier to skin while imparting a bacon- like flavor to the rinds. In 1957, mechanical skinners eliminated the need for smoking -- bad news for Rudolph, since John couldn’t conceive of consumers liking rinds without the smoky taste. His wife, Mary, came to the rescue. Harper tells the story: “‘What are we going to do?’ John said to Mary. Mary replies, ‘I have a degree in home economics from Bowling Green. We’ll figure this thing out.’ And they basically worked around the clock and came up with the secret recipe, and basically that process is intact today.” “Artisanal Slabs” Silva, 63, grew up middle-class in Monterrey, Mexico, savoring his mother’s home-cooked pork skins, called chicharrones. He got into the rinds business in Mexico in 1979 when he first saw bagged rinds come in from the U.S. He had a degree in food technology and had spent seven months at a meat distribution company. He knew his pigs and knew Mexicans loved their rinds, which until the U.S. imports arrived had always been sold as large “artisanal slabs” in butcher shops. “Every Mexican knows this food,” says Silva. “The moment that I saw the margins for the product, I said, ‘Why don’t we do this in Mexico instead of importing from the U.S.?’” Life was good until 1982, when the Mexican peso underwent a massive devaluation and the “entire Mexican economy went downhill,” Silva recalls. He realized he’d have to start an American operation to stay alive. After a detour to Sioux City, Iowa , where he set up a factory “to be close to the skins,” he got a call from a private equity firm that had taken over Evans. Evans was then a small private pork rind maker in Chicago that sold mainly to the African-American market. The private equity group had bought Evans to make money, not pork skins, and was eager to flip it. Liquid Smoke “They knew about me because I was a competitor, selling my product cheap just to keep the plant going. They said, ‘What are you doing? What is your purpose in life?’ ‘To be the biggest pork rind maker in the world.’ ‘Buy us out,’ they said.” That was 1985. Silva swung the deal on credit, putting up his remaining Mexican properties as collateral. “From Day One, we were almost as big as Rudolph,” says Silva. “We would grow bigger. Oh, and Evans dates back to 1947 -- so my company is older than theirs.” Today, on the strength of Evans tripling sales since 1993, Silva owns a lakeview condo on Michigan Avenue near Chicago’s Magnificent Mile. And his growth-oriented stewardship of Evans landed him a seat as a director of Walgreen , the Chicago-based drugstore chain. As for Rudolph’s belief that its rinds taste better, Silva says: “They smoke the rinds, yes. We add smoke, liquid smoke. Is that a different quality? I think it depends to some extent on what spices you use. People eat rinds without flavorings. They may notice a bit of a difference. But really, distribution sells the product. If you have it in the store, they’ll buy it.” ‘Confidential’ Relationship Silva has built a formidable network. “My largest customer is Wal-Mart. The second is Family Dollar. We have national distribution with them,” he says. That said, about half of Rudolph’s business is producing rinds for Frito-Lay -- not a bad client to have, he concedes. In fact, the largest single selling brand in the U.S. is Frito-Lay’s smoky-flavored Baken-ets. All the same, Rudolph, which also packages and sells eight of its own brands, doesn’t want to talk in any detail about Frito-Lay, calling the relationship “confidential.” But back to the core issue: Who is actually the No. 1 pork rind maker in the world? For all the competitive posturing, it turns out that Rudolph and Evans entertained an amicable merger in 2007. It didn’t work out, according to Silva, “but that’s how I know I’m bigger. We had to disclose certain information. I saw their books and they saw mine. And I said, ‘Now tell me, who is the one who makes more?’” Rudolph’s Singleton yields no ground: “I’m very sure we’re No. 1.” To contact the reporter on this story: Ken Wells in New York at Kwells8@bloomberg.net To contact the editor responsible for this story: Bradford Wieners in New York at bwieners@bloomberg.net |
2024-11-09 | Bloomberg | Austrian Watchdog to Gain Company Accounts Oversight in Proposal | Austria’s financial watchdog will be empowered to regulate accounting practices and financial reports under a government proposal to bring the country into compliance with an eight-year-old European Union law. The Finanzmarktaufsicht , known as the FMA, will gain the authority to check auditing practices and financial reports under a law proposed today, the Finance Ministry said. It covers companies with shares or bonds traded on Austrian public markets. “Investors’ trust in the integrity and stability of the entire market has been shattered by corporate scandals at home and abroad in recent years,” the ministry said in the proposal. “The predominant goal is the supervision of financial reporting of capital market-oriented companies.” Austria has bailed out three banks since 2008, and prosecutors are investigating whether false accounting played a role. Retail investors have also suffered losses in real estate companies whose financial problems may have been hidden from investors. No authority in Austria currently has the power to review company accounts. The FMA oversees banking, insurance, pension saving and securities trading. The only way to put companies to a test is to report suspicions to state prosecutors who might then investigate whether there were accounting problems. The proposed law will go before parliament for consideration next. To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-05-27 | Bloomberg | Lloyd’s of London Prepared for Greece Euro Exit, Telegraph Says | Lloyd’s of London Ltd. is prepared for a collapse of the European single currency that may be triggered if Greece leaves the euro, The Sunday Telegraph said, citing an interview with Chief Executive Officer Richard Ward. Lloyd’s has a contingency plan to switch from euro underwriting to multi-currency settlement if Greece returns to the drachma, the newspaper said. The insurance provider has reduced its exposure as far as possible to euro-area countries and it may have to accept writedowns on some of its 58.9 billion pounds ($92.3 billion) of assets under management, the paper said, citing Ward. Lloyd’s spokesman John Battersby confirmed the remarks were made in an interview with The Sunday Telegraph when contacted by Bloomberg News. He declined to comment further. To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net |
2024-04-17 | Bloomberg | U.S. Amasses Data on 10 Million Consumers as Banks Object | The new U.S. consumer finance watchdog is gearing up to monitor how millions of Americans use credit cards, take out mortgages and overdraw their checking accounts. Their bankers aren’t happy about it. The Consumer Financial Protection Bureau is demanding records from the banks and is buying anonymous information about at least 10 million consumers from companies including Experian Plc. (EXPN) While the goal is to sharpen enforcement and rule-making, banking executives have questioned why the bureau is collecting so much without being more specific about the benefits. “Do they need the reams and reams and reams of data we’re having to provide to them?” Susan Faulkner, senior vice president at Bank of America Corp. , asked at a banking conference in March. “Don’t we have to find a healthier balance here?” Director Richard Cordray has said that the consumer bureau needs raw material to make “data-driven” decisions based on how financial products and services are used or abused. Research will improve regulation as well as the marketplace, he said. “The more information there is, the more innovation there can be and the more competition there is among the institutions around customer service ,” Cordray told consumer groups last year. “It’s something we want to encourage.” ‘Big Data’ The agency’s approach dovetails with a trend toward data analytics, often dubbed “Big Data,” by firms such as Amazon.com Inc., Google Inc., International Business Machines Corp. (IBM) and General Electric Co. Those companies are mining massive pools of information for insight into areas including consumer behavior, manufacturing, dairy farming and genetics. The consumer bureau, created by the Dodd-Frank law of 2010, consolidates and expands U.S. oversight of consumer finance. It supervises banks with assets over $10 billion, including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) as well as payday lenders, mortgage originators, debt collectors and credit bureaus. Dodd-Frank bars the agency from collecting data “for purposes of gathering or analyzing the personally identifiable financial information of consumers.” Sendhil Mullainathan, the consumer bureau’s assistant director for research, said the agency is committed to protecting the privacy of consumer information and doesn’t collect personally identifiable data such as Social Security numbers. He described himself as “very sympathetic” to the reaction some consumers might have to massive data repositories. ‘Seems Invasive’ “I understand that people don’t want firms doing it, so why would you want the government doing it?” he said. “It seems invasive.” Bureau researchers are assembling data from across the financial landscape, according to a review of government records. Credit-card information from nine banks will be stored and analyzed by Argus Information & Advisory Services LLC , a White Plains , New York-based consultancy that won a $15 million contract for the work, procurement documents show. The documents don’t name the nine banks. As part of a separate industry-wide review, banks are being ordered to provide records of credit-card add-on products including credit monitoring and debt cancellation, according to two people briefed on the matter. And last year, the bureau persuaded banks to submit data on checking-account overdrafts. Payday Loans The consumer bureau is buying other records from outside the banking industry. Experian, the Dublin-based credit-monitoring company, will be paid up to $8.4 million to provide data on 5 million to 10 million consumers “for use in a wide range of policy research projects,” according to contract documents. The agency also plans to buy auto-loan information from Experian. Clarity Services Inc. , a Clearwater, Florida-based credit reporting agency, will earn $443,260 for providing data on short-term credit known as payday loans, the documents show. Together with the Federal Housing Finance Agency , the consumer bureau is also building a mortgage database that will integrate consumer credit information with loan and property records. CoreLogic Inc. (CLGX) , an Irvine , California-based provider of financial and property information, will be paid about $796,000 for loan-level data on mortgages, procurement records show. “It’s credible to say that within the next year, CFPB will be the best place for consumer finance data,” Mullainathan said in an interview. “Anybody who wants to do research on consumer finance will want to be there.” Publishing Data Mullainathan, who is also a professor of economics at Harvard University , said that the consumer bureau should play the kind of role in consumer finance that the Federal Reserve does in macroeconomics, continuously collecting unemployment data so analysts can dive deeper into the subject at any time. Ronald Rubin, a former enforcement attorney for the consumer bureau, said data will help the agency decide which areas need the most attention. “A very important function at the outset is to see who is making a lot of money from a particular practice relative to other companies,” Rubin, now a partner at Hunton & Williams LLP in Washington , said in an interview. “Then you know where to begin your focus.” Cordray has said the bureau hopes to publish its data to promote research outside the agency. He noted that the financial industry reacted with a “certain amount of criticism and a fair amount of resistance” to publication of the consumer-complaint database, which was expanded and posted on the bureau’s website in March. Auto Defects “To the extent the public can help us do our work, that’s a good thing,” he said in July. “If it helps us to have this information, I’m assuming it would help the public as well.” Joan Claybrook , a former head of the National Highway Traffic Safety Administration , lauded the consumer bureau’s approach. She compared it to the transport agency’s early-warning database on auto safety defects that may have contributed to fatalities. The agency also conducts random sampling to look for patterns in the data, she said. “It’s useful to have a broad, basic database so you can evaluate new problems quickly,” Claybrook said in an interview. Bankers say that the information-gathering by the consumer agency is a vexing new regulatory burden. Banking lobbyists opposed the creation of the agency in Dodd-Frank, saying it would add a layer of unnecessary bureaucracy to U.S. regulation and impose rules that would restrict choices for consumers. Bankers Conference The remarks by Bank of America’s Faulkner, made on March 12, drew murmurs of approval from the hundreds of bankers gathered at a conference of the Consumer Bankers Association in Phoenix that day. The U.S. Chamber of Commerce, in a Feb. 14 letter to Cordray, said the bureau’s data requests have been “often unfocused, overly inclusive and not coordinated with other regulators.” The bureau is misusing the regularly scheduled examinations of banks to “demand huge amounts of data,” requests that instead should be made by rule or order, said the letter from David Hirschmann, head of the chamber’s Center for Capital Markets Competitiveness. The center doesn’t disclose its membership. The letter reflects the concerns of big banks who are members, according to a person briefed on the discussions. JPMorgan spokesman Paul Hartwick and Wells Fargo spokeswoman Richele Messick declined to comment about the data request. Regulatory Departure The consumer bureau’s procedures depart from those typically used by the Office of the Comptroller of the Currency or the Federal Deposit Insurance Corp., which previously conducted consumer finance examinations at larger banks, according to two people briefed on its work. While those agencies seldom deviated from their scheduled examinations, the consumer bureau’s supervisors have demanded data from multiple banks when they find a potential consumer-protection issue at a single institution, two people briefed on its work said. Richard Riese, senior vice president in the Center for Regulatory Compliance at the American Bankers Association , said it’s “a very laborious exercise” for banks to meet some of the data requests. Still, he said, the bureau’s examiners are new to the field and over time will learn to be more focused. “I think both sides will evolve in this process and we’ll get to some efficiencies,” Riese said in an interview. Seeking Innovation Raj Date, the bureau’s former deputy director, said that public analyses of data could lead lenders to innovate in ways that could cut the costs of services including checking accounts. That’s a better potential outcome than what usually results from traditional rulemaking, he said. “The danger is that regulation is inherently conservative -- it creates inertia in the marketplace,” Date said in an e-mail. “By being tough-minded and data-driven, you can avoid getting anchored to the parochialism of the products and practices of bygone eras.” Mullainathan said the data repository could be used for a variety of purposes. For example, he said, data on how often consumers renew their payday loans could help in developing policies about the industry. Credit-card records could help the bureau measure the impact of its rules. “This does not mean just touting successes but actually learning from mistakes quickly,” Mullainathan said. Protecting Data David Jacobs, consumer protection counsel at the Electronic Privacy Information Center, said that by aggregating information it collects or buys, the bureau complies with federal privacy laws. It will have to ensure that data it releases doesn’t add up to a fuller picture. “Any agency compiling massive amounts of data has to consider that you can use bits that are not personally identifiable and put them together,” Jacobs said in an interview. Mullainathan said researchers have no interest in specific individuals. “No researcher needs to know about any one person,” he said. “Just the opposite. They need to know about thousands of people.” To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net. To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net |
2024-03-18 | Bloomberg | Xiao Quits Bank of China to Take Helm at Securities Watchdog | Xiao Gang, who stepped down yesterday as chairman of Bank of China Ltd. , will take on the challenge of restoring confidence in Asia’s third-largest stock market as head of the nation’s securities regulator. His appointment was announced to China Securities Regulatory Commission staff at a meeting yesterday, according to a person with direct knowledge of the matter who asked not to be identified because he isn’t authorized to speak to the media. The 54-year-old, who resigned from Beijing-based Bank of China because of “the needs of national financial work,” will succeed Guo Shuqing at the watchdog. Xiao is tasked with overseeing stocks in Asia’s worst- performing major market of the last three years, as well as deepening a bond market supervised by multiple regulators. His appointment comes as China transitions to a new government under Premier Li Keqiang , who pledged over the weekend to open the world’s second-biggest economy to more market forces even when it feels “like cutting one’s wrist.” “Xiao is likely to extend Guo’s policies, but there will definitely be some changes,” Wang Aochao , Shanghai-based head of research at UOB Kay Hian Ltd., said today. “Handling resistance to reforms will be Xiao’s biggest challenge.” China’s equities benchmark index, which had plunged to near a four-year low in December even as Guo, 56, withheld approval for more than 800 initial public offerings, rallied to end January in a bull market before paring back gains. Government Reshuffle Guo’s future role wasn’t disclosed at the CSRC meeting, the person said. He may be appointed governor of Shandong province in eastern China, the South China Morning Post reported on March 13. The regulator’s Beijing-based press office declined to comment on Xiao’s appointment today. Shares of Bank of China fell as much as 3.4 percent in Hong Kong trading today, closing at HK$3.49, a loss of 1.7 percent. The Hang Seng Index dropped 2 percent. Li, 57, vowed to target 7.5 percent annual economic growth through 2020 after being named premier on March 15. His economic team retained People’s Bank of China Governor Zhou Xiaochuan and added sovereign wealth fund chief Lou Jiwei as finance minister after a once-in-a-decade leadership transition. Zhou, 65, had previously served as chairman of the securities watchdog between 2000 and 2002. Xiao may be a “transitional figure” at the securities regulator as the government prepares him for a more senior role, such as succeeding Zhou, said UOB’s Wang. Reforms Slowdown “If that’s the case, the pace of new measures being pushed out may slow,” said Wang. “His focus may be on making sure there’s no major problem within the securities system.” Xiao’s success in steering the nation’s largest foreign- exchange lender through the global economic crisis and to mounting record profits, as well as his calls for a crackdown on shadow banking, may give him credibility with global and domestic investors. Xiao was named head of Bank of China in March 2003. Under his stewardship, the Beijing-based lender’s net income probably grew for a seventh straight year to a record 132.5 billion yuan ($21.3 billion) in 2012, according to a Bloomberg survey of 34 analysts. That would match earnings at JPMorgan Chase & Co. (JPM) , the most profitable U.S. bank. Bank of China will report 2012 results by the end of the month. Still, Xiao’s strategy at Bank of China has been “rather conservative” compared to its local rivals, said Rainy Yuan, a Shanghai-based analyst at Masterlink Securities Corp. ‘Law Abiding’ “Xiao leaves no room for criticism,” said Yuan. “Other banks have come out with all sorts of ways to circumvent new regulations and restrictions, but Bank of China has been conservative and law abiding.” Xiao had previously held various posts at the People’s Bank of China for more than 20 years, and rose to become deputy governor of the central bank before joining Bank of China, according to the lender’s annual report. He had graduated from the Hunan Institute of Finance and Economics in 1981, and obtained a master’s degree in international economic law at Renmin University of China in 1996. He became a full member of the Communist Party’s 205-member Central Committee in November. Bank of China’s profit has grown by an average 31 percent a year since 2006, when its shares started trading. That compares with an average 19 percent increase at HSBC Holdings Plc (5) , Europe’s largest bank by market value, and 20 percent at New York-based JPMorgan. The lender is China’s fourth-largest by assets, and ranks No. 14 globally. FX Monopoly Founded in 1912 by Sun Yat-sen, known as the father of modern China, Bank of China held a monopoly on the nation’s foreign-exchange dealings and overseas banking from 1949 to 1994. The lender today has the biggest overseas operations of any Chinese bank, accounting for about 24 percent of its assets at the end of June, data compiled by Bloomberg show. Xiao took the reins at Bank of China at a time when the lender was struggling to overcome a legacy of fraud and mismanagement. A vice president was given a suspended death sentence in 2005 for embezzling funds and in 2003, a former president was sentenced to 12 years in prison for taking millions of yuan in bribes and gifts. As chairman, Xiao set up a risk-management system that forces loan approvals to be reviewed by a central oversight commission, according to the bank. Previously, individual branches approved loans without supervision from headquarters. Overseas Success On Xiao’s watch, Bank of China also expanded its global reach to more than 11,000 outlets in over 35 countries, according to its interim report. It was the only Chinese bank included on the Financial Stability Board’s provisional list of 28 systemically important financial institutions in 2011. Its Hong Kong unit was appointed by China’s central bank as the clearing bank for yuan business in Hong Kong in 2003, the first outside the mainland. This year, BOC was selected for the same role in Taipei, while larger rival Industrial & Commercial Bank of China Ltd. (3988) won the right to clear yuan transactions in Singapore. “Xiao has done pretty well in running the overseas business of BOC,” said May Yan, a Hong Kong-based analyst at Barclays Plc who recommends that clients buy the stock. “When the global economy rebounds, BOC’s performance will improve.” At home, Bank of China and its three largest rivals, which include ICBC, China Construction Bank Corp. (939) and Agricultural Bank of China Ltd. , account for about half the outstanding loans in the country. Biggest Risk As Chinese banks increasingly came to rely in recent years on higher-yielding off-balance-sheet financing, and especially wealth-management products, to fund their businesses, Xiao repeatedly warned against such operations, calling shadow banking “the biggest risk to China’s banking system.” “Xiao is very prudent,” said UOB’s Wang. “In the past ten years, he’d rarely made any blunt comments until very recently, when he became outspoken about shadow banking.” The outstanding balance of banks’ wealth management products may have reached 13 trillion yuan at the end of last year, compared with 8.5 trillion yuan the previous year, according to Fitch Ratings. “China’s shadow banking sector has become a potential source of systemic financial risk over the next few years,” Xiao wrote in a China Daily commentary in October. “Particularly worrisome is the quality and transparency of wealth management products.” Xiao’s relative youth and his background working in China’s financial system will make him valuable to the new government, said Chen Xingyu, a Shanghai-based analyst at Phillip Securities Group. His “relatively low-key” style may also set him apart from Guo, Chen said. Bull Market Since Guo became chairman of the securities watchdog in 2011, the CSRC has expanded foreign investor quotas to buy stocks, cut trading fees and pushed companies to increase dividends. The Shanghai Composite Index (SHCOMP) entered a bull market on Jan. 29 after rallying 20 percent from Dec. 3. The gauge has dropped 8 percent since its Feb. 6 high. Guo has also overseen a surge in corporate bond sales as part of China’s effort to wean companies of a dependence on bank lending to finance their operations. Sales of corporate bonds more than doubled last year to 1.41 trillion yuan as share sales declined 12 percent to 286 billion yuan, according to data compiled by Bloomberg. Xiao’s new role will also give him oversight of China’s securities industry, whose 114 brokerages posted a combined profit of $5.29 billion for 2012, according to the Securities Association of China. That’s 41 percent less than Goldman Sachs Group Inc. (GS) ’s $7.48 billion. Xiao will probably continue with reforms, said Chen of Phillip Securities. “He is a young and pragmatic person,” the analyst said. “By reading his resume, you can tell that the party has been grooming him to take up important roles.” To contact Bloomberg News staff for this story: Aipeng Soo in Beijing at asoo4@bloomberg.net ; Jun Luo in Shanghai at jluo6@bloomberg.net ; Steven Yang in Beijing at kyang74@bloomberg.net ; Stephanie Tong in Hong Kong at stong17@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-12-16 | Bloomberg | Hoku, Jakks Pacific, LinkedIn, Phoenix Cos.: U.S. Equity Preview | Shares of the following companies may have unusual moves in U.S. trading on Dec. 19. Stock symbols are in parentheses. Hoku Corp. (HOKU) : The Honolulu-based energy products company said Chief Financial Officer Darryl Nakamoto resigned, effective March 31. Jakks Pacific Inc. (JAKK) : The toymaker slashed its 2011 adjusted earnings and sales forecast, citing a “difficult” retail environment for toys. Earnings will be 37 cents to 40 cents a share, compared with an earlier estimate for $1.32 to $1.35 a share. LinkedIn Corp. (LNKD US): Prudential Financial Inc. amended a filing, reporting its stake in the biggest professional- networking website at 7.8 percent, compared with 15.9 percent reported Dec. 12. Phoenix Cos. (PNX) : The insurer and money manager that caters to wealthy clients had the outlook on its Phoenix Life Insurance Co. raised to “positive” from “stable” by Moody’s Investors Service. To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-11-01 | Bloomberg | Credit-Default Swaps Little Changed After Manufacturing Report | The cost of protecting U.S. corporate bonds from default was little changed following three days of gains after a report showed October manufacturing expanded by the fastest in five months while consumer spending rose less than expected. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 0.4 basis point to a mid-price of 94 basis points as of 5:02 p.m. in New York, according to index administrator Markit Group Ltd. The Institute for Supply Management’s factory index increased to 56.9 from 54.4, the Tempe, Arizona-based group said today. Consumer spending rose less than forecast in September and incomes dropped for the first time in more than a year, data from the Commerce Department showed. Globally, the number of “weakest links,” or borrowers rated B- or lower with a “negative” outlook by Standard & Poor’s, totaled 118 as of Oct. 21, down from 264 a year earlier, S&P said today. Contracts on Ambac Financial Group Inc. surged after the New York-based company, whose bond insurance unit is being restructured by Wisconsin regulators, said in a regulatory filing that it skipped a bond payment today and will pursue a pre-packaged bankruptcy with a group of creditors. Five-year swaps protecting against an Ambac default jumped 5.2 percentage points to 74.2 percent upfront, according to data provider CMA. That’s in addition to 5 percent a year, meaning it would cost $7.42 million initially and $500,000 annually to protect $10 million of Ambac debt. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point, 0.01 percentage point, equals $1,000 annually on a contract protecting $10 million of debt. The North American investment grade index, which typically drops as investor confidence improves and rises as it deteriorates, touched the lowest in more than five months Oct. 26 at 92.5 basis points. To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-06-15 | Bloomberg | Turkish Banks May Be Hurt by Guarantee Proposals, Oyak Says | Turkish banking industry profit will be hurt by a proposed increase in deposit guarantees to their customers, Oyak Securities said. An increase in the savings deposit insurance guarantee to the European Union average of 100,000 euros ($144,000) from 50,000 liras ($31,000) would affect 2.5 percent of depositors in Turkey and double the burden on banks to $1 billion, Oyak said. “Deposit rates for private banking clients should be affected in principle, but we do not think banks can push the costs to the segment, which has high bargaining power,” Oyak said in a e-mailed note to clients today. ‘The increase will affect banking system profits.’’ The Savings Deposit Insurance Fund is reviewing the level of the guarantee and hasn’t made any decision, Sakir Ercan Gul, head of the fund, said in a statement carried by state news agency Anatolia today. Any decision will be taken in consultation with the central bank, the banking regulator and the Treasury, he said. The fund is considering increasing the guarantee to as much as 100,000 euros to align the amount with EU regulations, Haberturk reported today, citing the fund. The fund is also considering changes to the premiums banks pay for the deposit insurance, Gul said, according to Anatolia. The fund collects about 200 million liras ($125 million) from the industry in premiums every three months, he said. The index of Turkish banks has dropped almost 18 percent since December 1, 2010. Turkiye Garanti Bankasi AS (GARAN) , Turkey’s largest listed bank by market value, has fallen almost 19 percent. Yapi & Kredi Bankasi AS, owned by UniCredit SpA (UCG) and Koc Holding AS (KCHOL) , dropped 28 percent over the same period. To contact the reporter on this story: Benjamin Harvey in Ankara at bharvey11@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net |
2024-10-23 | Bloomberg | Citigroup Reviving Bond Underwriting Couldn’t Save Pandit | Citigroup Inc. (C) , which last week ousted Chief Executive Officer Vikram Pandit over management missteps, is staging a comeback in corporate-bond underwriting as it helps overseas companies borrow in the U.S. Citigroup, the top underwriter of bond sales worldwide in the decade before the 2008 financial crisis, managed 6.1 percent of sales this year through yesterday, up from 5.7 percent in 2011, according to data compiled by Bloomberg that excludes self-led deals. The New York-based lender climbed to second in rankings from fourth last year, closing in on JPMorgan Chase & Co. (JPM) and relegating Bank of America Corp. to third. From Asia to the U.S., issuance of corporate bonds totals $3.2 trillion this year, second only to 2009’s pace, as central banks led by the Federal Reserve cut interest rates to record lows and investors seek riskier assets. Citigroup’s global reach has helped it win underwriting business from companies including Heineken NV (HEIA) and Nippon Life Insurance Co. looking to tap U.S. markets amid unprecedented demand for dollar-denominated assets. Citigroup views “underwriting, particularly in an environment where yields are still dropping, as a lower risk and more profitable activity,” Anthony Valeri, market strategist at LPL Financial in San Diego , said in a telephone interview. “It probably seems like an easier decision given the Fed’s support of the bond market and the demand to refinance.” Dominance Lost Citigroup is reclaiming some of the dominance it lost during the financial crisis four years ago, when the U.S. government injected $45 billion and taxpayers guaranteed more than $300 billion of assets to prevent its failure. After ceding the top rankings to JPMorgan and Bank of America, the bank is reemerging after shoring up capital and bolstering its balance sheet with deposits approaching $1 trillion. “It has now got enough capital to more aggressively go after the market,” Richard Bove , an analyst at Rochdale Securities LLC in Lutz, Florida , said in a telephone interview. “It is now able to go back to its customers and say, ‘We can do this underwriting for you and do it more cheaply.’” Elsewhere in credit markets, swaps-market participants will have a grace period before trades are required to be cleared, settling confusion over a rule that will begin early next year, said Commodity Futures Trading Commission Chairman Gary Gensler. Clear Channel Communications Inc. received the consent of its lenders to amend the agreement to its credit facilities. Credit Swaps The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to bet on creditworthiness, jumped the most in four weeks, climbing 3.7 basis points to 97.7 basis points as of 11:58 a.m. in New York , according to prices compiled by Bloomberg. The Markit iTraxx Europe Index , tied to the debt of 125 investment-grade companies, rose 5.4 to 128.3, the biggest increase since Sept. 26. Both indexes typically rise as investor confidence deteriorates and fall as it improves. Credit swaps 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. Swap Spreads The U.S. two-year interest-rate swap spread, a measure of debt market stress, increased 0.48 basis point to 10 basis points. The gauge, which narrows when investors favor assets such as corporate bonds and widens when they seek the perceived safety of government securities , touched 8 basis points on Oct. 17, the lowest level in Bloomberg data back to 1988. Firms dealing in $648 trillion of outstanding swaps contracts expected that trading during a phase-in period wouldn’t need to be processed by central clearinghouses, according to an Oct. 5 e-mail sent to clients by Davis Polk & Wardwell LLP, which represents the Securities Industry and Financial Markets Association. While the firms were wrong, misreading one sentence in 17,000 words of regulation, Gensler said today the idea was always to allow a grace period. “I know what I believed when I voted on it, it was prospective,” he told reporters today at Sifma’s annual conference in New York, saying that the market needs time to adjust to the “paradigm shift” of bringing U.S. oversight to unregulated interest-rate, credit-default and other swaps and to move them into clearinghouses. “This was an easy one for me,” Gensler said. Clear Channel The Clear Channel amendments will allow the San Antonio- based radio and billboard company to exchange term loans for as much as $5 billion in new debt securities, to prepay portions of its term loans, to allow for below par repurchases of term loans and to repay junior debt, as well as other debt management measures, according to a statement today distributed by Business Wire. The amendment will become effective with the closing of an offer to exchange a portion of the company’s term loans, according to the statement. Bonds of Citigroup are the most actively traded dollar- denominated corporate securities by dealers today, with 160 trades of $1 million or more as of 11:54 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bank sold $1.5 billion of 5.95 percent perpetual preferred notes yesterday that switch to a floating rate after 10 years, Bloomberg data show. The securities rose 1.5 cents to 101.5 cents on the dollar, according to Trace. Reclaiming Share Citigroup helped manage $167 billion of global sales this year, up from $146.5 billion in 2011, Bloomberg data show. In the U.S., the bank moved up one level this year to become the second-largest underwriter of investment-grade debt with 11.3 percent market share, up from 9.9 percent in 2011. In U.S. high- yield bonds, it remains the fifth-largest with 8.2 percent, down from 8.9 percent last year. One of the lender’s biggest gains has been in managing sales in the U.S. market for foreign companies as borrowing costs in the nation plunge to all-time lows and Europe ’s fiscal crisis increases demand for the dollar’s relative safety. “The U.S. dollar market continues to be viewed as the most reliable source of liquidity globally, particularly as local markets become more constrained,” Peter Aherne, Citigroup’s head of North America investment-grade capital markets, syndicate and new products in New York, said in a telephone interview. Foreign Issuance Citigroup has led 11.7 percent of dollar-denominated investment-grade issuance this year by non-U.S. corporate borrowers, Bloomberg data show. That’s the most of any bank and up from a fifth-place ranking last year with a 9.3 percent share. The bank “has a large corporate client base and it’s just natural that it should be a big player in debt underwriting,” Richard Staite, an analyst at Atlantic Equities LLP in London , said in a telephone interview. Citigroup served earlier this month as one of the managers on a $3.25 billion, four-part sale by Amsterdam-based Heineken, the world’s third-biggest beer-maker, to fund the acquisition of Asia Pacific Breweries Ltd. It helped run a $2 billion sale by Nippon Life, Japan ’s biggest life insurer, on Oct. 11 of 30-year subordinated debt. Citigroup directors replaced Pandit with Michael Corbat on Oct. 16 after concluding his mismanagement of operations caused setbacks with regulators and cost credibility with investors, a person with knowledge of the discussions said. Board members ousted Pandit even as the bank increased total deposits to 944.6 billion, the highest level in Bloomberg data going back to 1996. ‘Compete Meaningfully’ “In the last 12 months they’ve been able to come back pretty nicely,” Bove said. “You want to watch liquidity, capital and their spread-to-Treasuries in borrowing. You put all those things together and you got a company which is able to compete meaningfully for this business.” The extra yield investors demand on average to own the bank’s bonds instead of Treasuries has plunged to 160 basis points through yesterday from 402 basis points at the end of 2011 and compares with an average 167 among its U.S. peers, Bank of America Merrill Lynch index data show. The cost to protect against losses on Citigroup debt using credit-default swaps has dropped 47 percent this year and reached a more than 15-month low of 139 basis points on Oct. 17, prices compiled by Bloomberg show. The bank posted a surprise third-quarter profit last week, reporting third-quarter net income of $468 million, or 15 cents a share, according to an Oct. 15 statement. Including one-time items, analysts estimated Citigroup would post a loss of $777 million. Sales of global corporate bonds are the busiest on record after $3.3 trillion during the same period in 2009, Bloomberg data show. Issuance by overseas borrowers in U.S. markets is at record levels, with $494.1 billion issued this year compared with $418.7 billion in the same period last year. “We aspire to be a prominent player, a top three player, in each of our underwriting business,” Aherne said. To contact the reporter on this story: Sarika Gangar in New York at sgangar@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-12-16 | Bloomberg | Flaherty Urges Canadian Provinces to Balance Budgets, Pool Pension Funds | Canada’s Finance Minister Jim Flaherty said provincial governments should seek to balance their budgets in the “medium term,” which he described as about 2015. “I’m going to encourage all the provinces and territories to get to balance,” he told reporters in Ottawa today. Flaherty, who said in October that Canadian deficits will total C$165.2 billion ($164.3 billion) over the 2009-2014 period, had said the country is “on track” to meet its goal of returning to balance by 2015-16. Ontario Finance Minister Dwight Duncan said last month the province will run a deficit of C$18.7 billion in the current fiscal year, down from a June forecast of C$19.7 billion. Ontario will have budget gaps of C$17.3 billion in 2011-12 and C$15.9 billion in 2012-13 and a balanced budget in seven years. Flaherty, who will meet with his provincial counterparts Dec. 19-20 at a meeting in Kananaskis, Alberta, said he spoke to Duncan “recently on this subject.” Flaherty also said Canada’s economic recovery is “modest” and that Europe’s situation remains “serious.” He said his second goal for the meeting is to get his provincial counterparts to agree to new rules for pooled registered pension plans that would allow small companies and self-employed workers to have better options. Range of Options The pooled plans “would improve the range of retirement savings options available to Canadians,” Flaherty said in a letter he sent to provincial finance ministers ahead of their meeting. Flaherty and provincial ministers said in June they would look for ways to give banks and insurance companies more scope in providing pension plans for multiple employers or the self- employed. The pooled plans “will be particularly beneficial to Canadians that do not have the benefit of an employer sponsored pension plan, including the self-employed,” according to a document provided by Finance Canada. The plans would have lower management costs and insure that the funds are invested in the best interest of the plan’s members, the document said. The finance ministers said in June they would consider increases to the Canada Pension Plan , a mandatory system in which workers and employers contribute. ‘Get This Right’ “There are no quick or easy solutions on CPP,” Flaherty said. “We must keep in mind the implications of proposals on the larger Canadian economy and we’re not ignorant of that. What’s key here is taking the time to get this right.” Alberta Finance Minister Ted Morton in June opposed expanding the Canada Pension Plan, saying it’s an over-reaction to the need to boost retirement income and the higher deductions would be a “ job killer” payroll tax that puts an unfair burden on future generations. The proposals can proceed over Alberta’s objections as long as two-thirds of Canada’s provinces, representing two-thirds of the population, are in favor. To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net. To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net ; David Scanlan at dscanlan@bloomberg.net . |
2024-08-29 | Bloomberg | Canadian Imperial Profit Rises 5.8% on Wealth Management Gains | Canadian Imperial Bank of Commerce , the country’s fifth-largest lender by assets, said third-quarter profit rose 5.8 percent, lifted by its wealth-management unit. Net income for the quarter ended July 31 climbed to C$890 million ($847 million), or C$2.16 a share, compared with C$841 million, or C$2, a year earlier, the Toronto-based company said today in a statement. Adjusted profit excluding some items was C$2.29 a share, the bank said, beating the C$2.13 average estimate of 14 analysts surveyed by Bloomberg. CIBC advanced 0.3 percent to C$80.44 in Toronto trading yesterday. The shares have climbed 0.6 percent this year, compared with a 5.7 percent rise in the Standard & Poor’s/TSX Financials Index of 45 Canadian companies over that same period. CIBC is the fourth of the country’s biggest six banks to disclose quarterly results this week. Bank of Montreal (BMO) , Bank of Nova Scotia (BNS) , and National Bank of Canada (NA) each reported earnings that beat analyst estimates. (CIBC will hold a conference call to discuss results at +1-416-340-2217 or +1-866-696-5910 passcode 3201624 starting at 8:30 a.m. Toronto time.) To contact the reporters on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net ; Doug Alexander in Toronto at dalexander3@bloomberg.net To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net |
2024-11-07 | Bloomberg | BHP, Qantas Airways, QBE, Sphere, Woodside: Australian Stock Preview | The following is a list of companies whose shares may rise or fall in Australia. This preview includes news announced after markets closed on Nov. 5. All prices are from that day’s close unless otherwise stated. The S&P/ASX 200 Index futures contract due in December gained 0.4 percent to 4,829 as of 7:59 a.m. in Sydney. The Bank of New York Australia ADR Index rose 0.3 percent. The S&P/ASX 200 Index climbed 1.2 percent to 4,800.60. Mining shares: Copper rose 0.9 percent in New York, while a measure of metals traded in London gained 0.3 percent. BHP Billiton Ltd. (BHP AU), the world’s largest mining company, surged 3.6 percent to A$45.27 in Sydney. Its American depositary receipts climbed 1 percent in New York trading. Rio Tinto Group (RIO AU), the world’s third-biggest miner, jumped 4.8 percent to A$87.20 in Sydney. Oil producers: Crude oil surged to its highest level in two years as U.S. payrolls rose more than forecast in October. Woodside Petroleum Ltd. (WPL AU), Australia’s second- biggest oil and gas producer, climbed 1.9 percent to A$45.75. Santos Ltd. (STO AU) gained 1.8 percent to A$13.08. Gold producers: Gold futures for December delivery rose 1.1 percent to settle at $1,397.70 at 1:33 p.m. in New York, the highest settlement ever. Newcrest Mining Ltd. (NCM AU), Australia’s largest gold producer, rose 4.6 percent to A$42.84. Banking shares: Australian Prime Minister Julia Gillard will unveil new banking rules this week that will force most banks to cut exit fees charged on mortgages, the Australian newspaper reported today, citing comments from Gillard and Treasurer Wayne Swan. Commonwealth Bank of Australia (CBA AU), the nation’s biggest lender by market value, slipped 0.5 percent to A$48.88. Separately, Chief Executive Officer Ralph Norris said in an interview with the Australian Financial Review that Australia should avoid “populist” banking changes which could damage foreign investors’ perceptions of the nation. GrainCorp Ltd. (GNC AU): Australia’s largest grain handler was rated new “buy” at UBS AG. The stock advanced 1.7 percent to A$7.99. Qantas Airways Ltd. (QAN AU): Australia’s biggest airline has found issues with three more Rolls-Royce engines on its grounded Airbus SAS A380 fleet, the Age newspaper reported, without saying where it got the information. The engines were removed from the aircraft for closer inspection, the newspaper said. Qantas shares lost 1 percent to A$2.86. QBE Insurance Group Ltd. (QBE AU): The Australian insurer was downgraded to “neutral” from “buy” at UBS AG. The shares fell 1.1 percent to A$17.27. Sphere Minerals Ltd. (SPH AU): The Australian iron-ore developer said it rejected a bid by a Sin-Tang Development Pte Ltd.-led Chinese group to fund the Askaf project in Mauritania and recommended shareholders accept Xstrata Plc’s cash offer of A$514 million ($520 million). Sphere slipped 0.3 percent to A$2.94. To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net. To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net . |
2024-05-16 | Bloomberg | Statement by the IMF Mission to Italy (Text) | Following is the text of the mission statement from the International Monetary Fund visit to Italy : With broad political support, the authorities have embarked on an ambitious and wide-ranging agenda that has lifted Italy from the brink and is now seen as a model for fiscal stabilization and growth-enhancing reforms. However, the work has only just begun, and a lot remains to be done to revive growth and restore dynamism to the economy. The emphasis should continue to be on comprehensive structural reforms to boost productivity and labor participation, a supportive fiscal strategy that is both growth-friendly and sustainable, and steps to promote a more dynamic and resilient banking system. Italy’s success also depends on progress at the European level to resolve the crisis and promote growth. The economy is expected to contract this year due to strong headwinds from fiscal consolidation, tight financial conditions, and the global slowdown. Economic activity is expected to recover in early 2013, led by a modest pickup in exports and investment. Headline inflation is expected to ease only gradually, as the impact of weak demand will be partly offset by higher indirect taxes. The risks to the outlook are tilted to the downside. Renewed financial turmoil could push government bond yields higher, tighten bank credit, and weaken activity. Slow progress in implementing needed fiscal and structural reforms could undermine confidence and raise concerns about Italy’s fiscal position. On the upside, a more robust global recovery or faster progress in reforms could boost market sentiment and activity. Italy’s outlook also depends on continued progress at the European level in creating a more complete monetary union. A more integrated euro area with greater fiscal and financial discipline and risk sharing would provide a more durable solution to the euro area crisis and, combined with further monetary easing and unconventional measures as needed by the European Central Bank (ECB), support Italy’s adjustment efforts. Maintaining the momentum for reform will be important to address stagnant productivity and entrenched structural weaknesses that have constrained Italy’s medium-term growth potential. The difficult business environment, fragmented labor market, and limited competition in services have contributed to the poor growth performance and a loss in competiveness. The high level of youth and long-term unemployment risks creating a “lost generation” with lasting consequences for growth. Addressing these weaknesses is a key priority for reviving growth and alleviating the social cost of the crisis. I. Structural Reforms to Jumpstart Growth The potential gains to growth from deeper structural reforms are substantial. IMF staff estimates suggest that product and labor market reforms that bring Italy closer to OECD best practices could increase the level of GDP by about 6 percent over the medium term. The government has embarked on important reforms to deregulate the service sector and make the labor market more inclusive and flexible. Accelerating these reforms, and locking in now the necessary legislative and administrative changes, would strengthen confidence and create momentum for further reforms. Greater coordination at the EU level, especially in strengthening the single market for energy, transportation, and services, would also support Italy’s efforts in these areas. The labor market reform bill should be passed quickly to reduce uncertainty and encourage new hires. The bill promotes open-ended and apprenticeship contracts for young workers and makes unemployment insurance more universal. It also facilitates hiring by allowing companies to lay off workers for economic reasons and reducing the cost of dismissal. Clarifying further the conditions for reinstatement via the judicial process would reduce uncertainty and facilitate out-of-court settlements of dismissal disputes. More is needed to bridge the gap between permanent and temporary workers and address the high unemployment of youth and women. The cost of new regular hires could be lowered by allowing for a more flexible open-ended contract for new workers that gradually increases employment protection with tenure. This would also facilitate the employment of young workers. Reducing the marginal tax rates for married second-earners would help raise female labor participation (one of the lowest in the OECD). Allowing companies and workers to first set firm-level contracts, unless they agree to opt out and abide by national ones, would better match wages to productivity, while greater differentiation of public wages across regions would support private wage flexibility and employment, especially in the South. In product markets, priority should be given to accelerating reforms in the energy, public and professional services sectors with the broadest impact on growth. Completing the planned separation of gas distribution and production by end year would improve competition and eventually help drive down energy prices, which are among the highest in the euro area. Accelerating the opening of professional orders would also strengthen competition and lower rents. A greater push for privatization, especially for local public utilities, would enhance the efficiency, cost, and quality of public services. Increasing the efficiency of the judicial system would have wide-ranging benefits for reducing the backlog of legal cases, lowering business costs and uncertainty, and strengthening labor market reforms. Helping small and medium-size enterprises (SMEs) grow would facilitate the shift of resources to new growth areas. Reducing the high cost of startups and streamlining tax and other regulations would lower business uncertainty and costs. Expanding risk-based--as opposed to collateral-based--lending would improve SMEs’ access to credit, while developing further the venture capital and private equity industry would expand the availability of risk capital. Recent initiatives to foster firm recapitalization, such as the allowance for corporate equity, are welcome in this regard. In addition, reforms to promote greater inward FDI (among the lowest in the OECD) would allow SMEs to benefit from the growth in global supply chains and technology transfer. II. Making Fiscal Consolidation More Growth-Friendly The government has enacted an impressive fiscal package to improve the primary surplus. The package features significant and front-loaded consolidation; pension reforms to strengthen long-term sustainability; a modest shift from direct to indirect taxes (in support of a so-called “fiscal devaluation”); and more aggressive action against tax evasion. As a result of these measures, the primary surplus of the general government is expected to rise significantly, to above 4 percent of GDP by 2013, the highest in the euro area. The fiscal adjustment this year and next is appropriate. The sizeable improvement in the structural primary balance in 2012-13 will weigh heavily on growth but is critical for fiscal sustainability. The mission welcomes the increased focus on targeting a structural balance which adjusts for the economic cycle and allows fiscal policy to remain flexible in a more severe downturn. To bolster the recovery, the mission welcomes the government’s efforts to identify and implement the needed expenditure cuts to avoid an increase in the VAT rate later this year. Shifting further the composition of adjustment towards expenditure cuts and lower taxes would better distribute the burden of adjustment, thereby supporting growth. Cutting government expenditure, such as the public sector wage bill or other areas identified in the ongoing spending review; reducing Italy’s sizeable tax expenditures; and stepping up efforts against tax evasion would create space for growth-supporting measures. These measures could include: reducing the labor tax wedge to boost employment; raising the allowance for corporate equity to encourage investment; or financing a modest, well-targeted increase in public infrastructure investment. Staff estimates that a sizeable shift in the composition of adjustment could raise the level of GDP by 1 percent over the long term. The newly adopted constitutional fiscal rule is an important instrument for strengthening fiscal discipline and policymaking. Adopting a binding multi-year expenditure framework and unifying and enhancing the role of spending reviews in the budget process would buttress the credibility of the fiscal rule. The fiscal council will be important in assessing fiscal developments and improving accountability, and should be set up fully independent in terms of staffing, funding, and work agenda. Locking in prudent fiscal policies over the medium term would improve confidence and support growth. Looking beyond 2013, the ongoing spending review should expeditiously identify further cuts to unproductive expenditure and use some of the savings to reduce debt. With the debt-to-GDP ratio projected to decline only gradually, the fiscal position will remain vulnerable to market distress or an economic slowdown. To raise the buffer against such shocks, targeting a 1 percent of GDP structural surplus from 2014 onwards as the medium-term anchor for the fiscal rule would put the debt ratio on a more robust downward path, even under adverse conditions. The credibility gains from a faster pace of debt reduction could lower borrowing costs significantly, especially once European market conditions stabilize. The stock of outstanding public payments needs to be addressed. Completing quickly the stocktaking exercise to determine the size of pending and overdue payments at the central and subnational levels, along with a strategy for improving the reporting and timeliness of public payments, would strengthen expenditure control and accountability. Such a strategy should be complemented by improved coordination among all levels of government and continued incentives for fiscal prudence also at the subnational levels. The debt management strategy should seek to maintain the favorable maturity structure of debt and diversify the investor base. Moving to provide collateral in swap transactions would further strengthen financial stability. Subsequent regular reporting of such transactions in government accounts would enhance transparency. In addition, the authorities should assess the scope to mobilize public assets, including through privatization and other means, to maximize revenue generation and reduce public debt. III. Promoting a More Dynamic and Resilient Banking System Italian banks continue to benefit from their large and stable retail funding base, low leverage, and traditional lending model which has limited exposures to risky assets. The resilience of the system has been supported by firm supervision and regulation. Italian banks weathered the global financial crisis and strengthened their capital base without large-scale equity support from the government. Despite these strengths, banks remain pressured by concerns about the economic outlook and link with the sovereign. Gross impaired loans (including bad, substandard, restructured, and past-due loans) have risen to 11 percent in 2011, from less than 6 percent before the crisis. Together with a decline in provisioning rates below the pre-crisis levels, this leaves Italian banks vulnerable to the downturn, especially from the weaker SME and construction sectors. Exceptional liquidity support from the ECB has been critical for meeting banks’ funding needs and has helped prevent a sharp contraction of credit. Reducing impaired loans would free up resources for new lending. Banks’ buildup of impaired loans reflects both an inefficient legal process that delays loan write-offs and the flow of new bad loans arising from the slowdown. The growing stock and slow pace of disposal have constrained core profitability and tied up funding and capital. Supervisors should encourage banks to develop strategies for selling, restructuring or writing down impaired loans to free up resources for lending. The development of a market for restructuring distressed assets could be facilitated by ensuring adequate bank provisioning, aligning more closely tax deductibility of loan loss provisioning and write-offs, and streamlining bankruptcy and foreclosure procedures. Banks should maintain adequate capital and liquidity buffers to remain resilient to the downturn. The Bank of Italy (BoI) should continue to encourage large banks under the European Banking Authority (EBA) to meet their capital needs by raising equity or disposing of noncore assets, rather than cutting loans. To further enhance transparency, the BoI should consider extending its stress tests to a larger set of institutions, including mid-sized banks, and publish the results in its regular Financial Stability Reports. This would help market participants assess banks’ capacity to withstand a slowdown and funding distress and anchor market discipline. Encouraging banks to improve their capacity to post eligible collateral at the BoI would facilitate access to Eurosystem liquidity facilities. We are grateful to the authorities and our counterparts for their hospitality and open and constructive discussions. An IMF team visited Italy from May 3 to May 16, 2012, for the annual evaluation of the economy as part of the regular consultations under Article IV of the IMF’s Articles of Agreement. This statement describes the preliminary findings of the staff. SOURCE: International Monetary Fund |
2024-10-11 | Bloomberg | Singapore Plans ‘Judicious’ Management of Dollar as Economic Growth Slows | Singapore said its economy will probably expand at a slower pace in the next few years and the central bank will continue “judicious management” of its currency to curb inflation and support growth. The island’s expansion will be affected by a “more uncertain” global economy and the government will increase spending in the next five years, Finance Minister Tharman Shanmugaratnam, who is also deputy prime minister and chairman of the Monetary Authority of Singapore, said in a statement yesterday. The government issued the statement to elaborate on plans presented by President Tony Tan in parliament on Oct 10. “The headwinds from slower global growth will mean slower growth in Singapore in the next few years,” Shanmugaratnam said. “In this environment of heightened risk and volatility, MAS will continue to provide the basis for economic and financial stability in Singapore.” Europe ’s debt crisis and a faltering U.S. recovery have hurt demand for Asian goods, raising the threat to regional growth and prompting some central banks to start cutting interest rates or refrain from increasing borrowing costs. Singapore’s central bank will remain “vigilant” against a resurgence in inflationary pressures and price gains are expected to moderate toward the end of 2011, Shanmugaratnam said. Singapore’s monetary authority uses the exchange rate rather than borrowing costs to conduct monetary policy and manage inflation, adjusting the pace of appreciation or depreciation against an undisclosed trade-weighted basket of currencies by changing the slope, width and center of the band. ‘Anchor of Stability’ “A stable Singapore dollar is an anchor of stability for our small, open economy,” Shanmugaratnam said. “Continued judicious management of the effective exchange rate of the Singapore dollar against a trade-weighted basket of currencies will help dampen inflationary pressures while supporting economic growth.” Singapore remains vulnerable to fluctuations in overseas orders for manufactured goods even as the government boosts financial services and tourism, making it the most volatile Asian economy, according to Credit Suisse Group AG. The island, located at the southern end of the 600-mile (965-kilometer) Malacca Strait, has the world’s second-busiest container port. Singapore plans to “significantly enhance” its transport networks, and improve education, health-care and housing services, Shanmugaratnam said. The policies will increase government expenditure as a percentage of gross domestic product in the next five years, he said. Election Effect Prime Minister Lee Hsien Loong has vowed to be more responsive to public criticism after support for his party fell to a record low of 60 percent in the May general election as citizens expressed discontent over rising costs and competition with foreigners for jobs and housing. He has unveiled measures to widen the social safety net for elderly and lower-income Singaporeans as well as tighten curbs on foreign workers. “We must maintain a sound and sustainable fiscal system,” Shanmugaratnam said. “We have put in place a resilient revenue structure to enable us to meet these higher spending needs.” Europe’s sovereign-debt woes and the threat of a U.S. recession have roiled global stock markets, erasing almost $10 trillion from equities last quarter. Sovereign Wealth Management Government of Singapore Investment Corp. and Temasek Holdings Pte, the island’s state investment companies, spent more than $25 billion buying stakes in U.S. and European banks in the past four years as the collapse of the subprime mortgage market led to more than $2 trillion in losses and writedowns worldwide. “In a more volatile and challenging investment environment, we must hold to a framework that enables GIC and Temasek to focus on the long term and pursue investment strategies that generate sustainable portfolio returns,” the finance minister said. The central bank will boost surveillance and conduct regular stress tests on its financial sector, the government said yesterday. There are also plans to introduce new liquidity standards and improve the risk-based capital framework for insurance companies, it said, without elaborating. Singapore’s three banks are ranked among the world’s six strongest banks, based on criteria such as Tier 1 capital ratio, non-performing assets and a comparison of costs against revenue, Bloomberg Markets magazine reported in its June issue. Oversea- Chinese Banking Corp. topped the global list, with DBS Group Holdings Ltd. (DBS) at No. 5 and United Overseas Bank Ltd. (UOB) at sixth. To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net |
2024-09-20 | Bloomberg | Buffett Calls Fed History’s Greatest Hedge Fund | Billionaire investor Warren Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank’s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion. “The Fed is the greatest hedge fund in history,” Buffett told students yesterday at Georgetown University in Washington. It’s generating “$80 billion or $90 billion a year probably” in revenue for the U.S. government, he said. “And that wasn’t the case a few years back.” The central bank has been buying $85 billion of bonds a month to help the U.S. recover as it emerges from the deepest slump since the Great Depression. Chairman Ben S. Bernanke and other Fed policy makers unexpectedly opted this week to sustain that pace of asset purchases instead of tapering it, saying they need to see more signs of lasting improvement in the economy. The Fed remitted $88.4 billion to the U.S. Treasury Department last year. The payments have ballooned as the central bank built its balance sheet during the past five years. The Fed “is under no pressure, none whatsoever to have to deleverage,” Buffett said. “So it can pick its time, and if you have somebody wise there -- and I think Bernanke is wise, and I certainly expect his successor to be -- it can be handled. But it is something that’s never quite been done on this scale. It will be interesting to watch.” Bernanke steered the Fed through the 2008 crisis, and his term ends in January. President Barack Obama hasn’t nominated a successor, who will oversee the policy’s wind-down. Janet Yellen Fed Vice Chairman Janet Yellen is Obama’s leading candidate to replace Bernanke after former Treasury Secretary Lawrence Summers withdrew his name from consideration, people familiar with the matter said this week. The president has also said that he’s weighing former Fed Vice Chairman Donald Kohn for the post. Buffett praised Bernanke for signaling in 2008 that he’d do whatever was needed to stabilize markets and said the next chairman should follow his approach to economic stimulus. Investors expected a taper by Bernanke, who said Sept. 18 that he wants to see further gains in U.S. employment before scaling back the bond purchases. “He says he’s going to keep doing it until he sees more improvement in the economy, and I think he’s been mildly disappointed -- not hugely disappointed -- in the rate of improvement in the economy in the last few years,” Buffett said. “He’s not pre-judging exactly when it’s going to happen, he’s telling you the conditions under which he’ll change.” Federal Reserve Bank of St. Louis President James Bullard , a voter on policy this year who has backed record stimulus, said the decision not to slow bond buying was a close call and “small” tapering is possible next month. ‘Borderline Decision’ “That was a borderline decision” after “weaker data came in,” Bullard said today on Bloomberg Television’s “Bloomberg Surveillance” with Tom Keene. “The committee came down on the side of, ‘Let’s wait.’” Buffett, 83, became the world’s fourth-richest person by building Omaha, Nebraska-based Berkshire Hathaway Inc. (BRK/A) into a $290 billion business. As the company’s chairman, chief executive officer and largest shareholder , he transformed a failing textile maker into a firm operating in industries from insurance to railroads. The Dodd-Frank Act may limit future leaders from taking the steps that Bernanke and then-Treasury Secretary Henry Paulson did in 2008 to calm markets, Buffett said. The officials injected billions of dollars into insurer American International Group Inc. (AIG) and the largest banks, while backstopping money-market funds as the financial system teetered. Buffett’s Worry “I worry actually that Congress doesn’t like to give anybody that much authority,” Buffett said. “There will be another panic. Where it comes from, who knows? But when that time comes, the question will be, ‘Are the people who have panicked, who have frozen, who have caused the economic engine to stop, will they believe and come right back and be doing something?’ And I’m not sure whether what’s been enacted is a plus or a minus in that regard.” Buffett stopped short of endorsing Yellen to take over as Fed chairman, during an interview on CNBC prior to the Georgetown event. The billionaire said his top pick for the job is Bernanke, even though he may not want to stay. “If you’ve got a .400 hitter in the lineup, you don’t take him out,” Buffett told the business news network, referring to a high batting average in baseball. “I don’t have a second choice. I don’t know Janet Yellen at all.” Buffett, who has committed almost all his wealth to charity, also spoke yesterday about philanthropy during the Georgetown gathering alongside Bank of America Corp. (BAC) CEO Brian T. Moynihan. Even as the billionaire praised the U.S. economic system, he said inequality needs to be addressed. “We have learned to turn out lots of goods and services, but we haven’t learned as well how to have everybody share in the bounty,” Buffett said. “The obligation of a society as prosperous as ours is to figure out how nobody gets left too far behind.” To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net ; Rick Green at rgreen18@bloomberg.net |
2024-05-31 | Bloomberg | Dodd-Frank Exemption for Single N.Y. Bank Advances in House | A New York City bank with $10.5 billion in assets would be the sole beneficiary of a Dodd-Frank Act exemption approved today by the House Financial Services Committee. Emigrant Bank asked lawmakers on the committee to approve a change to the 2010 financial-regulation overhaul law that will save the institution $300 million. The committee voted 35-15 today to approve the measure. A group of New York lawmakers, led by Republican Representative Michael Grimm, have taken up the bank’s cause, arguing that it would be unfairly punished for protecting itself during financial stress. The measure would retroactively change the date used to determine which institutions are exempt from new rules on how institutions consider trust-preferred securities. “This would have a very, very detrimental impact on my constituents who rely on the bank,” Grimm said today. “It was an act of prudence on the part of Emigrant Bank that caused them to be captured” by the provision. Grimm’s measure has eight co-sponsors, six of whom are from New York and on the Financial Services Committee. The measure is not currently scheduled for House floor consideration and has no companion measure in the Democrat-controlled Senate. Senator Susan Collins , a Maine Republican, pushed for the inclusion of the new rules on how banks count trust-preferred securities during the Senate debate on Dodd-Frank in 2010. The provision, bolstered by the support of then-Federal Deposit Insurance Corp. Chairman Sheila Bair , eliminated the tier-one capital treatment for trust-preferred securities at institutions with more than $15 billion in assets. $2.3 Billion Loan Emigrant Bank went over the threshold when it took out a $2.3 billion loan in order to cover its uninsured deposits during the financial crisis, Richard C. Wald, the bank’s chief regulatory officer, said in May 18 testimony on the measure. By the time the bank was back under $15 billion in assets, it was past the law’s cutoff date of Dec. 31, 2009. “Because of an effort to be exceedingly cautious with regard to addressing its liquidity during the peak of the financial crisis, Emigrant had more than $15 billion in assets on December 31, 2009 but significantly less than $15 billion when Dodd-Frank was enacted,” Wald said. Grimm’s measure would add March 31, 2010 as another cutoff date, relieving the bank of its potential losses. “When we find ourselves in these situations we should be responsive to mitigating unintended consequences,” Representative Spencer Bachus , an Alabama Republican and chairman of the committee, said. Representative Barney Frank , the top Democrat on the committee and co-author of the law that bears his name, said he had no objection to the substance of the measure intended to address the problems of a single bank. “In my judgment that’s not necessarily a bad thing,” Frank said, noting that he “proudly” sought earmarks for projects in his Massachusetts district. He also said regulators had not raised objections to the change. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net |
2024-09-02 | Bloomberg | IDB Yield Hits Record, Shares Drop on Rating Cut: Tel Aviv Mover | The yield on IDB Holding Corp. (IDBH) ’s 2020 bond soared to a record and the shares fell after its credit rating was cut and accountants questioned the viability of the owner of Israel’s biggest mobile-phone provider. The yield on IDB’s 5.1 percent notes maturing in December 2020 jumped 170 basis points, or 1.7 percentage points, to 78.45 percent, at the 4:30 p.m. close in Tel Aviv, the highest level since the notes started trading in May 2007. The shares dropped 2.1 percent to 14.01 shekels, bringing the slump this year to 64 percent. Israel’s benchmark TA-25 index slipped 0.5 percent. The second-quarter loss at IDB, whose chairman is Nochi Dankner, increased to 1.27 billion shekels ($316 million) from 883 million shekels in the year-earlier period, the company said Aug. 31. Standard & Poor’s Maalot that day lowered the holding company’s rating to CCC, citing a continued deterioration in liquidity levels and concern over debt repayment abilities over the coming year. “Dankner is the latest in the so-called Israeli tycoons to have run into financial difficulties,” Richard Gussow, an analyst at DS Securities & Investments in Tel Aviv said today by phone. “He’ll have to reach a settlement with bondholders and sell off some of his assets, which could provide a much-needed lifeline to IDB.” ‘Rough Days’ Israeli companies will struggle to issue new debt and roll over maturing liabilities to pay obligations coming due in 12 months, Moody’s Investors Service Inc. said in a report on May 8. More than 30 Israeli companies sought debt forgiveness since 2011 as refinancing costs rose and growth slowed, the Israel Securities Authority said in a July 1 report. “The company does not have the ability at this point to recycle its debt in the capital markets or with banks and it hasn’t yet attained additional sources to repay its debt from June 2013 onwards,” IDB’s accountants BDO Ziv Haft and KPMG- Israel said in a so-called going-concern warning in the notes accompanying the quarterly report. “Significant doubts arise as to the continued existence of the company,” the accountants said. IDB, which has stakes via a unit in Cellcom Israel Ltd. (CEL) and Shufersal Ltd. (SAE) , the largest supermarket chain by market value according to data compiled by Bloomberg, has enough money to continue operations for “close to a year,” Dankner said in a letter to employees. The company will sell some assets, cut expenses and seek partners to get through the current “rough days,” Dankner, who owns IDB Holding via Ganden Holdings Ltd., said in the message that was circulated internally on Aug. 31 and made public yesterday by e-mail. Selling Assets A unit of billionaire Warren Buffett ’s Berkshire Hathaway Inc. (BRK/B) last month agreed to acquire a U.S. unit of IDB’s Clal Insurance Enterprise Holdings Ltd. (CLIS) for $221 million. IDB said Aug. 29 it is in talks with a potential investor. Israeli Finance Minister Yuval Steinitz said today in a cabinet meeting that he foresees no “significant” damage to the public’s pension savings as a result of IDB Holding Corp.’s difficulties, even in a worst-case scenario, according to an e- mailed statement today. IDB appointed Avital Bar-Dayan as head of investor relations and debt, according to an e-mailed statement today. Discount Investment Corp. (DISI) , a unit of IDB, said today its Ma’ariv Holdings Ltd. (MARV) will stop publishing a daily newspaper, with the exception of a printed weekend edition, and focus on its website. Discount Investment said Aug. 31 its second-quarter loss widened to 1.27 billion shekels from 703 million shekels a year ago. The Tel-Bond 40 index of corporate bonds fell for a fourth day, declining less than 0.1 percent to 266.04. To contact the reporters on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net ; Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net |
2024-12-23 | Bloomberg | Baht Set for Weekly Gain on Flood-Insurance Inflow Speculation | Thailand ’s baht was poised for its first weekly gain in three amid speculation overseas insurance companies will increase demand for the currency to pay for claims related to the nation’s worst floods in almost 70 years. The currency gained today as the MSCI (MXAP) Asia-Pacific Index of shares snapped two weeks of declines. A drop in U.S. jobless claims to the lowest since April 2008 and an increase in consumer confidence added to signs the world’s biggest economy is weathering Europe’s debt crisis, brightening the outlook for Asia ’s exports. “Speculation about the fund inflows related to insurance payments is an underlying support for the baht,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp. in Bangkok. “More importantly this week, risk sentiment has been quite stable with no major bad news from Europe. Europe will continue to be the main factor to drive the market next week.” The baht added 0.4 percent from a week ago and 0.1 percent today to 31.23 per dollar as of 8:17 a.m. in Bangkok, according to data compiled by Bloomberg. It touched a one-week high of 31.18 on Dec. 21. The currency may trade between 31.15 and 31.40 next week, Hasegawa said. The Southeast Asian currency is still headed for its first annual decline since 2008, falling 4 percent, as exchange data show international investors sold $427 million more Thai equities than they bought. The yield on the 3.25 percent debt due June 2017 added six basis points, or 0.06 percentage point, to 3.12 percent this week, according to data compiled by Bloomberg. The rate was unchanged today. To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net |
2024-03-15 | Bloomberg | Silvia, Hoffman Say Fed’s Statement Suggests No Need for QE3 | John Silvia , chief economist at Wells Fargo Securities LLC , and Stuart Hoffman , chief economist at PNC Financial Services Group Inc., said the Federal Reserve ’s statement today indicates that there will be no third round of quantitative easing by the central bank. They spoke after Fed officials met in Washington today and said in the statement that the recovery is gaining strength. Paul Ballew , a former Fed economist and a senior vice president at Nationwide Mutual Insurance Co., Diane Swonk , chief economist at Mesirow Financial Inc., and Jim O’Sullivan , chief economist at MF Global Inc., also commented. Silvia: “This statement takes QE3 off the table as they are taking off the downside risk in deflation and saying the economy is on track.” “They are coming to the view that the economy has improved over time. They are going to finish QE2. There is no need for more stimulus at this point.” “They are putting a positive spin on the whole commodity issue. They are getting slightly higher inflation numbers, which is pretty much what they want. They are giving a message that while inflation is rising, it is within their plan so it is ok.” Hoffman: “I would call it one of the more positive statements they’ve made on the economy since the recovery began.” “But it hasn’t reached a point yet that it would call for any near-term change in the Fed funds rate or the completion of QE2.” “The FOMC statement or outlook was pitch black, then it was dark grey and maybe this is a lighter grey, but it’s not green yet.” “Their assessment of the economy or at least recent economic conditions seems to be a little bit of an upgrade, with words like ‘firmer footing’ and even referring to the labor markets as gradually improving.” “My base case is they finish QE2, they’re done and there’s no QE3 and maybe a year from now they’ll start to raise the Fed funds rate. Between now and then, they’ll give the markets a heads up by removing the ‘extended period’ phrase.” “They finish QE2, they go dormant and they’re dormant in the second half of this year and then start dropping signals at year end that the day of reversal of policy is coming.” Ballew: “The Fed said what many private forecasters have been saying for quite a period of time: that the economy is on firmer footing.” “They were a little more dismissive on commodity prices and inflation pressures than I would have expected, but that’s not a surprise: that’s been their position.” “The Fed, from a PR standpoint, got up today and played it straight down the middle because there is enough information affecting the markets and the Fed had no desire to contribute to all the noise out there.” “They certainly understand what the risks are out there and the risks are greater than they were 60 days ago: from the Middle East and oil prices to Japan and how that could affect financial markets and regional growth. It’s not a surprise they’re going to keep their powder dry and see how things play out.” “Their biggest challenge is global events outside of their control: oil prices and the Middle East and Japan and asset bubbles in Asia. The Fed is trying to deal with all those global factors while also dealing with what is still a fragile economy” in the U.S. Swonk: “My guess is that the nod to the stronger economy was enough for the hawks.” “All of the uncertainty out there was enough to keep the hawks on the sidelines and not get those dissenting votes that you very much could have gotten at this particular meeting.” The next issue for the Fed “is whether or not they continue to backstop the size of their balance sheet by replacing maturing mortgage-backed securities with Treasury bonds.” “That will be the next decision. I think that will be very difficult for the Fed to do that at this stage of the game. I think they will let their balance sheet run off as long as the economy is stabilizing, even though they’d still be out of their dual mandate.” O’Sullivan: “Certainly, this the most optimistic Fed officials have sounded since asset purchases began in November and, at a minimum, that’s consistent with the expectation there will be no third round of purchases.” “But there’s not enough sustained strength in growth numbers yet for them to start talking about reversing stimulus. The turmoil in markets in recent days adds a new element of uncertainty, but coming into the turmoil, the momentum in growth numbers was looking increasingly impressive, including in labor markets.” To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-07-16 | Bloomberg | Manacled Mormon, Cloned Pooch Headline Errol Morris’s ‘Tabloid’ | Errol Morris has gotten movie ideas from weird newspaper stories about pet cemeteries and a Florida town where residents cut off their limbs to collect insurance money. No wonder his new documentary is called “ Tabloid .” It’s about a former beauty queen, Joyce McKinney, who allegedly kidnapped her ex-boyfriend, chained him to a bed and raped him while he was on a Mormon mission in England in 1977. The story became a tabloid sensation often referred to as the “Manacled Mormon” case. McKinney resurfaced in the headlines three decades later when her beloved pit bull Booger died and she had him cloned in South Korea , giving her five identical puppies. “I was unaware of Joyce McKinney until I read a wire- service story in the Boston Globe about a woman who had her dogs cloned,” Morris recalled during an interview at a boutique New York hotel. “It mentioned that this woman also was the protagonist in a 30-year-old sex-and-chain story. Of course, that immediately got my attention.” Morris won an Oscar for “ The Fog of War ,” his 2003 documentary about former Secretary of Defense Robert McNamara and the painful lessons he learned from his role in the Vietnam War. The filmmaker also helped free a convicted murderer with his 1988 investigative documentary “ The Thin Blue Line .” Tabloid War The McKinney saga might seem trivial by comparison, but Morris sees deeper meaning there. “Sure, it’s not McNamara talking about nuclear apocalypse,” he said. “However, I think there are a number of fascinating themes -- about the search for truth, the nature of love and how we see ourselves.” Morris, 63, has short white hair and an impish grin. He sipped coffee and punctuated his remarks with animated gestures as we spoke in a suite with a sweeping view of lower Manhattan. Though he’s a tabloid aficionado, Morris is appalled by the News of the World scandal that has shaken Rupert Murdoch ’s media empire. “I think the News of the World crossed a number of journalistic and ethical lines,” he said. “They broke the law and obliterated the facts.” McKinney has disputed many of the purported facts in “Tabloid,” especially the accounts given by reporter Peter Tory and photographer Kent Gavin, two British journalists who covered the case. Marshmallow in Meter Tory’s Daily Express and Gavin’s Daily Mirror waged a tabloid war over the story, including allegations of kinky sex, fake guns and brainwashing. “Joyce says she had no idea there would be other people in the movie,” Morris said. “There had to be other people because they’re part of the story. And it’s not as though I portray these tabloid journalists as purveyors of the truth. Listening to them, you become aware that they helped create this story to lure readers to their newspapers. Morris agrees that tabloids are fond of exaggeration, citing a line from Tory as an example: “He says, ‘I think it was ropes, but ‘chains’ sounds better.’” McKinney, who claims to have a genius IQ, also is a colorful talker. Speaking in a soft Southern drawl, the garrulous blonde peppers the film with her down-home expressions. “She’s one of the funniest people I’ve ever met,” Morris said. “Who else would say, ‘A woman can’t rape a man. It would be like putting a marshmallow in a parking meter.’” “Tabloid,” from Sundance Selects, opened yesterday in New York, Los Angeles , San Francisco , Boston, Chicago , Washington , Minneapolis and Salt Lake City. (Rick Warner is the movie critic for Muse, the arts and leisure section of Bloomberg News. Opinions expressed are his own. This interview was adapted from a longer conversation.) To contact the writer on the story: Rick Warner in New York at rwarner1@bloomberg.net. To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net . |
2024-05-17 | Bloomberg | Biggest Investment Boom in Two Decades Spurs 4% Growth on Emerging Markets | Investment spending in emerging markets is outpacing expenditures in developed economies for the first time, as a surge in infrastructure supports global growth and profits at companies from Siemens AG (SIE) to Caterpillar Inc. (CAT) The “biggest investment boom of recent decades” will help boost expansion worldwide about 4 percent this year and next, compared with a long-run average of just below 3 percent, according to Michael Saunders , Citigroup Inc.’s chief European economist. International Monetary Fund data show investment will top 24 percent of global gross domestic product in 2012, the most in more than two decades, and then rise above 25 percent, the highest since records began 30 years ago. Saunders calculates that developing nations will probably secure the largest share of it this year. That’s showing up in the bottom line of Siemens, Europe’s largest engineering company. The Munich-based business predicts profits will rise about 75 percent to at least 7.5 billion euros ($10.6 billion) in the year ending Sept. 30. “The growth momentum from the emerging economies is fully intact,” Peter Loescher , Siemens chief executive officer, told Bloomberg Television’s “On The Move” with Francine Lacqua on May 4. “We have refocused the company on a broad-based infrastructure portfolio, on sustainability solutions, and we see the need for it all around the world.” Caterpillar, the world’s biggest manufacturer of construction equipment, last month lifted its full-year earnings forecast to between $6.25 and $6.75 a share from “near” $6 amid higher demand from emerging markets. Emerging Market Demand Investors can take advantage of the “megatrend” for infrastructure expenditure by buying the stocks of building- material suppliers China National Building Material Company Ltd. and France’s Cie. de Saint-Gobain SA, said Giles Keating, Zurich-based global head of research for private banking and asset management at Credit Suisse Group AG, which manages the equivalent of about $1.5 trillion. Credit Suisse’s emerging-market infrastructure index advanced 36 percent between the start of 2010 and the end of last month, compared with a 19 percent rise in the MSCI World (MXWO) Index of developed nation equities. Demand for copper, steel and other commodities used in construction also may “provide a floor” beneath raw-material prices, said Bob Baur, chief global economist at Des Moines- based Principal Global Investors, which oversees about $235 billion. The Standard & Poor’s GSCI Index of 24 commodities has fallen by about 10 percent this month. China Copper Phoenix-based Freeport-McMoRan Copper & Gold Inc. (FCX) , the world’s largest publicly traded copper producer, said April 5 it is confident the need for Chinese cooper will continue to grow even if the country’s economy slows. Global fixed investment will reach $23.2 trillion by 2016, an increase of 61 percent from last year, according to Saunders’ calculations based on IMF data, as urbanization prompts developing countries including China and India to plow cash into roads, power stations and water systems. Foreign direct investment in China climbed 15 percent to $8.5 billion in April as companies including Starbucks Corp. (SBUX) and Walt Disney Co. (DIS) expanded, the Ministry of Commerce said yesterday. Builders broke ground for a $4.4-billion Shanghai Disney Resort on April 8, the company’s first theme park in mainland China. The number of people in cities worldwide will grow by 1.5 billion in the next two decades, according to the research division of McKinsey & Co, a consulting firm. Outlays on railways and other basic structures may rise to $3.7 trillion in 2030 from $1.6 trillion in 2008 as spending on residential real estate more than doubles to $4.9 trillion. Another New York Richard Dobbs, a Seoul-based director at the McKinsey Global Institute, reckons China, the world’s No. 2 economy, would need to add residential and commercial floor space equivalent to building New York City every two years, to keep pace with population growth. India would need to add the footprint of Chicago each year. China also will lengthen its rail network to 120,000 kilometers (75,000 miles) from 86,000 by 2015, and its roadway capacity will surpass that of the U.S. within five years, from 70 percent of the size today, Morgan Stanley analysts project. The country’s urbanization ratio is rising toward the level of developed nations, to 63 percent longer-term from 47 percent now, the analysts said in an October study. The investment required to meet such needs is helping companies around the world, providing a buffer against weakness elsewhere in the global economy. U.S. expansion decelerated to 1.8 percent in the first quarter of this year after a 3.1 percent increase in the previous quarter. Stronger Elsewhere “We don’t see the demand in the U.S. being near as strong as the opportunities that we have elsewhere, particularly the Asia-Pacific region,” David Rosenthal, vice president of Exxon Mobil Corp. (XOM) , said on an April 28 conference call. Siemens said May 4 that orders from emerging markets totaled $7.48 billion euros in the quarter ending March 31, an increase of 52 percent. Zurich-based ABB Ltd. (ABBN) , the world’s largest maker of power-transmission gear, identified “positive signs” of recovery in its infrastructure-related businesses when it said April 27 that first-quarter profit rose 41 percent. In the U.S., Deere & Co. (DE) , the world’s biggest maker of farm equipment, said April 27 it plans to spend $100 million to expand manufacturing in India, where it expects an increase in mechanization. Caterpillar says it aims to deliver earnings of $8 to $10 a share in 2012 as demand for excavators, trucks and wheel loaders increases with construction of roads and buildings in China, India and Brazil. ‘Great Position’ “Companies like Caterpillar and Deere are going to benefit continually from the infrastructure build,” said Nick Calamos, who helps to manage $39.1 billion in assets as co-chief investment officer at Naperville, Illinois-based Calamos Asset Management Inc. The companies “are in a great position,” he told Bloomberg Television’s ‘Street Smart’ on May 3. Not every country will benefit, said Saunders at Citigroup in London. While Germany and Sweden should gain from greater demand for their products, Greece, Spain and the U.K. may not do as well, even as they need higher exports to offset fiscal austerity. The reason is that they have less trade with the countries that are driving spending, he said. The investment boom may end up raising borrowing costs by reducing the amount of capital, said Nobel laureate Michael Spence, an adviser to Newport Beach , California-based Pacific Investment Management Co., which runs the world’s largest bond fund. Real U.S. interest rates are currently about 150 basis points below their 3.3 percent average of recent decades, McKinsey estimates. Awash With Money “It’s reasonable to expect a fairly sharp rise in interest rates in the relatively near future,” Spence said. “Investment’s going to go back up to at or near post-World War II levels.” The chase for capital still may take time to trigger higher borrowing costs because “the world is awash with money,” said Axel Merk , president of Merk Investments LLC in Palo Alto , California. The 10-year Treasury yield has fallen to 3.11 percent from 3.61 percent at the start of this quarter on signs of a U.S. slowdown and continued purchases by the Federal Reserve of $600 billion in government debt. The next stage may be for emerging nations to accelerate their investment abroad as they look to reinvest their newfound riches. The United Nations last month reported that developing and transition economies accounted for 28 percent of such spending flowing elsewhere in 2010, up from 15 percent in 2007. China will invest more than $1 trillion abroad by 2020, according to estimates in a report published this month by the Asia Society and Woodrow Wilson Center for International Scholars. “There’s a new reality out there that the growth economies are the emerging markets and that they need infrastructure investment,” said Richard Threlfall, head of infrastructure, building and construction at KPMG LLP in London. “It creates an opportunity for countries to invest in those markets, but it also creates the opportunity for China, India and others to invest elsewhere.” To contact the reporters on this story: Simon Kennedy in London at skennedy4@bloomberg.net Richard Miller in Washington at rmiller28@bloomberg.net To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net Chris Wellisz at cwellisz@bloomberg.net |
2024-06-14 | Bloomberg | Iraq Veteran West Won’t Flinch at Selling Medicare Cuts to Florida Seniors | If some U.S. House Republicans are having qualms about the political fallout over their plan to privatize Medicare, Allen West isn’t one of them. Less than two weeks after voter opposition to the Medicare proposal helped elect a Democrat to an open House seat in New York, West offered constituents in his south Florida district an unambiguous defense of the plan that Republicans say is needed to save the federal insurance program for the elderly. “We have got to do something about this program or else,” he told voters of the 22nd Congressional District at a June 6 town-hall meeting at Old Davie School Historical Museum , a 1918 national landmark that sits amid Florida’s commercial and residential sprawl. “The clock is ticking -- 2024 and it goes away,” he said, referring to the first year when Medicare will be unable to pay full benefits, according to its trustees. “It won’t even be here for some of the seniors who are about to enter this program.” West, 50, is among 10 House Republicans identified by the National Republican Congressional Committee as likely to be targeted by Democrats next year because President Barack Obama carried their districts in 2008. For many, the future of Medicare looms as one of the largest issues. Already, two Democrats have said they are running against West, one of the Tea Party-backed candidates whose victories in November’s midterm elections enabled Republicans to control the House of Representatives this session. Lois Frankel, a former mayor of West Palm Beach , and businessman Patrick Murphy have declared their candidacies, setting up a Democratic primary next year. The nonpartisan Cook Political Report in Washington rates West’s re-election chances as a tossup. ‘Swing District’ Mitch Ceasar, the Democratic Party chairman in Broward County, which includes Fort Lauderdale , calls the 22nd the “definition of a swing district.” It stretches from Fort Lauderdale north along Florida’s southeast coast to Jupiter, with several inland enclaves in Palm Beach County. Palm Beach, Boca Raton and Fort Lauderdale, home to billionaire investor H. Wayne Huizenga, make the area the richest of Florida’s 25 congressional districts, with a median household income of $62,111, 2009 census data show. According to the 2010 census, 20.4 percent of the district’s 694,259 residents are 65 or older, meaning they are among the nation’s 48 million Medicare recipients. A Republican plan passed by the U.S. House in April would offer vouchers for the purchase of private health insurance when people become eligible for Medicare. The plan has met with public resistance so far: A Washington Post-ABC News nationwide poll of 1,002 adults conducted June 2-5 found that 49 percent of voters oppose the idea and 32 percent support it. Ammunition for Democrats While the plan stands little chance of becoming law, Democrats are already using it as a campaign issue against Republicans. Democrat Kathy Hochul won the May 24 special election in a reliably Republican House district in western New York after criticizing her opponent for endorsing the Medicare plan contained in the House-passed 2012 budget resolution. Democrats contend that Ryan’s plan would shortchange future beneficiaries because the premium subsidy wouldn’t keep pace with rising insurance costs. They cite an April 5 letter to Ryan from the Congressional Budget Office in which the CBO determined that by 2030 a typical 65-year-old under the Republican plan would pay 68 percent of his or her health-care costs, compared with 25 percent to 30 percent under traditional Medicare. At stake, Republicans say, is the future of the program, which is among the main drivers of the budget deficit -- and the party’s plan is intended to curb costs. Constituents Get It Another freshman Republican, Lou Barletta, represents the 11th Congressional District in northeastern Pennsylvania , where census data show that 16.4 percent of the 687,860 residents are over 65. He said his constituents see the need for the plan. “I’ve been encouraged by the conversations we’ve had with seniors back home,” Barletta, whose re-election is also rated a tossup by the Cook Political Report, said in an interview. These voters “understand that nothing will happen to their benefits, but they are concerned about their children and grandchildren and whether Medicare will be there for them.” Not all Republicans offer unwavering defenses of the language drafted by Wisconsin Representative Paul Ryan, chairman of the House Budget Committee. Last month, Representative Dave Camp of Michigan , the chairman of the House Ways and Means Committee, which has primary jurisdiction over Medicare, said he has no plans to draft legislation revamping the program. Just Numbers Ohio Republican Steve LaTourette said he tells voters that the House budget resolution is just “a set of numbers.” Only after two other committees draft legislation will they “be able to sit down and talk about it,” he said. “I’m not having any trouble,” LaTourette said in an interview. West, a blunt-spoken retired Army lieutenant colonel who is one of only two black Republican House members, doesn’t shrink from the issue of overhauling Medicare -- or from criticizing members of his own party. In April, he voted against the deal negotiated by House Speaker John Boehner to reduce $38.5 billion in government spending , saying it would result in only $352 million in actual cuts this year. “I like people to be upfront with me,” he told reporters at the time. “Surprises are for birthdays.” Last month, West took issue with a bipartisan group of lawmakers calling for faster troop withdrawals from Afghanistan , telling reporters: “Just because you killed Osama bin Laden does not mean the Taliban stop fighting.” Obama’s Leadership West, who retired from the military after being reprimanded for firing a gun close to the head of a detainee while in Iraq , added, “I would take these gentlemen over and let them be shot at a few times. Maybe they’d have a different opinion.” He is trying to focus the 2012 election campaign on Obama’s leadership, telling his constituents that the president and his fellow Democrats aren’t offering the right solutions for the nation’s economic and fiscal ills. “We can agree” that the 2008 financial crisis “was a bad situation,” West said at the Davie town-hall meeting. “But the thing is, leaders don’t take bad situations and make them worse. Leaders take bad situations and come up with viable solutions.” Then he was asked about Medicare. ‘Destroying Medicare’ “What ideas do you have to reduce the cost of delivery of Medicare for seniors versus just shifting the cost for Medicare to the patient?” said a written question from “Elizabeth from Fort Lauderdale.” West said Congress must “introduce a defined-contribution premium-support plan” because fee-for-service payments to doctors and hospitals are “destroying Medicare.” Another written query warned West: “Don’t cut Medicare.” He took that as an opportunity to attack the health-care overhaul the Democrats passed last year when they controlled Congress. “There is a group of individuals that voted last year to cut Medicare,” he said. “They voted $500 billion out of Medicare” to help finance the legislation. The Republicans “are not leaving any American in the lurch” because “if you are of a lower-income rate as a senior, you will be taken care of,” West said. He told the audience of more than 200 that only people younger than 55 would be affected by the proposed changes because the new system would begin in 2022. Significant Impact Democrats say that impact would be significant. If Ryan’s plan is enacted, 124,000 current residents of West’s district who are between the ages of 44 and 54 would have to save from $182,000 to $287,000 to pay for future health-care costs, according to a report by the Democratic staff of the House Energy and Commerce Committee. Financial planner Joni Simon, 65, of Weston, said she was reassured by West’s words that Republicans “would not just give us a voucher and throw us to the wolves.” Ed Brown, 65, a retired Social Security Administration official, said he wasn’t convinced that the comprehensive change Republicans are proposing is necessary. He said Congress should first see “if you can save Medicare by cutting some of the money that will be spent frivolously” on other programs. “I like Medicare the way it was,” Brown, a Republican, said. To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net |
2024-04-07 | Bloomberg | Obama Policies Echo Clinton’s 1990s Best of Times | A newly elected Democratic president pushes a controversial tax increase through Congress without a single Republican vote. A veteran Federal Reserve chairman holds short-term interest rates at record lows. And the economy struggles to recover from a financial crisis. 2013? No, 1993, when Bill Clinton was president, Alan Greenspan headed the central bank and the U.S. was coping with the savings and loan collapse. The parallels between then and now, particularly on the policy front, suggest better economic times may lie ahead. “We had tight fiscal and easy-money policies in the 1990s, and we had the longest peace-time expansion,” said Allen Sinai , chief executive officer of Decision Economics Inc. in New York. “Now that same sort of combination may give us stronger growth and another three to five years” of expansion. The magnitudes are different: The budget deficit is bigger and interest rates are lower, as President Barack Obama and Fed Chairman Ben S. Bernanke were forced to respond to the worst contraction since the Great Depression. That slump was more than three times as deep and lasted more than twice as long as the eight-month recession that preceded Clinton’s tenure. The policy mix 20 years ago proved to be a tonic for the financial markets. The Standard & Poor’s 500 Index of stocks more than tripled from 1993 to a peak of 1,527 in 2000. While bond yields rose in 1994 as the Fed increased the federal funds rate from a then-record-low 3 percent, yields subsequently tumbled as the central bank eased policy for much of the rest of the decade. And the dollar ended 2000 more than 15 percent stronger than at the start of 1993 against a basket of major currencies. Something Similar Something similar could be in store this time, provided the economy keeps growing. “If this cycle can extend out three or more years, the S&P has a solid chance of reaching a new all-time high in real terms,” Michael Darda, chief economist at MKM Partners LLC in Stamford, Connecticut, said in an April 2 e-mail to clients. That would push the index over 2,000, he added. While the stock gauge fell 0.4 percent to 1,553.28 on April 5 following news of a smaller-than-forecast rise in payrolls, it is still 9 percent higher than at the start of the year, in spite of higher taxes and reduced government spending. Investors have been “looking beyond the braking effect” of those steps on the economy and taking comfort from the Fed’s accommodative actions, said Michael Holland , chairman and founder of New York-based Holland & Co., which oversees more than $4 billion. “There are some reverberations of things that were going on in the 1990s in the mix of the two” policies. Obama-Congress Squabbles Squabbling over the budget between Obama and congressional Republicans has resulted in real savings -- as budget squabbles did 20 years ago. “It’s not been a pretty process,” said Roberto Perli, a former Fed official who is now a managing director at International Strategy & Investment Group LLC in Washington. “But we have accomplished something. And the market internalizes that.” The Congressional Budget Office forecasts that discretionary expenditures by the federal government will decline to 6.4 percent of the economy in 2016 from 8.9 percent in 2009, when Obama first took office. Military spending is projected to fall to 3.3 percent from 4.7 percent, helped by the end of the wars in Iraq and Afghanistan. Cold-War Spending Such an outcome would echo that of the Clinton years. Under the 42nd president, discretionary spending dropped to 6.3 percent of gross domestic product in 2000 from 8.2 percent in 1993. Defense outlays fell to 3 percent from 4.4 percent, thanks to the end of the Cold War with the Soviet Union. Greenspan responded to the budget squeeze in the latter half of the 1990s by resisting pressure to raise rates, even as unemployment fell to levels not seen in decades. Instead, he nudged rates lower, reducing the central bank’s target for the benchmark overnight interbank lending rate to 4.75 percent at the end of 1998 from 6 percent in early 1995. Under Bernanke, Greenspan’s successor, the Fed again is acting to cushion the impact of tighter fiscal policy on the U.S., this time through the purchase of $85 billion of mortgage-backed debt and Treasury securities per month. The central bank is worried that “restrictive fiscal policies may slow economic growth and job creation in coming months,” Bernanke said at a March 20 news conference. Budget Surplus While the policy mix now echoes that of the 1990s, the orders of magnitude are different. The confrontation between Clinton and House Speaker Newt Gingrich eventually resulted in a budget surplus for fiscal 1998, the first in 29 years. “Today you’re going from a huge deficit to a still-large deficit,” Perli said. “But the direction is similar.” The shortfall will drop to $476 billion in 2016 from a record $1.4 trillion in 2009, according to the CBO. Monetary policy , too, is on a different scale: It’s “much more radical,” said John Makin, a resident scholar at the American Enterprise Institute in Washington and a senior adviser to Cornwall Capital Inc. The Fed cut the target for the fed funds rate to near zero in December 2008, and in December 2012 pledged to keep it there as long as unemployment exceeds 6.5 percent and projected inflation isn’t more than 2.5 percent -- the first time policy makers linked the benchmark borrowing cost to economic indicators. Eight-Month Recession The economy also is in a much different place. When Clinton assumed the presidency in 1993, the U.S. already was recovering from the 1990-91 recession, which took 1.4 percent off GDP. The high for the unemployment rate was 7.8 percent, in 1992, and during his two terms, it averaged 5.2 percent. When Obama became president in January 2009, the U.S. was still in the midst of an 18-month recession that didn’t end until June. By that time, it had lopped 4.7 percent off GDP. Unemployment rose to a 26-year high of 10 percent that year. It was 7.6 percent last month. To help the labor market heal faster, Robert Rubin suggests twinning a “moderate upfront stimulus” with the same kind of budget-balancing strategy he championed in the 1990s as Clinton’s Treasury secretary. Such an approach would embolden companies to hire more workers, in part by restoring executives’ faith in the government’s ability to corral the deficit, he told a March 13 conference convened by The Atlantic magazine. Discretionary Squeeze “It’s the opposite of what we’ve done,” said Rubin, who is now co-chairman of the Council on Foreign Relations in New York. He criticized as “counter-productive” the squeeze on discretionary spending, saying it would deprive the economy of needed public investment. Federal Reserve Bank of New York President William C. Dudley also took issue with the size of fiscal restraint, arguing that it’s putting an unnecessarily large drag of about 1.75 percent of GDP on the economy this year. This is “an unfortunate outcome,” he told the Economic Club of New York on March 25. The result, said Priya Misra , head of U.S. rates strategy at Bank of America Merrill Lynch in New York, is that monetary policy will have to “stay easy, longer,” to offset the restrictive fiscal posture. That will be good for the economy in the longer term, Sinai said. He sees growth strengthening to 2.7 percent this year on a fourth quarter over fourth quarter basis, from 1.7 percent in 2012. Next year, it will hit 3 percent to 3.5 percent, he said. Economic Footprint The government’s smaller economic footprint gives the more-productive private sector additional room to grow, Sinai said. Low borrowing costs encourage companies to invest and expand, helping to lift the economy’s potential. “The private sector benefits more over the long run from easy money than it is hurt by tighter fiscal policy,” he said. United Technologies Corp. (UTX) , maker of Pratt & Whitney jet engines and Otis elevators, predicts the expansion will remain intact, even though cuts in U.S. military spending may trim the Hartford, Connecticut-based company’s profits. “The U.S. economy is better, and it is going to continue to get better,” Chief Financial Officer Gregory Hayes said at a March 14 analyst meeting. “We’ve got another year-and-a-half or so probably of low interest-rate environment, which we could hope to capitalize on.” The unconventional nature of monetary policy -- in particular the Fed’s use of asset purchases to influence long-term interest rates -- opens up another avenue for it to dovetail with the budget, according to David Ader , head of U.S. government-bond strategy at CRT Capital Group LLC in Stamford, Connecticut. As the Fed cuts back on its purchases of Treasuries, the federal government will be reducing its issuance of such securities in line with a declining deficit. “It’s not going to be one for one,” Ader said. “But the market will be surprised by how balanced it will be.” To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-03-15 | Bloomberg | Iran Drops Four Places Among Indian Oil Suppliers Amid Sanctions | Iran slid four places to become India ’s seventh-largest crude supplier from April to December, as the South Asian nation reduced imports from the Persian Gulf state because of global sanctions. The Middle East producer exported 9.7 million metric tons of crude to India, Asia ’s second-biggest energy consumer, in the fiscal year that started in April, according to data given to parliament by P. Lakshmi, the Indian junior oil minister. Iran sold 7.2 percent of the Asian nation’s imports in that period, down from 10.5 percent in the prior 12 months, the data show. The U.S. and its allies enacted sanctions in July to restrict Iran’s oil exports, its largest source of revenue. The countries are trying to pressure the Persian Gulf nation to curb its nuclear program, which they say is designed to develop an atomic weapon. Indian refiners have struggled to get tankers for transporting supplies from Iran, and may have to stop buying crude from there because of difficulties in receiving insurance cover for plants that process the oil. Saudi Arabia , Iraq, Venezuela , Kuwait , the United Arab Emirates , and Nigeria provided more oil than Iran, according to the data. Iran was India’s third-biggest crude supplier in the fiscal year to 2012, selling 18.1 million tons, according to the data. India, which relies on imports for 80 percent of its oil needs, bought a total of 134 million tons of crude from April to December last year, the government data show. Asia’s third- largest economy took in 171.7 million tons in the year ended March 31, 2012. U.S. Waiver The drop in India’s imports show that the South Asian nation is complying with a U.S. requirement that calls for “significantly reduced” purchases from Iran. The U.S. in December renewed a waiver for India and eight other nations from a law that cuts institutions off from the American banking system if they process payments for Iranian oil. The exemption is subject to a review every 180 days. Indian refiners planned to reduce their purchases from Iran by as much as 20 percent in the year starting April 1 to keep the waiver, a Bloomberg News survey of five refinery officials last month showed. OPEC’s biggest oil producers, including Iraq and Saudi Arabia, have assured that they have enough supplies to provide extra crude to India if it halts imports from Iran, four people with knowledge of the matter said March 13. Indian refiners may cease buying Iranian crude as local insurers refuse to cover the risks for using the oil, P.P. Upadhya, the managing director at Mangalore Refinery & Petrochemicals Ltd. (MRPL) , said March 8. The refiners and the Indian government plan to discuss the option of forming a fund to be run by the processors and government-owned insurers to provide cover for the plants in coming weeks, two people with knowledge of the matter said on March 13. To contact the reporters on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net ; Rakteem Katakey in New Delhi at rkatakey@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net |
2024-10-03 | Bloomberg | BofA, JPMorgan Face $13.5 Billion in FHA Claim Costs, FBR Says | Bank of America Corp. (BAC) , JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) are among mortgage servicers that may face $13.5 billion in costs if the Federal Housing Administration rejects insurance claims on soured loans, according to FBR Capital Markets Corp. Denials from the FHA, which insures loans made by banks and private lenders for home purchases, could be the latest expense from U.S. housing programs, Paul Miller , an FBR analyst, said today in a note to clients. The government said in May that it could pursue other lenders after suing Deutsche Bank AG for more than $1 billion, accusing the firm of lying to the FHA while arranging mortgage insurance. “The servicing of FHA loans comes with highly technical regulatory mandated procedures,” Miller said in the note. “The agency’s narrowly proscribed requirements make it more likely for the servicers, not the originators, to be tripped up. If the agency is looking for a way to deny a claim, the servicing process is an easy target.” Lenders and servicers have faced surging costs as U.S.- owned Fannie Mae and Freddie Mac demanded that banks repurchase defective loans and the U.S. sued 17 firms to recoup losses on mortgage-backed securities. Bank of America has plunged 59 percent in New York this year, falling below $6 today for the first time since 2009. JPMorgan and Wells Fargo have dropped 32 percent and 25 percent, respectively. The FHA also could target lenders, which may result in $11.5 billion in additional costs, Miller wrote. The agency has been focusing on “procedural issues,” rather than the quality of collateral behind mortgages, making it more likely that servicers will face scrutiny, he wrote. Delinquent Loans Borrowers have turned more to FHA-backed loans after the collapse of subprime lenders, according to Miller. The FHA covers about 10 percent of all mortgage debt outstanding, up from 4 percent in 2006. The insurance program has $4.7 billion in capital against a $1 trillion portfolio, he wrote. “If housing prices decline further, more loans could become delinquent and the agency’s capital buffer could creep toward zero,” Miller wrote. “The agency could turn to widespread claim denials in order to reduce losses to its insurance fund.” Bank of America Chief Executive Officer Brian T. Moynihan was asked during a June conference whether he was concerned that the FHA would reject the lender’s claims. “I’d say it is a risk,” said Moynihan, 51. “All of us, as we think about the mortgage business, continue to think about how you do business with various counterparties if their behavior can change on you during stress times.” Jerry Dubrowksi, a spokesman for Charlotte, North Carolina- based Bank of America and Tom Kelly of New York-based JPMorgan declined to comment. Vickee Adams of Wells Fargo, based in San Francisco, and the FHA’s Tiffany Thomas Smith didn’t immediately return phone calls seeking comment. To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net To contact the editor responsible for this story: Rick Green in New York at rgreen18@bloomberg.net . |
2024-05-10 | Bloomberg | Europe’s Leaders Can Save Union for 320 Euros per German | Europe ’s chaotic political landscape is doing an excellent job of exposing a fundamental flaw in the euro area: the lack of a mechanism to revive growth in hard-hit economies. Recent elections in Greece , France and Italy , where anti- austerity candidates made major gains, have demonstrated the failure of policies that seek to solve the euro area’s debt problems through spending cuts and tax increases alone. Economic strife has brought Greece to the brink of a political breakdown and exit from the euro -- a move that could trigger contagion throughout the currency area and have dire repercussions for the entire European project. Economists have long warned that the euro area would be prone to such disasters. The member states’ economies are too out of sync to be considered an “optimum currency area.” Prices, wages and the flow of people across borders are not dynamic enough, a shortcoming that can be fatal unless the currency union has a powerful shock absorber. In the currency area known as the U.S., for example, federal transfers such as income-tax credits help struggling states catch up, cushioning as much as 40 percent of the blow of economic downturns. Restore Growth The obvious remedy for Europe’s deepening problems, then, is to restore the growth needed to bolster tax revenue and reduce budget deficits, thus making debts more sustainable. The victory of Francois Hollande in France’s May 6 presidential election suggests that many Europeans, in their own way, recognize this. Sadly, talk of a new “growth pact” among European officials has so far lacked the necessary substance. Some of Europe’s leaders, particularly in Germany, think the pact should be mainly a recommitment to stalled structural reforms. They have a point: The region’s lagging economies need to make it easier to fire workers, so businesses can restructure more quickly and prices and wages can fall to competitive levels. In France, for example, businesses are often afraid to hire because it can take years to get rid of unwanted employees. Such reforms, though, will only inflict more pain in the near term unless they are combined with stimulus measures. Officials have signaled a willingness to ease the harsh deficit targets set out in Europe’s recently forged fiscal pact, and to boost public-works spending through the European Investment Bank. These temporary measures will have only a limited effect, and won’t help fix the euro area’s flaws. It would be folly to expect Europe to build a full system of federal transfers, like that in the U.S., in time to save the common currency. But a new proposal by two economists -- Jacques Delpla of France’s Conseil d’Analyse Economique and Pierre- Olivier Gourinchas of the University of California , Berkeley -- suggests a way forward: Euro-area countries could create a common unemployment-insurance fund, which would give struggling members an economic boost as they liberalized their labor markets. The system would funnel money precisely to the people and countries that need it most, and precisely when they need it. Countries that chose to join would make an annual contribution equivalent to roughly 1 percent of their gross domestic product, while countries experiencing high unemployment could tap the fund for much more than that amount. Delpla estimates that net payments to Spain , where the unemployment rate is approaching 25 percent, could be as much as 2 percent to 3 percent of GDP. That might be enough to lift the economy out of recession. New Labor Contract Crucially, the system wouldn’t be another form of budget support, or a return to the European welfare state. Rather, it would circumvent dysfunctional national bureaucracies by offering a new, voluntary European labor contract directly to workers. Employers throughout the euro area could simply download the contract, which would represent -- and require -- a radical change in most countries’ employment laws. If workers signed up, they would immediately be easier to fire, and, if fired, would have to enter a retraining program or demonstrate persistent efforts to find a new job. In return, they would be guaranteed severance pay commensurate to seniority and receive European unemployment benefits on top of what their national governments provide. An unemployed Greek store clerk, for example, might get 1,000 euros a month from the insurance fund in addition to Greek unemployment benefits, which are less than half that. To provide an immediate boost, countries could allow the unemployed to sign up right away. The payments from a unified fund could sharply change attitudes toward the European Union among the hardest-hit Greeks, Portuguese and Spaniards, providing the political glue needed to hold the European project together. There is, of course, a catch: Germany and other relatively well-off countries will balk at the idea of direct transfers to stricken nations. So far, their support has come almost exclusively in the form of loans. Monitoring job searches and training programs in recipient countries could also be a challenge. But the fund pays nothing unless workers sign up for labor reforms, and the cost is reasonable -- about 26 billion euros a year for Germany , or about 320 euros per German. Beyond that, the system works both ways: At some point, Germany and other northern European countries could find themselves on the receiving end. In the long run, rich countries should contribute no more, as a share of GDP, than do poor countries. Eventually, Europe will have to forge some kind of fiscal union if it wants the common currency to survive. Given the imminent risk and potentially devastating cost of a euro breakup, the region’s leaders would be wise to take a step in the right direction now. Read more opinion online from Bloomberg View. Today’s highlights: the View editors on the future of Fannie Mae and Freddie Mac ; Stephen L. Carter on the overuse of the word “emergency” ; Jonathan Weil on Chinese banks ; Virginia Postrel on Amazon’s move into high fashion ; Jonathan Alter on human capital and venture capital ; Tom Valasek on Ukrainian politics and soccer ; Gerald M. Rafshoon on Mitt Romney and Jimmy Carter. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-10-06 | Bloomberg | Former SEC Watchdog Kotz Violated Ethics Rules, Review Finds | The former internal watchdog for the U.S. Securities and Exchange Commission violated ethics rules by overseeing investigations that touched on people with whom he had “personal relationships,” an outside review found. H. David Kotz , who resigned as the agency’s inspector general in January amid questions about his tactics and conduct, shouldn’t have participated in a probe of the SEC’s office re- organization because he engaged in “extensive” and “flirtatious” communications with an employee associated with the project, according to the review. Kotz also shouldn’t have opened an investigation related to R. Allen Stanford’s Ponzi scheme because he was friends with a female attorney who represented victims of the fraud, investigators said in the 66-page report. The outside review of Kotz’s activities was led by David Williams , the inspector general of the U.S. Postal Service. It was requested by the commission after an investigator in the inspector general’s office raised allegations about Kotz’s personal conduct. The report, dated Sept. 17, was released in response to a public records request. Kotz, who didn’t respond to requests for comment, is a director at Berkeley Research Group, a consulting firm in Washington. Kotz “appeared to have a conflict of interest” when he opened and supervised an investigation into the court-appointed receiver in the Stanford case because of his relationship with Gaytri Kachroo, a Massachusetts attorney, the review found. One month after beginning the probe, Kotz listed her as a business reference and a “personal friend,” the report noted. Seeking Business Kachroo, who declined to be interviewed for the report, said she was one of many who asked Kotz to probe the Stanford receiver. “My understanding is that the investigation of the Stanford receivership would not have been initiated but for numerous complaints made before ours,” Kachroo said in an e- mail. “The request made by my firm was a formal letter request made on behalf of hundreds of Stanford victims my firm represents, who have no relationship with Mr. Kotz whatsoever.” In a response included in the report, Kotz said that he met with Kachroo after his departure from the SEC in an effort to “drum up business” for his new job. He indicated that their meeting didn’t result in a close business relationship or additional work for his company. Madoff Case The review also called into question Kotz’s work on his most high-profile investigation -- of the SEC’s failure to catch the Bernard Madoff Ponzi scheme -- because of his friendship with the whistleblower in the case, Harry Markopolos. While investigators were unable to determine when the two became friends, Williams concluded it would have violated U.S. ethics rules if their relationship began before or during Kotz’s probe. Markopolos had tried to flag the Madoff fraud to the SEC, but was rebuffed. On the office re-organization report, the review found there was no evidence Kotz interfered with his investigators’ conclusions. Still, it noted, Kotz’s “flirtatious communications” with a woman working at the SEC occurred during the investigation. ‘Retail Therapy’ In a July 20, 2008 e-mail included in the review, the woman, whose name was blacked-out in the text, wrote to Kotz that she had “resorted to retail therapy.” Kotz answered: “Nice, what are you buying? How about a short skirt or two?” The woman asked in response whether she was exempt from the dress code, to which Kotz replied, “Special exemption for after work get togethers.” During a Sept. 4 interview with investigators, Kotz denied having any personal, romantic or sexual relationship with the woman. When the e-mails were discussed, Kotz indicated he was simply talking to her the way he would talk to any other employee and that he didn’t believe any of the communications were inappropriate, the report said. Senator Charles Grassley , an Iowa Republican who has pushed for a strong inspector general at the SEC, said in a statement that the report “reveals poor judgment by several top employees, including the former inspector general himself.” Still, he said that “the report also found that the integrity of important audit and investigative work conducted by the office was not compromised.” Probes Questioned Kotz had a controversial four-year tenure at the SEC. He was lauded by some lawmakers for his thorough investigations and willingness to hold the agency accountable for missteps overseeing Wall Street. Still, the watchdog was publicly criticized by SEC employees and alumni who said some of his probes lacked evidence of wrongdoing and unfairly damaged workers’ reputations. He also drew criticism for an interview he gave last year to a Philadelphia-area financial adviser, Phillip Cannella III, for a paid radio program. Cannella uses Kotz’s remarks to market a “crash-proof retirement” to senior citizens and has refused requests by the SEC to take video clips from the interview off his website. After his meeting with Kotz, Cannella procured three club- level tickets to a sold-out Philadelphia Eagles football game for the watchdog and his children. Kotz reimbursed Cannella $95 apiece; the team said the tickets had a value of $240 each. Kotz has said his investigations helped turn around an ineffective agency that had fallen down on the job. He also said he followed ethics advice in his interactions with Cannella. The SEC watchdog office is being overseen on a temporary basis by Jon Rymer, the inspector general of the Federal Deposit Insurance Corp. For Related News and Information: To contact the reporters on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net ; Joshua Gallu in Washington at jgallu@bloomberg.net. To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net . |
2024-04-12 | Bloomberg | Black’s Apollo Strengthens Former Drexel Links With Push Into Brokerages | Leon Black’s Apollo Global Management LLC is joining private-equity firms that have their own broker-dealers, relying in part on an investment bank built by his former boss at Drexel Burnham Lambert Inc. Apollo, which is based in New York , invested an undisclosed amount in preferred stock of Morgan Joseph TriArtisan LLC, a securities firm co-founded by the late Drexel Chief Executive Officer Fred Joseph, according to a March 31 regulatory filing. The firm also registered its own brokerage, AP CM LLC, to find clients and negotiate deals for its buyout and hedge funds, according to the same filing. Apollo, which gained a listing on the New York Stock Exchange in March through a $565 million share sale, follows publicly traded rivals Blackstone Group LP (BX) and KKR & Co. in setting up its own broker-dealer. The firm is seeking a bigger share of fees paid by its portfolio companies to sell securities or restructure debt, said James Hill, who runs the private- equity practice of law firm Benesch LLP in Cleveland. Apollo’s principals “are probably sitting around their boardroom saying ‘Last year, we paid tens of millions of dollars in investment-banking fees,’” Hill said in a telephone interview. “‘Maybe we should be doing this ourselves.’” Apollo, with $67.6 billion in assets as of Dec. 31, said in the offering documents for last month’s stock sale that it may pursue growth by acquiring other investment managers and entering the insurance, broker-dealer or financial-advisory industries. Charles Zehren , a spokesman for Apollo, declined to comment on either the broker-dealer start-up or the Morgan Joseph investment. Drexel Connections The investment in Morgan Joseph TriArtisan, formed through the December merger of Morgan Joseph LLC and merchant bank Tri- Artisan Partners LLC, entitles Apollo to “a percentage of dividends declared on Morgan Joseph’s revenues from its underwriting activities,” according to the filing. Morgan Joseph TriArtisan, also based in New York, will help underwrite bond sales for companies controlled by Black’s funds, the filing said. Apollo may provide additional financing to the securities firm to help it underwrite these offerings, according to the SEC filing. The investment allows Black, 59, to strengthen his longtime connection to former colleagues at Drexel, where Michael Milken pioneered the use of high-yield, high-risk bonds to finance a surge in takeovers during the 1980s. Drexel filed for bankruptcy protection in 1990 after Milken was indicted for securities violations as part of the biggest insider trading scandal at the time. Black, once the firm’s head of mergers and acquisitions, started Apollo that year. Milken’s Son John Sorte, 63, who was CEO at both Drexel and Morgan Joseph, now holds that title at Morgan Joseph TriArtisan. Mary Lou Malanoski, former chairwoman of Drexel’s credit committee, heads investment banking at the combined firm. Milken’s son Lance is a partner in Apollo’s private equity group, having worked for Black for about 13 years. Milken pleaded guilty to six felony securities laws violations in 1990 and served 22 months in prison. The SEC barred Joseph, Drexel’s CEO during the 1980s, from holding a top management position at a securities firm after he settled allegations of failing to supervise Milken. The SEC readmitted Joseph as managing director of a Morgan Joseph affiliate in May 2002. Joseph, who died in 2009 at age 72, co-founded Morgan Joseph LLC in 2001 when he was part of a group that bought a retail brokerage established by John Adams Morgan, the great- grandson of financier J. Pierpont Morgan. Joseph sought to create a high-yield business for mid-size companies and hired investment bankers laid off by larger securities firms after the technology-stock bubble burst in 2000, said Hill. ‘New Models’ “Morgan Joseph was formed during the recession before the Great Recession” of 2008, Hill said in a phone interview. “Investment banks were dumping lots of really good investment bankers.” Realogy Corp., the Parsippany, New Jersey , residential real estate brokerage that Apollo acquired in April 2007 in a $9 billion transaction, hired Morgan Joseph along with Goldman Sachs Group Inc. (GS) , JPMorgan Chase & Co. (JPM) and others to underwrite a $700 million lien note sale in February, according to a company filing. NCL Corp., the Apollo-controlled parent of the Norwegian Cruise Line, listed Morgan Joseph as an underwriter in a November filing for a $250 million high-yield bond sale. “The conventional wisdom is that the U.S. is turning into Canada , where large institutions are going to dominate everything,” Brad Hintz, a securities-industry analyst at Sanford C. Bernstein & Co. in New York, said in a phone interview. “And yet we are seeing a bunch of new models popping up.” Blackstone, KKR Blackstone has at least two registered broker-dealers, including one that conducts the firm’s financial advisory business and a second, Park Hill Group LLC, that finds institutional investors for the parent company’s buyout and hedge funds. KKR Capital Markets LLC, a KKR subsidiary that is registered as a broker-dealer, arranges debt and equity financing for transactions, structures investment products and underwrites securities offerings. TPG Capital LP, the private equity firm founded by David Bonderman , also has a registered broker-dealer that markets the company’s funds to investors. While Apollo plans to use Morgan Joseph to underwrite securities offerings, AP CM will line up investors for Apollo private-equity and hedge funds, a task the parent company had delegated to firms including J.P. Morgan Securities and Park Hill Group LLC, a unit of rival Blackstone, filings show. Finding Investors AP CM’s broker-dealer registration, submitted to the SEC in September, was approved April 1, according to documents on the Financial Industry Regulatory Authority’s website. The broker- dealer’s president is Barry J. Cohen, who joined Apollo in July 2008 after 21 years at Bear Stearns Cos. with stints as head of risk arbitrage and senior managing director of alternative investments, the documents show. Apollo will also use the broker-dealer for some tasks traditionally handled by investment bankers, such as negotiating buyouts and debt restructuring efforts on behalf of its portfolio companies, according to its March 31 SEC filing. Under U.S. financial regulations, companies must register with the SEC as a broker-dealer to receive transaction fees in return for marketing securities to investors. The firm’s sixth buyout fund and the companies it controlled sought to free up cash in 2009 by repurchasing bonds at a discount or refinancing borrowings so they matured later. The restructuring efforts cut the amount of debt due at these companies through 2016 by 36 percent to $33.6 billion, while maturities scheduled for 2017 through 2019 tripled to $16.7 billion, according to a client presentation in November. To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net |
2024-11-10 | Bloomberg | Canada's Dollar Rises to Seven-Week High Against Euro on Commodity Outlook | Canada’s dollar climbed to the highest level in seven weeks against the euro on speculation Europe’s sovereign-debt crisis will make currencies related to commodities more attractive. The loonie rose versus all of its most-traded counterparts after dropping against most of them in October on concern a stalled U.S. recovery would slow Canada’s economy. The Canadian dollar rose versus the greenback today as crude oil gained. “In the commodity space it’s been far more positive for prices,” said Mike Moran , a senior currency strategist at Standard Chartered in New York, in an telephone interview. “You would expect to see the euro underperform commodity currencies broadly.” The Canadian currency climbed 0.9 percent to C$1.3760 versus the euro at 12:50 p.m. in New York, from C$1.3884 yesterday. The loonie gained 0.6 percent to C$1.0022 per U.S. dollar, from C$1.0080 yesterday. The loonie was supported as Finance Minister Jim Flaherty said Chinese insurance companies will be allowed to invest in Canada through their wealth-management operations, The agreement with China gives Canadian financial markets access to a pool of up to C$106 billion ($106 billion), Flaherty said in a statement today from Seoul, South Korea. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-07-12 | Bloomberg | What Glass-Steagall 2 Gets Wrong: Everything | A new bill proposed by, among others, Senators John McCain and Elizabeth Warren, misses the point about what caused the financial crisis. The so-called Glass-Steagall 2 would do nothing to protect us from the devastation we recently experienced. Worse, it threatens to distract attention away from legitimate reform efforts. There is a myth, popularized in part by inane television programs , that the 1933 decision to separate commercial banking and investment banking made the financial system safe and promoted decades of prosperity. According to this false narrative, the financial system was just fine until the government decided to repeal the Glass-Steagall Act of the early 1930s in 1999. This allegedly empowered unsavory securities dealers to gamble with customer deposits, or something. People who believe this story think that the 2007 crisis would never have happened if the wall separating commercial and investment banks had remained intact. Similarly, they also believe that future crises can be prevented by enforcing a hard separation between "boring" banking (mortgages, loans to businesses, etc.) and "dangerous" banking (everything else, especially derivatives trading). This line of thinking has inspired recommendations to " ring-fence " commercial banking operations in Europe, as well as the U.S. " Volcker Rule " that is supposed to limit the ability of banks with insured depositaries to engage in proprietary trading, among other things. All of these measures are a waste of time. As my colleague James Greiff notes, taking on deposits and lending for long periods of time is inherently risky. Iceland, Ireland and Spain all managed to generate devastating debt bubbles without the help of derivatives or complex securities. Here in the U.S., Countrywide, Washington Mutual, Wachovia and Indymac were all "boring" lenders that managed to fail spectacularly because they had made bad bets on mortgages amid a housing bubble. Nevertheless, the strange notion persists that certain financial activities are basically safe while others are dangerous by their very nature. But don't take my word for it: Warren herself told Andrew Ross Sorkin in an interview last year that the financial crisis would not have been prevented by Glass-Steagall. (To be fair, she also argued that the 1999 repeal sent a signal to companies and regulators that the financial industry could do whatever it wanted.) I wouldn't mind this Quixotic push to roll back decades of bank mergers if, as Kevin Roose argues in New York Magazine, it were part of a long game to expand the debate about banking regulation. However, it looks more like a distraction from more useful issues, such as raising equity capital requirements and protecting consumers from products designed to take advantage of them. Some cynics even suggest that the banks are surreptitiously encouraging Warren in her misguided adventure in order to keep her away from issues where she can actually endanger their business model. There is a much better policy program out there for those who genuinely want boring banking: separate money creation from lending. Companies that take deposits and offer payment services can only hold reserves issued by the central bank. Any company that wants to make loans has to finance all of its operations with equity raised from investors. That's what Warren and her colleagues should suggest if they really want to make banking safer. (Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter.) |
2024-12-01 | Bloomberg | Toyota Gains as U.S. Auto Sales Accelerate | Toyota (7203) Motor Corp., posting its first monthly sales increase since April, joined Chrysler Group LLC and Nissan Motor Co. in topping analysts’ estimates, leading to the best U.S. light-vehicle sales pace in more than two years. Toyota deliveries rose 6.7 percent in November to 137,960 cars and light trucks, the Toyota City, Japan-based automaker said in a statement. Chrysler sales soared 45 percent to 107,172 and Nissan increased 19 percent to 85,182. Ford Motor Co. (F) and General Motors Co. (GM) , boosted by demand for F-Series and Silverado pickups, also posted gains. Four of the six largest automakers by U.S. sales beat expectations, boosting industry sales to a 13.6 million seasonally adjusted annualized rate , according to Autodata Corp. The pace exceeded the 13.4 million average estimate of 14 analysts surveyed by Bloomberg and is the best month since sales were helped by “cash for clunkers” in August 2009. “Consumers have been waiting for this,” Jessica Caldwell, an analyst for the researcher Edmunds.com, said today in a phone interview. “Cars are getting old, and people are getting to the point where they need to replace them. There’s recession fatigue and people want to buy. We’re getting tired of being in this saving pattern.” Sales of Toyota’s Prius hybrid rose 49 percent to 15,208, while deliveries of its Camry sedan climbed 13 percent to 23,440. The automaker exceeded five analysts’ average estimate for a 5 percent increase in November deliveries. Jeep Surges Chrysler, the automaker controlled by Fiat SpA (F) , topped the 37 percent gain predicted by eight analysts as its Jeep brand sales rose 50 percent. Nissan deliveries exceeded five analysts’ average estimate for a 12 percent rise. Ford sales rose 13 percent, beating estimates for a 10 percent increase, while GM’s gain of 6.9 percent missed estimates for a 7.4 percent gain, both the average of eight estimates. Ford’s F-Series pickup deliveries climbed 24 percent and GM’s Silverado sales increased 34 percent. “You’re seeing some elements of housing stabilize, the commercial sector is showing a bit of growth, gas prices have moderated and there’s some support on those vehicles from an incentive standpoint,” Paul Ballew , chief economist for Nationwide Mutual Insurance Co., said in a phone interview. Ford plans to build 675,000 cars and trucks in 2012’s first quarter, a 3 percent increase from the year-earlier period, according to a company statement. Ford’s sport-utility vehicle sales climbed 29 percent, while car deliveries fell 8.8 percent, with the Focus declining for a fifth-consecutive month. Away From Cars “We’re moving away from cars because we are finding crossovers that exceed our miles per gallon expectations,” Rebecca Lindland , an analyst with researcher IHS Automotive, said in a phone interview. “We’ve discovered we don’t have to compromise on space to get fuel economy. The Explorer and Escape are perfect examples.” Sales for Honda Motor Co., Japan ’s third-largest automaker, missed estimates, dropping 6.4 percent to 83,925 in November, the company said in a statement on its website. The automaker cited reduced production at North American plants resulting from floods in Thailand that disrupted parts supply. Analysts expected Tokyo-based Honda to report a 2.6 percent increase, the average of five estimates. Toyota’s Supply Toyota’s inventories are recovering from Thailand’s floods and the March earthquake and tsunami in Japan, Bob Carter , vice president of U.S. sales, said today in a conference call. “We’re confident our volumes and our share will recover throughout 2012,” Carter said. Hyundai Motor Co. (005380) , South Korea ’s largest automaker, and its affiliate Kia Motors Corp. (000270) , combined to sell 29 percent more vehicles than a year earlier, beating three analysts’ average estimate for a 24 percent increase. Kia’s Optima sedan sales surged more than sixfold to 9,533. Consumers spent a record $52.4 billion during the holiday weekend, excluding autos, according to the National Retail Federation. Consumer confidence surged in November by the most in more than eight years, and the portion of consumers planning to buy a new vehicle within six months climbed to the highest since April, data from The Conference Board showed Nov. 29. “We’re encouraged by the industry’s recent performance and the developments that we’ve seen in the economy,” Don Johnson , vice president of U.S. sales, said on a conference call. The Conference Board’s figures “drives even more support for our belief in the continued growing of the U.S. economy next year.” GM’s Pickups GM’s inventory of full-size pickups rose on a selling-day basis to 105 days as of Nov. 30, from 104 days at the end of October, the Detroit-based automaker said today in a statement. Full-size truck supply was 202,720 at the end of November, from 207,596 as of Oct. 31. Ford’s sales accelerated through the end of the month, culminating with the best results the day after Thanksgiving, which retailers call “Black Friday,” said Ken Czubay , Ford’s U.S. sales chief. “The dealers enjoyed the same uplift that the other merchants enjoyed,” Czubay said today on a conference call. GM fell 1.6 percent to $20.96 at the close in New York. Ford fell less than 0.1 percent to $10.59. Chrysler’s deliveries of its 200 midsize sedan increased to 8,065 in November, almost six times the year-earlier sales of the Sebring model that it replaced, the company said in a statement. Sales of Nissan’s Rogue compact SUV rose 27 percent to 10,845, according to an e-mailed statement. Volkswagen AG (VOW) ’s U.S. sales unit said deliveries of its VW brand surged 41 percent to 28,412, boosted by demand for its Passat sedan. Sales Pace U.S. light-vehicle sales exceeded a 13 million annualized rate for the third consecutive month as Toyota and Honda inventories recover from Japan’s tsunami in March, which disrupted auto-parts supply and vehicle output. The sales pace failed to exceed 12.2 million in the prior four months. Industrywide car inventory rebounded to 53 days supply at the beginning of November, from 43 days a month earlier, according to LMC Automotive. That’s the biggest sequential increase since February, said Jeff Schuster , a Troy, Michigan- based analyst. “It looks like the close of the month was definitely a strong one and it’s setting up a positive story for the industry as the year closes,” Schuster said today in a phone interview. The U.S. averaged annual sales of 16.8 million vehicles from 2000 to 2007, according to Woodcliff Lake , New Jersey-based Autodata. Deliveries may rise about 9.5 percent to 12.7 million cars and light trucks this year, the average of 18 analysts’ estimates in a Bloomberg survey in August. To contact the reporter on this story: Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net |
2024-02-26 | Bloomberg | U.S. Stocks Advance Amid Better-Than-Estimated Reports | U.S. stocks gained, following the biggest decline in benchmark indexes since November, amid better-than-estimated housing and consumer confidence data. PulteGroup Inc. (PHM) and KB Home jumped at least 5.7 percent to pace gains among homebuilders. Home Depot Inc. (HD) rallied 5.7 percent as it raised its dividend and approved a $17 billion share buyback after profit beat analysts’ estimates. Macy’s Inc. (M) , the second-largest U.S. department-store chain, gained 2.8 percent after forecasting earnings that beat projections. The Standard & Poor’s 500 Index advanced 0.6 percent to 1,496.94 at 4 p.m. in New York, after tumbling 1.8 percent yesterday. The Dow Jones Industrial Average increased 115.96 points, or 0.8 percent, to 13,900.13. About 7.2 billion shares changed hands on U.S. exchanges today, or 14 percent above the three-month average. “The economic numbers have been holding up really well,” said Brad Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab Corp. His firm has $2.01 trillion in client assets. “The home data show that the housing market is rebounding and should continue to contribute to growth. It helps to feed into consumer confidence as well. They’re related. In a time when we see more uncertainty rising, decent economic data helps to calm things down a little bit.” Equities rose as data showed purchases of new homes in the U.S. jumped in January to the highest level since July 2008, indicating the industry will keep adding to growth in the economy. Home prices in 20 U.S. cities rose in the 12 months to December by the most in more than six years. Confidence among U.S. consumers jumped more than forecast in February. Bernanke Testimony Federal Reserve Chairman Ben S. Bernanke defended the central bank’s unprecedented asset purchases, saying they are supporting the expansion with little risk of inflation or asset- price bubbles. He spoke today in prepared testimony to the Senate Banking Committee in Washington. Automatic federal budget cuts set to begin March 1 will put a “significant” burden on the economy if lawmakers can’t avert the reductions, Bernanke told lawmakers in the first day of his semiannual monetary policy report to Congress. He also urged lawmakers to put the budget on a “sustainable long-run path.” Bernanke and his colleagues on the Federal Open Market Committee are debating whether to curtail $85 billion in monthly bond-buying amid concern the Fed’s record $3.1 trillion balance sheet may encourage excessive risk-taking by investors and complicate the Fed’s exit from easing. Several participants at the Jan. 29-30 meeting said the Fed should be prepared to vary the pace of purchases as the economic outlook changes, according to minutes released last week. Italy’s Election Global stocks fell as Italy’s election deadlock reignited concern Europe’s debt crisis will deepen. As results pointed to a hung parliament, Italy was headed toward a political stalemate that threatens to derail 15 months of austerity under Prime Minister Mario Monti ’s government. Former Italian Prime Minister Silvio Berlusconi acknowledged rival Pier Luigi Bersani’s narrow victory in the lower house of Parliament and said he’s open to a broad alliance to avoid a second election. The S&P 500 has gained 5 percent this year as U.S. lawmakers agreed on a compromise on taxes in January and amid better-than-estimated corporate earnings. About 75 percent of the S&P 500 companies that have released quarterly results beat profit estimates , according to data compiled by Bloomberg. The index trades at 14.8 times reported earnings, below the average since 1954 of 16.4. Biggest Gains All 10 groups in the S&P 500 gained today as commodity and consumer discretionary companies had the biggest gains. A measure of 11 homebuilders in S&P indexes jumped 4.2 percent. PulteGroup gained 5.7 percent to $19.05. KB Home increased 7.2 percent to $18.37. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slumped 11 percent to 16.87. The gauge, which yesterday surged the most since 2011, had the biggest drop since Jan. 2 today. Home Depot added $3.64 to $67.56. Rising home values are encouraging consumers to spend more on remodeling while the repairs after Hurricane Sandy spurred demand in the U.S. Northeast. The average purchase at Home Depot, the largest U.S. home-improvement retailer, rose 5.6 percent to $55.46 while the number of customer transactions increased 8.6 percent to 329.1 million, helped by an extra week in the quarter. Macy’s gained $1.07 to $39.59. The company will earn as much as $3.95 a share this year, the Cincinnati-based retailer said in a statement today. The analysts surveyed by Bloomberg estimated $3.84 on average. Apple Climbs Apple climbed 1.4 percent to $448.97. The company should split its stock 10 for 1 rather than follow a proposal by Greenlight Capital Inc.’s David Einhorn for a new class of dividend-paying preferred stock, Laurence Balter, chief market strategist at Oracle Investment Research, said in a note today. A stock split would spur a rally in the shares by attracting individual investors willing to buy Apple at a lower price, while Einhorn’s plan would deplete the company’s cash flow, he said. SanDisk Corp. gained 2.2 percent to $50.39. The maker of flash memory for mobile devices was raised to outperform, which is the equivalent of buy, at RBC Capital Markets by equity analyst Doug Freedman. The 12-month share-price estimate is $65. JPMorgan Chase & Co. (JPM) lost 0.2 percent to $47.60, after gaining as much as 1.2 percent earlier today. The biggest U.S. bank plans to reduce headcount by as many as 19,000 people in its mortgage and community banking businesses through 2014 as Chief Executive Officer Jamie Dimon cuts expenses. ‘Mad Men’ AMC Networks Inc. slumped 3.6 percent to $56. The cable- network company that airs “Mad Men,” “Breaking Bad” and “The Walking Dead” plunged after fourth-quarter earnings missed analysts’ estimates. Best Buy Co. fell 3.2 percent to $16.46. The biggest consumer electronics retailer cut 400 jobs at its headquarters as Chief Executive Officer Hubert Joly works to reduce costs. Joly, who took charge in September, is working on a plan announced last year to reduce costs by $750 million as the retailer works to compete with rivals such as Amazon.com Inc. Tyson Foods Inc. dropped 3.7 percent to $22.40 as the largest U.S. meat processor said margins narrowed in its beef and pork units. “Margins have been compressed throughout the past month as the value of beef has fallen more than the price of cattle,” James Lochner, chief operating officer of Springdale, Arkansas- based Tyson, said at the Goldman Sachs 17th Annual Agribusiness Conference today. Retail Sales Retail sales are rising fast enough to indicate the effects of tax-law changes and gasoline-price increases on consumer spending will be fleeting, according to Jonathan Golub , UBS AG’s chief U.S. equity strategist. Last month’s 4.4 percent sales increase from a year earlier almost matched the average 4.6 percent pace for the previous 20 years. The comparison is based on figures compiled by the Commerce Department. “The general trend appears to be quite healthy” even though the end of a payroll-tax break, a delay in income-tax refunds and higher gas prices are weighing on consumers, Golub wrote yesterday in a report. Golub favors makers of food, beverages and other staples, as well as companies most dependent on consumers’ discretionary spending. His view ran counter to a recommendation yesterday by David Bianco , a strategist at Deutsche Bank AG. Both strategists are based in New York. Bianco reaffirmed “underweight” ratings on staples companies and retailers in a report, citing a “continuing struggle of low- to middle-income households to make ends meet.” His call means the two groups ought to be a smaller percentage of investors’ holdings than their weight in the Standard & Poor’s 500 Index would suggest. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Sarah Pringle in New York at springle1@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-12-18 | Bloomberg | Canadian Dollar Drops as U.S. Lawmakers Seek Budget Compromise | The Canadian dollar declined against its U.S. counterpart amid signs lawmakers may find a compromise to avert the so-called fiscal cliff, bolstering prospects for the American economy. Canada ’s currency rallied against the U.S. dollar by the most in five days yesterday after the federal statistics agency said foreign investors had their fourth straight month of net investment in the nation’s securities. Further gains for the so- called loonie may be limited as a technical measure shows it may have rallied too much, too fast. The currency trailed the majority of its 16 most-traded peers today along with the fellow commodity-related dollars of Australia and New Zealand as oil pared earlier gains. “Anything relating to the fiscal cliff, any positive developments, are certainly going to help the U.S. dollar,” said Blake Jespersen, managing director of foreign exchange in Toronto at Bank of Montreal (BMO) , in a telephone interview from Toronto. He said currency flows have declined recently as market participants go on vacation. The loonie, as the Canadian currency is known for the image of the aquatic bird on the C$1 coin, fell 0.2 percent to 98.51 cents at 10:26 a.m. in Toronto. One Canadian dollar buys $1.0151. The loonie has gained 0.9 percent this month, paring it quarterly loss to 0.1 percent. Canada’s dollar fell after the 14-day relative strength index versus the dollar touched 33 yesterday, approaching the level of 30 that indicates a currency may have strengthened too rapidly and is due for a reversal. Going Long Futures on crude oil, the nation’s largest export, rose 0.3 percent to $87.49 a barrel in New York after rising as much as 0.8 percent. The Standard & Poor’s Index of stocks gained 0.3 percent. The loonie has lagged behind other majors amid “a lack of interest to add to what are already fairly aggressive long position in both the Canadian and Australian dollars,” Jack Spitz , managing director of foreign exchange at National Bank of Canada (NA) , said by telephone from Toronto. Futures traders have increased their bets that the loonie will gain against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- was 62,533 on Dec. 11, compared with net longs of 57,071 a week earlier. Bonds Decline Canadian government bonds fell, pushing the benchmark 10- year note up one basis point, 0.01 percentage point, to 1.84 percent. The price of the 2.75 percent notes maturing in June 2022 rose 10 cents to C$107.92. Yields on Canadian securities maturing in 2041 increased one basis point to 2.41 percent. “That’s some decent movement in the long end,” said Noel Hebert, chief investment officer at Bethlehem, Pennsylvania- based Concannon Wealth Management, which oversees about $250 million. “Some of this feels like early exits in anticipation of re-entering at better levels.” U.S. President Barack Obama lowered his tax revenue demand, moving closer to a budget deal with House Speaker John Boehner , as politicians in Canada’s biggest trade parter seek to avoid more than $600 billion in tax increases and spending cuts scheduled to begin in January. They want to replace the immediate deficit reduction with more gradual changes. Canada’s currency has gained 0.8 percent this year versus nine developed-nation peers tracked by Bloomberg Correlation- Weighted Indexes. The greenback has dropped 3.2 percent and the yen has been the biggest loser, tumbling 12.2 percent. New Zealand’s dollar leads gainers, up 5.7 percent. To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-03-04 | Bloomberg | Malaysia Regime Ouster Hinges on Borneo as Radio Aids Opposition | At 7 p.m. on the Malaysian side of Borneo island, Luang Entiyang turns the dial on a transistor radio in search of an anti-government talk show as about a dozen villagers sit cross-legged on the floor waiting to listen. Similar meetings occur daily across the jungles of Sarawak, Malaysia ’s biggest state and one that has underpinned the ruling Barisan Nasional alliance’s 55-year hold on national power. The two-hour broadcast by U.K.-based Radio Free Sarawak , in which villagers call in to tell stories of land-grabs by palm oil companies, aided by local officials, has helped to pry loose Entiyang and other lifelong BN backers since it began in 2010. “It makes a great difference because we are listening and learning,” Entiyang, 61, said Feb. 15 at his home in Melikin, a hillside village about a two-hour drive from Kuching, Sarawak’s capital. “If BN wins the election, the natives will have nothing. They will take all the land. Once they betray us, we say goodbye.” Opposition inroads in Borneo rain forests that hold a quarter of Malaysia’s parliamentary seats pose the biggest threat to Prime Minister Najib Razak’s tenure as he prepares to call an election in the coming weeks. The prospect of a loss has unsettled investors, who have made the FTSE Bursa Malaysia KLCI Index the worst-performing benchmark in Asia this year on concern the country will undergo its first transfer of power since gaining independence from Britain in 1957. ‘Awakening’ “There’s been more of an awakening in these rural areas, but how much that’s going to translate into votes is still a little bit up in the air,” Bridget Welsh , a political science associate professor at Singapore Management University , said by phone. “We’re talking about easily 20 seats in Sabah and Sarawak that are gray, that are competitive, that fundamentally will make the difference in national power.” In 2008, Najib’s ruling BN alliance won 54 of 56 seats up for grabs in Sarawak and neighboring Sabah, cementing its 12th straight election win after peninsular Malaysia mostly split the other constituencies in the 222-member parliament. The opposition, which lost in 2008 by a 58-seat margin, is targeting at least 20 seats in the two states this year. Both Najib and opposition leader Anwar Ibrahim have made frequent visits to the two former British colonies that joined Malaysia in 1963, an area that has some of the highest poverty rates in the country and accounts for about half of its natural gas reserves and palm oil production. More than 60 percent of its 5.8 million people are Borneo natives, collectively known as Dayaks, who have traditionally lived off the land. Shortwave Radio A move toward the opposition in the two states will be “enough to alter the shift in balance of power nationwide,” Anwar said in a Feb. 19 interview in Kuala Lumpur. Najib promised greater development in a visit to Sabah on Feb. 14, telling voters “there’s no need to think about the other parties,” according to state-run Bernama news agency. Radio Free Sarawak’s broadcasts are making that more difficult. Clare Rewcastle Brown, the sister-in-law of former British Prime Minister Gordon Brown , founded the station in 2010 to provide remote villages with an alternative to state-run media. Funded by donors in Europe whom Brown declines to identify, RFS uses shortwave transmissions through London-based WRN Broadcast , whose clients include MTV and Nickelodeon. Local authorities tried to block the station during April 2011 state elections by pumping gospel music on the same wavelength from a broadcaster in Ukraine, according to Brown, who was born in Sarawak. After she protested, Ukraine’s government stopped the jamming. Najib’s coalition won 55 out of 71 seats in the local elections, seven fewer than in 2006. Taib Targeted “We suspect there will be more attempts to jam us in the election,” Brown said by e-mail. “The anger and a new sense of unity and defiance is shown nightly over our show -- native people, and most significantly headmen, are calling to say enough is enough and it is time for change.” The broadcasts mainly target moves by Abdul Taib Mahmud, Sarawak’s chief minister, who has ruled the state for 32 years, to lease land for palm oil plantations and build about a dozen hydropower dams by 2020, providing the capability to produce about 15 times more electricity than the state uses. Taib, 76, heads Najib’s coalition in Sarawak and oversees state portfolios for finance, planning and resources management. He declined a request to be interviewed. Anwar’s opposition alliance sees Radio Free Sarawak as a way to break BN’s grip on an area where thick forest, broken roads and spotty mobile-phone reception make campaigning tough. Since 2010, it has distributed 25,000 Chinese-made radios costing about 35 ringgit ($11) apiece to villagers, according to See Chee How, a local opposition leader. Message Spreading The rural electorates may help sway the national vote because some have four times fewer people than seats in Chinese- dominated urban areas that shifted support to the opposition in the 2011 state elections. Anwar’s coalition is “very optimistic” it could win at least 20 seats of the 56 available in Sabah and Sarawak, See said. “Now our message is spreading throughout Sarawak,” See said in a Feb. 13 interview in Kuching. “Rural people can see the relevance to protect their land, protect their rights, to get a fair share of economic gains. They are ready for change.” Najib’s alliance disputes that assessment. While BN may lose about six urban constituencies, it expects to retain all the rural Dayak seats, giving it 25 overall for Sarawak, according to Stephen Rundi , the coalition’s secretary-general in the state. The ruling coalition took 30 of Sarawak’s 31 seats at the last election. ‘Naughty’ Opposition claims that Taib is using his position for personal gain are unfounded, Rundi said. The government is working to tackle land problems, he said, particularly in “gray areas” where the boundaries between land belonging to the state and the indigenous people is not clearly demarcated. Taib in January called Radio Free Sarawak “naughty” and asked authorities to halt its operations, Bernama reported. Najib’s alliance has trained a network of loyalists in Sarawak’s remote villages over the past year to counter the radio broadcasts, Rundi said, without saying how. “They are talking about issues that are sensitive, and they play it repeatedly just to instigate people,” Rundi said in a Feb. 14 interview at his Kuching office. “Our strategy is to go to the ground as much as we can through the grassroots leaders to tell the people the truth and tell them not to be easily misled.” Why Change? Najib’s alliance has considered setting up a competing radio station because state-run broadcasts use long-wave transmissions and can’t reach certain remote areas, according to Edward Kurik, executive secretary of Parti Rakyat Sarawak , a rural-based party that is part of BN. Even so, he said, rural people would vote for Najib because they are afraid of losing benefits such as fertilizer subsidies and free school lunches. “We are not people who dare take the risk,” Kurik said. “Why should we change if what we’ve got from the government is guaranteed? We are not born rich -- we depend so much on the government and cannot lose this political power.” Sarawak’s poverty rate was 5.3 percent in 2009, compared with 3.8 percent for the whole country, according to government data. The porous borders in Sabah, with a poverty rate of 19.7 percent, have also posed challenges for the government. Anwar’s alliance blamed Najib today for an ineffective response after an armed Muslim group from the Philippines claiming sovereignty over Sabah invaded a coastal town last month. At least 25 people have died, including eight Malaysian police, during the three-week standoff. ‘Weak Leadership’ “We are disappointed with the weak leadership shown by the federal government whose responsibility is to keep Malaysia’s security intact,” the alliance said in a statement. In Sarawak, people involved with the radio station have faced threats, said Nicholas Mujah, who helps villagers bring lawsuits against palm oil companies that encroach on ancestral lands and was arrested last year for copying broadcasts on CDs. Peter John Jaban , a tattoo-covered Dayak who was one of Radio Free Sarawak’s first deejays, said he was detained last year under the Sedition Act. Villagers listening to the broadcasts are also intimidated, he said. “Authorities and police will threaten them, saying if you listen to this you will be arrested, or your village would not be given roads or electricity,” Jaban, who has been blocked from leaving Sarawak, said in Kuching. ‘Blatant Lies’ Rundi said the government “cannot just swallow” the “blatant lies” on Radio Free Sarawak. However, he said, the government opposed measures to intimidate people, including the use of gangsters by palm-oil companies to scare villagers. “The government is always against all force and intimidation by anybody,” Rundi said by phone. For indigenous people such as Entiyang, who worked for decades in a state-run medical clinic, taking cash to vote for BN became routine -- including the 50 ringgit distributed on election eve in 2008. Najib’s alliance won his district that year with more than 80 percent of the vote. Rundi denied that BN buys votes, while acknowledging payments to party workers. Two years later, Entiyang disposed of the BN flag that hung above his house after palm oil companies began operating on what he and other villagers see as native land, and pressured locals to accept money in return for giving up their rights. He’s now involved in a lawsuit against the companies, United Teamtrade Sdn. and Memaju Jaya Sdn., one of about 300 similar land cases around Sarawak. Land Lawsuits United Teamtrade has received a 60-year lease to develop the land from the Sarawak government and disputes claims that it’s encroaching on indigenous lands, John Su, a spokesman for the company, said by phone. The payments to villagers are a “goodwill gesture,” he said. A man answering to the name Tan Thian Siang, who is the managing director at Tetangga Akrab Sdn. Bhd., which shares the same Kuching address as Memaju Jaya, hung up the phone when asked for comment. “We are anxious to hear on the radio how other villages are dealing with these problems,” Entiyang said as he picked up the radio. “Without this, we really were blind.” To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net |
2024-04-04 | Bloomberg | Merck, J&J’s New Hepatitis C Treatment Fetches $31,000 in France | New hepatitis C drugs from Merck & Co. and Johnson & Johnson (JNJ) are being sold in France for 22,000 euros ($31,271) and more, a precedent some doctors say may limit access after the medicines are approved throughout Europe. J&J and Vertex Pharmaceuticals Inc. (VRTX) ’s telaprevir costs 22,000 euros under a French program for seriously ill patients for whom there is no other effective treatment on the market, according to patient association SOS Hepatites. Merck & Co. said its boceprevir costs 30,000 euros under the same program. The price may drop once the drugs are approved for the broader market, Merck and J&J executives said. Still, the French model shows the new drugs may triple the cost of hepatitis C treatment, leaving England , Russia and eastern Europe likely to delay use or restrict which patients are allowed access, said Antonio Craxi, director of gastroenterology and internal medicine at the University of Palermo. “It may be that we can’t use it at all until the price comes down,” Mark Thursz, professor of hepatology at Imperial College London , said in an interview at a conference in Berlin over the weekend. “It’s not the best economic environment to launch an expensive new drug.” The U.K.’s National Institute for Health and Clinical Excellence may restrict the new drugs to patients who have tried existing treatments without success, Thursz said. The agency may also require genetic tests to determine whether patients are likely to respond to the medicines, he said at the meeting of the European Association for the Study of the Liver. ‘Triple the Cost’ Italy and Spain also may delay or restrict use, Craxi said. Italy spends about 350 million euros a year on existing hepatitis C treatments, he said. “If you triple the cost, that would be more than 1 billion euros,” he said. Vertex fell 10 cents, or less than 1 percent, to $47.49 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Merck rose 20 cents, or less than 1 percent, to $33.27 in New York Stock Exchange composite trading. J&J increased 66 cents, or 1.1 percent, to $60.15. The new drugs are being reviewed by regulators at the European Medicines Agency. Both are scheduled for U.S. Food and Drug Administration hearings at the end of this month. In France , telaprevir and boceprevir received special temporary authorization in December, under a program designed for seriously ill patients for whom there is no other effective treatment on the market, according to French pharmaceutical regulator AFSSAPS. This allowed the drugs to bypass the usual approval procedures, the regulator said. 500 Patients About 500 patients are being treated in France now, said Michel Bonjour, spokesman for SOS Hepatites. The new drugs are prescribed together with the current standard therapy of interferon and generic ribavirin, and the total cost of a yearlong cycle of treatment may reach 45,000 euros to 70,000 euros per patient, Bonjour said in an interview. The cost is covered in full by France’s national health insurance program. “It’s not a good indication of price elsewhere,” Patrick Bergstedt, senior vice president for vaccines and infectious diseases at Whitehouse Station , New Jersey-based Merck, said in an interview. The very sick patients in the French program get 44 weeks of treatment with boceprevir, while a more typical course of therapy is 24 weeks to 32 weeks, he said. There’s a “high likelihood” the eventual commercial price for a course of treatment will be less than the 30,000 euros Merck charges under the French program, he said. ‘Cost Effective’ “It’s black and white that these drugs are cost- effective,” Bergstedt said. “The challenge will be how do you stratify treatment, and how do you use these drugs responsibly to ensure the patients with the greatest need are treated first.” Vertex, based in Cambridge, Massachusetts , referred questions to partner J&J, which will market telaprevir in Europe. J&J hasn’t decided on a final price, said Isabelle Lonjon-Domanec, global medical affairs leader for telaprevir at the New Brunswick , New Jersey-based company’s Tibotec Therapeutics unit. Patients take telaprevir for 12 weeks together with standard treatment, then continue on the older standard drugs for a total of six months to a year of therapy. Both new hepatitis C drugs are protease inhibitors crafted from the same technologies that led to discoveries in HIV research. Used in addition to existing therapies, they boost the chance of a cure from half of patients to between two-thirds and three-quarters of those treated, studies have shown. U.S. Pricing In the U.S., the new drugs may be priced at $35,000 to $40,000, estimates Howard Liang, a Boston-based analyst at Leerink Swann & Co. “A cure saves a lot of money down the road,” Liang said in an interview. “It’s a shock to physicians, but I think it can be justified because it’s a cure.” Hepatitis C, spread through contact with infected blood, is a virus that often lingers as a chronic condition, causing nausea and exhaustion as it destroys the liver over the course of years or decades. About 170 million people are infected, according to the World Health Organization. Meanwhile, the next generation of drugs with even higher cure rates and fewer side effects is likely to reach the market within three years, Liang said. Swedish drugmaker Medivir AB (MVIRB) has said it expects to begin selling a competitor pill to be used with interferon by 2013. Boehringer Ingelheim GmbH, Gilead Sciences Inc. (GILD) and Bristol- Myers Squibb Co. are among a dozen companies aiming for drug cocktails to replace the existing interferon combination. Looming competition leaves Merck, Vertex and J&J without much time to recoup their investment, said Charles Gore, president of the Geneva-based patient advocacy group World Hepatitis Alliance. “There is no easy answer to this,” Gore said in an interview. “We’ve got to have a way to give people access but incentivize the drug companies to research in this area.” To contact the reporters on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net ; Carol Matlack in Paris at cmatlack@bloomberg.net To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net ; |
2024-06-24 | Bloomberg | WellPoint's Kleinman Sees Health Insurer `Oligopoly' Fed by U.S. Overhaul | U.S. health insurers are “moving towards an oligopoly,” a process that this year’s health-care overhaul will accelerate, the investor-relations chief at WellPoint Inc. said today. New regulations on administrative spending and premium increases will push some independent insurers out of business or into deals with bigger rivals, said Michael Kleinman , vice president for investor relations, at a Wells Fargo & Co. conference in Boston. Indianapolis-based WellPoint, the country’s biggest health plan with 33.8 million members, has the scale to prosper from the overhaul, which is expected to add another 34 million to the ranks of the insured, he said. The insurance market is becoming an oligopoly, a market where supply and pricing are dominated by a few companies, “and health-care reform is going to move us in that direction more quickly,” Kleinman said. “There are going to be smaller insurers that are not going to be able to survive in this marketplace.” Led by WellPoint , 12 health plans cover two-thirds of the enrollment in the U.S. commercial-insurance market, said Ana Gupte , a Sanford C. Bernstein & Co. analyst in New York, in a June 11 note to clients. The health-care overhaul is likely to push at least 100 insurers with 200,000 members or less out of the business “as the plans are increasingly unable to invest in the infrastructure and technology to effectively manage care,” Gupte wrote. Consumer Protections Asked to comment today, Nicholas Papas, a spokesman for President Barack Obama, referred in an e-mail to the president’s remarks on June 22 touting the health-care overhaul. The law “will put an end to some of the worst practices in the insurance industry,” such as canceling policies when patients get sick or imposing lifetime limits on coverage, Obama, a Democrat, said at a White House ceremony. The changes “will make America’s health-care system more consumer-driven and more cost-effective and give Americans the peace of mind that their insurance will be there when they need it,” Obama said. “Insurance companies should see this reform as an opportunity to improve care and increase competition.” Angela Braly , WellPoint’s chairman and chief executive officer, was among a group of insurance chiefs who met Obama June 22. While Democrats have attacked the company for its premium increases, the relationship is improving, Kleinman said. “The Obama administration understands that we need to work in partnership, that in order to make health-care reform work, the carriers need to be able to charge appropriate rates and make an appropriate margin,” he said. “Hopefully, a lot of that bad rhetoric is behind us.” To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net. Enlarge image Wellpoint CEO Daniel Acker/Bloomberg Angela Braly, chief executive officer of WellPoint Inc. Angela Braly, chief executive officer of WellPoint Inc. Photographer: Daniel Acker/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); } }); }); //]]> |
2024-06-06 | Bloomberg | Cruzeiro Bondholders Say Brazil Seizure Should Be Default | Brazil ’s seizure of Banco Cruzeiro do Sul SA should trigger a default that allows bondholders to demand immediate payment of all debt, investors told the bank’s overseers. The central bank took control of Sao Paulo-based Cruzeiro on June 4, citing “serious” financial violations, and said it would be run by the privately owned deposit-insurance fund known as FGC for about 180 days. FGC said that during the intervention the bank will meet all financial obligations as they come due. “Any intervention by the central bank or the FGC is an event of default and therefore gives the bondholders the right to accelerate” payments they are due, Matthew Campbell, an emerging-markets trader at Goldman Sachs Group Inc., said yesterday on a conference call Cruzeiro and FGC held with analysts and investors. Campbell said allowing the company to operate in the interim will allow assets to be removed that should go to bondholders. “If you are going to continue to honor deposits and certificates of deposits that are maturing during this time, essentially letting the assets out of the door before the bondholders can really make a claim on these assets, it seems liquidation will be the best alternative for bondholders,” Campbell said. Campbell declined to comment beyond his remarks on the call, said Michael DuVally , a spokesman for New York-based Goldman Sachs. Central Bank Luciana Dias, a commissioner at Brazilian securities regulator CVM, said in an interview yesterday that her agency and the central bank have been supervising Cruzeiro do Sul “for a long time.” “The market was aware of the fragilities of the institution,” she said in an interview at Bloomberg’s headquarters in New York. Cruzeiro do Sul has about 2.8 billion reais ($1.39 billion) in international debt maturing through 2020, Antonio Carlos Bueno, head of FGC, told reporters in Sao Paulo June 4. The next maturity will be $175 million in September for a three-year Eurobond. Accelerated Payments The prospectus of Cruzeiro’s bonds due in 2020 says payments “may be accelerated only in the case of certain events involving our bankruptcy, liquidation, reorganization or insolvency proceedings, whether voluntary or involuntary.” The document also says the bank will be required to accelerate its obligations after being “declared bankrupt,” liquidated or dissolved. “In the event of default it’s very clear,” Richard Segal , director of the emerging-markets group at London-based Jefferies International Ltd., said in a telephone interview today. “On the other hand, it doesn’t seem as though they are granted the right to accelerate right away. It’s kind of in a gray area.” The fund plans to prepare the bank for sale while PricewaterhouseCoopers LLP concludes an audit, Bueno said. The period of FGC control may be shorter than 180 days should the process be concluded in less time, FGC said. Brazil’s federal police will begin investigating Cruzeiro do Sul for possible fraud, according to an e-mailed statement. Disbursing Funds Debt payments during the intervention period are being financed by assets Cruzeiro do Sul sold to the FGC in an asset- backed receivables fund last year. It has 2.3 billion reais ($1.1 billion) to be disbursed during the remainder of the 180- day period, said Fabio Mentone, an FGC board member. “We are confident this portfolio is good,” Mentone said. “We do not have a problem with future disbursements for the next 180 days.” The takeover “creates inequality between the creditors that have short-term maturing debt and the ones that have more than 180 days maturing debt,” Luis Miguel Santacreu, an analyst at Austin Rating in Brazil, said in an interview. That encourages every creditor to call their debt at the first opportunity, Santacreu said. “No creditor will take the risk to roll the debt over because of all the accusations against the bank,” he said. “If this were a bank liquidation, all the creditors would be treated the same way according to the law.” No Preference Mentone said on the call that no preference is being given to any creditor during the intervention process. Interest payments on bonds will be honored when they are due, just like payments to other creditors, he said. “We understand that after we have all the data controlled by the auditing company, we believe that we will be able to have a solution for the bank and continuity for the bank,” Mentone said. “But we can’t assure that.” The bank’s shares fell 42 percent to 4.40 reais in Sao Paulo , the lowest price since December 2008. Trading resumed today after being suspended June 4 on the central-bank intervention. Moody’s Investors Service cut Cruzeiro’s rating to Caa1 from B2 yesterday, citing “uncertainties” about the bank’s ability to service its debts. “The bank’s financial strength and solvency have been severely impaired by much weakened asset quality and funding conditions, which present a very high credit risk to bondholders,” Ceres Lisboa and Maria Celina Vansetti-Hutchins, analysts at Moody’s, wrote in an e-mailed statement. To contact the reporters on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net ; Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-01-17 | Bloomberg | Legal & General Names Ex-Resolution Executive as M&A Director | Legal & General Group Plc (LGEN) , the biggest investor in the U.K. stock market, appointed former Resolution Plc executive Wadham Downing as merger and acquisitions director as it prepares for small deals. Downing, 45, who worked for Britannic Group before it merged with Clive Cowdery’s Resolution, takes the newly created job after serving as interim chief financial officer at the insurer, London-based Legal & General said in a statement today. The firm will pursue “a selective mergers and acquisition strategy meeting strict and attractive criteria,” Chief Executive Officer Nigel Wilson said in the statement. Wilson said he is looking for “bolt-on” acquisitions on Aug. 7. Legal & General has been raising its dividend and generating more cash for investors over the past three years by exiting unprofitable businesses and focusing on growing its annuities and savings divisions, which have higher profit margins. Wilson said he plans to use some of this cash for small acquisitions in areas such as non-life insurance and digital savings technology. Legal & General’s last acquisition was Suffolk Life, a firm specializing in self-invested personal pensions, in 2008. It paid 62 million pounds ($99 million) for the company. The insurer’s search for a permanent CFO to replace Wilson, who was promoted to CEO in June, is proceeding “according to plan,” it said in the statement. The stock rose 1.5 percent to 151.3 pence a share at 3:13 p.m. in London , valuing the firm at about 8.9 billion pounds. 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 |
2024-06-20 | Bloomberg | EU May Phase in Solvency II Over Years to Help Life Insurers | The European Union is considering phasing in new capital rules for the life insurance industry over seven years, easing the burden on insurers who had criticized the changes. The European Commission, the EU’s executive arm, is considering the change as it negotiates with insurers and members of the European parliament about the transition from the current Solvency I regime to Solvency II rules, Karel van Hulle, the EC’s head of pension and insurance, said in a telephone interview from Brussels today. “One of the measures that is foreseen in this transition deals with existing life contracts, though it is not an exemption from the regime, but rather a phasing-in,” he said. The proposal is being discussed at a meeting in Brussels this afternoon, according to Stefaan de Rynck, a spokesman for Michel Barnier , the European Commisioner for Financial Services. Solvency II, which is scheduled to be applied in 2014, aims to improve policyholder protection by forcing insurers to hold more capital as a buffer against potential investment losses. About 40 percent of German life insurers would have problems complying with the new rules, Financial Times Deutschland reported today. Prudential Plc (PRU) , the U.K.’s biggest insurer by market value, has threatened to leave Britain if Solvency II hinders its U.S. business. Discount Rates Most insurance stocks in Europe rose today, with the Stoxx 600’s index of insurers advancing 0.9 percent. Aviva Plc (AV/) , Britain’s second-largest insurer, climbed 3.9 percent. The seven-year transition could buy the industry time to come up with a long-term solution to its struggle with the low interest-rate environment that reduces yields insurers earn on their investments, according to Stephan Kalb, who heads Fitch Ratings ’ insurance ratings team. “If we are back in times of normal interest rates , then it will help insurers,” Kalb said of the EU talks in an interview in Zurich. Failing that, “probably it will not solve the problem substantially,” he said. Life insurers currently use discount rates based on asset yields when calculating so-called technical provisions, the amount an insurer requires to fulfill its insurance obligations and settle all expected commitments to policyholders. The phase- in would allow them to progressively move to the risk-free discount rate required by Solvency II, van Hulle said. “For a period of seven years you can apply the existing discount rate under Solvency I” while transitioning to the market discount rate, which is used to determine the value of liabilities, he said. “It could be used for any member state. The problem is that the discount rate that is presently applied is higher than the market rate, which today is very low.” If Solvency II were to be applied immediately, “your technical provisions would jump to the ceiling,” meaning that liabilities would increase, van Hulle said. The Council of the European Union and the European Parliament will vote on the plans, which could be finalized at the beginning of July, van Hulle said. To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-08-12 | Bloomberg | Fernandez Seeks Rebound in Re-Election Bid as Argentine Primary Vote Nears | An open primary on Aug. 14 is becoming more urgent for Argentine President Cristina Fernandez de Kirchner’s re-election efforts after a string of defeats in regional votes undermined support for the government. Argentines can vote for any candidate in the Aug. 14 primary, which will give an indication of whether Fernandez, 58, has enough backing to win another four-year term in the first- round of the national election on Oct. 23 over opponents including lawmaker Ricardo Alfonsin and former President Eduardo Duhalde. Voting is mandatory. Support for Fernandez fell to 36.8 percent last month from 39 percent in June, according to a July 22-26 survey by pollster Management & Fit, following social protests and a corruption scandal involving a government ally. A global slowdown also threatens to erode Fernandez’s record of delivering average annual economic growth of 5.6 percent since 2008. “The idea that everything was already wrapped up has been killed,” said Federico Gonzalez, a political analyst at polling company Opinion Autenticada in Buenos Aires. The primary “will show that we are heading toward the October election with uncertainty” over Fernandez’s appeal. Investors Fleeing Investors began dumping Argentine assets following Standard & Poor’s decision last week to cut the U.S. credit rating one level to AA+. The benchmark Merval stock index tumbled 10.7 percent on Aug. 8, the most in the world, while the cost of insurance against a default over the next five years rose the most after Pakistan. Popular support for Fernandez slipped as pro-government candidates struggled in regional races. Last month, opposition leader Mauricio Macri was re-elected Mayor of Buenos Aires with a bigger margin than forecast and Fernandez ally Agustin Rossi finished third in the gubernatorial race in Santa Fe province. On Aug. 6, Jose de la Sota was elected Governor of Cordoba, the country’s second-biggest electoral district, after refusing to endorse Fernandez, a fellow member of the Peronist party. Fernandez was also hit by a corruption scandal over misappropriation of funds to build homes for poor families by the Mothers of the Plaza de Mayo , a human rights group with close ties to the government. Fernandez hasn’t been accused of wrong-doing in the controversy. Even with these setbacks, Fernandez’s closest allies are struggling to close the gap with the president. Opposition Support Alfonsin, 59, is running second with 17.5 percent and Duhalde, 69, had 12.7 percent support, according to Buenos Aires-based Management & Fit. About 30 percent of respondents in the survey supported other candidates or are undecided. The poll had a margin of error of 3.1 percentage points. Under Argentine law, a candidate needs to win 45 percent of the presidential vote, or 40 percent and hold a 10 percentage point lead over the second-place finisher, to avoid a Nov. 20 runoff. Duhalde is gaining ground and will do better than polls suggest, said an official with his campaign who declined to be identified because he isn’t authorized to speak publicly. Officials at Fernandez’s and Alfonsin’s campaigns didn’t respond to messages left by Bloomberg. Fernandez, a lawyer and mother of two, succeeded her husband Nestor Kirchner in 2007 and has since presided over the country’s fastest economic expansion in five years. The economy grew 9.9 percent in the first quarter from a year earlier and 9.2 percent in 2010, the most since 2005. Unemployment in the second quarter tumbled to a record low of 7.3 percent. Job Creation “Count on me to do what remains to be done in Argentina , which is to deepen the policies of inclusion and continue this fantastic process of re-industrialization and job creation,” Fernandez said at a rally Aug. 10 to close her primary campaign. Fernandez has tapped record central bank reserves to pay off debt, boosted spending on infrastructure, increased pension payments and created a program to pay poor families who keep their children enrolled in school. Last year she restructured $12.9 billion of bonds remaining from the 2001 default, prompting Argentine dollar debt to surge 36 percent, the most among major emerging markets, according to JPMorgan Chase & Co.’s EMBI+ Index. “Fernandez’s big strength is the economic growth and social improvements she instigated,” said Daniel Kerner , a political analyst at the Eurasia Group, in a phone interview in Buenos Aires. Even amid the global economic crisis, the peso has fallen just 0.4 percent this month to 4.1578 per dollar, the fourth- best performance among 25 major emerging market economies tracked by Bloomberg. Tapping Reserves Fernandez’s policy of using central bank reserves to keep the peso stable and pay off debt have helped fuel double-digit inflation, according to former central bank President Alfonso Prat-Gay. The government tapped $6.6 billion in central bank reserves in 2010 to pay debt and plans to use $7.5 billion this year. “From now until the elections in October the government will use reserves to keep a stable peso,” Segura said in an interview from New York. “But the crisis will hurt the next government.” While the government said that consumer prices rose 9.7 percent in June, opposition lawmakers say that prices rose an average of 23.6 percent. Fernandez has fined private economists, including Orlando Ferreres & Asociados and Ecolatina, for providing inflation estimates that differ from the official rate. Alfonsin, son of former President Raul Alfonsin, has based his campaign in part on pledges to improve inflation reporting and slow price increases. Hyperinflation Price increases of 5,000 percent in 1989 helped force Alfonsin’s father, Raul, to leave the presidency five months before his term was due to end. The poor economic track record of his father’s government and the fact that his Radical Civic Union party has stepped down from power early twice in the past 20 years means Alfonsin will struggle to gather enough votes to defeat Fernandez in a runoff, Kerner said. While the government has suffered at the polls in recent weeks, Fernandez can take heart by the fact that most of the defeats in regional votes came in provinces already controlled by the opposition, said Kerner. Voters are backing current office holders or their successors as a result of years of economic growth, he added. “The provincial elections so far have showed that when there’s a good economic situation, people tend to vote for the incumbent and don’t seek changes,” he said. 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 |
2024-01-20 | Bloomberg | Farmers Bet on Rates as MetLife Battles Rural Lenders | John Harder, a 65-year-old farmer with 7,500 acres in Iowa , said he’s taking out new loans almost every month as profits surge and land prices reach records. “If I can get the rate right and buy the property right, I’d borrow millions every day,” said Harder, who is expanding his corn and soybean plots with a 3.35 percent, variable-rate loan from a U.S. Farm Credit System bank. “I’m kind of a gambler anyway or else I wouldn’t be doing what I’m doing.” Farmers are taking advantage of a resurgence in government- chartered credit providers and Federal Reserve efforts to stoke the economy by holding the fed funds rate near zero. Competition from private lenders such as MetLife Inc. and Wells Fargo & Co. (WFC) is keeping borrowing costs near record lows as the value of farmland in the third quarter rose as much as 25 percent in the U.S. Midwest, driven by surging sales of corn to ethanol producers and grain exports. “We’re seeing very aggressive activity by the Farm Credit System and commercial banks,” Jason Henderson , vice president and Omaha, Nebraska branch executive at the Federal Reserve Bank of Kansas City, said in a telephone interview. “Everyone is battling for market share.” The Farm Credit System (RDETCDET) , created by Congress in 1916, increased its share of lending in the $136 billion farm real- estate market to 45 percent from 41.5 percent in 2007 and 35 percent in 2000, according to U.S. Department of Agriculture data. The network, made up of banks and 83 associations owned by farmers and funded by bond sales, won the business of those like Harder by cutting rates and paying dividends to borrowers. Top Credit Grades It raises money for lending by issuing Federal Farm Credit Banks Funding Corp. debt that according to Fitch Ratings has the “implicit support” of the U.S. government. The bonds carry the top credit grades from Moody’s Investors Service and Fitch, and are ranked at AA+ by Standard & Poor’s , the same as the U.S. government. They’re separate from Farmer Mac, a government- supported enterprise that provides a secondary market for mortgages created by commercial banks and other lenders. “In agricultural banking, we have our very own rogue elephant,” said John Blanchfield, who directs the ABA Center for Agricultural and Rural Banking at the American Bankers Association in Washington. “It’s the federal farm system.” The average value of an acre of U.S. farmland reached a record $2,350 in 2011, the Department of Agriculture said in August, climbing from $737 in 1980. Land prices at an average of $5,600 an acre in Iowa are more than triple what they were a decade ago. Jason O’Connor, 34, is spending $8,500 an acre on a corn and soybean farm near Herscher, Illinois. ‘Kind of Scary’ “It’s kind of scary,” said O’Connor, who turned to AgFirst Farm Credit Bank of the Farm Credit System for a 5.9 percent loan and expects to close on the 80 acre (32 hectare) plot next month. “We’re at a record high, and we’re all afraid the balloon is going to burst.” The land rally was cited in March 2011 by Sheila Bair as a potential risk for farm banks. Bair, then chairman of the Federal Deposit Insurance Corp., said the “steep rise” in farmland could cause instability in the system. Investors ranging from Singapore-based hedge-fund managers Jim Rogers , chairman of Rogers Holdings, and Stephen Diggle of Vulpes Investment Management to Harvard University’s endowment are betting on farmland as food prices rise. Perry Vieth, a former fixed-income trader for PanAgora Asset Management Inc., founded Ceres Partners LLC in December 2007 to buy and oversee farms. Investors in his Granger, Indiana-based firm receive a share of farmland, while Ceres leases land to local farmers. ‘Eager to Buy Ground’ “I was just talking to about 200 farmers in Southern Minnesota and they’re still very, very eager to buy ground at the current prices, even though they’re record prices,” said Michael Swanson , an agricultural economist and consultant for Wells Fargo. “Structurally we’re very enthused about the market.” While some agricultural companies have used the rally in land values to add to long-term borrowing, farmers are using increased earnings to repay debt. The result, according to USDA estimates, is a contraction in the market. “The challenge is to find, or even maintain the loan volumes that they’ve had in the past,” said Cole Gustafson, a professor with North Dakota State University. “The existing lenders have been very competitive, so loan margins have been driven very low.” Poaching Market Share Outstanding loans backed by agricultural real estate were poised to fall 3 percent to $132.1 billion in 2011, the USDA forecast in November. To counter, lenders are seeking to grab clients from competitors. MetLife teamed with Wells Fargo and Bank of America Corp. (BAC) to poach farmer-owned Aurora Cooperative from Farm Credit’s Cobank. The New York-based insurer, which had about $13 billion in agricultural investments as of Sept. 30, offered Aurora a lower interest rate and provided a real-estate appraisal that more than doubled the value of its collateral. That allowed Aurora, based in the Nebraska city of the same name, to boost long-term debt to $90 million from $40 million and cut the seasonal short- term borrowings it uses to fund inventory purchases. “These assets have really exploded in valuation over the last 5 to 10 years,” Aurora Chief Executive Officer George Hohwieler said in an interview. “The amount of leverage against those assets was very small” under the previous deal with Cobank, he said. Interest Rates MetLife (MET) and Lincoln, Nebraska-based Union Bank & Trust Co. provided Aurora’s long-term, property-backed debt. San Francisco-based Wells Fargo and Bank of America led the short- term financing, which is collateralized by inventory such as fertilizer, seed and grain, Hohwieler said. Arthur Hodges, a spokesman for Cobank, declined to comment. Agriculture real estate loan interest rates fell to the lowest since at least 1974 at 5.36 percent in the third quarter for the region that includes Illinois, Indiana, Iowa, Michigan and Wisconsin, according to the Chicago Federal Reserve Bank. Iowa, the largest corn producing U.S. state, had the lowest rate in the region at 5.24 percent. “It’s crazy not to use the money because the cash is so cheap right now,” said Bill Couser, a 57-year-old farmer who expects to close in March on a 10-year loan from State Bank & Trust Co. Couser is using the loan to finance a $1 million land purchase to expand his ownership of a corn-seed and cattle farm. DuPont, FMC Beneficiaries Lenders in the Farm Credit System are generally offering variable rate loans at about 3.5 percent and fixed-rate loans at 5.5 percent, according to Doug Stark, CEO of Farm Credit Services of America, an Omaha-based lender that is part of the Farm Credit System. Landowners aren’t the only ones gaining. “Ag-related names have benefited with farm incomes rising,” said Jeff Windau, a St. Louis-based analyst for Edward Jones & Co., who has “buy” ratings on DuPont Co. (DD) , the largest U.S. chemicals company by market value and FMC Corp. (FMC) “Farmers have more money to invest in machinery, and with higher commodity prices they’re able to go for the higher-value seeds.” The Farm Credit System required a bailout of as much as $4 billion of taxpayer-backed bonds in 1987 as land prices slumped after rising in the 1970s. The network weathered the 2008 credit seizure as Fannie Mae and Freddie Mac , the residential mortgage finance companies, had to be rescued by the U.S. Government, costing taxpayers more than $153 billion. Credit Perspective “We had our challenges in the 1980’s,” Stark said in a telephone interview. “We learned some valuable lessons from those times.” Net income at Farm Credit System rose to $2.99 billion for the first nine months of 2011 from $2.63 billion for the year-earlier period. From a credit perspective, “investors love the Federal Farm Credit bonds,” said Ralph Axel, a Bank of America analyst in New York. “They didn’t need a bailout, they have no big investments in private label securities and they’re not suffering from credit losses on their loans.” He recommended this month that agency debt investors favor the bonds of the Federal Farm Credit Banks and Federal Home Loan Banks over Fannie Mae and Freddie Mac after the government tapped the two mortgage companies to pay for last month’s extension of a payroll tax cut. The Federal Farm Credit Banks’ $481 million of 0.54 percent bonds due in October 2014 trade at 100 cents on the dollar to pay 18 basis points more than similar-maturity U.S. Treasuries, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. Tremendous Equity “There’s a tremendous amount of equity in agriculture,” said Calum Turvey, a professor of agricultural finance at Cornell University. “This is why the bonds issued by the Farm Credit System are trading just a couple of basis points above Treasuries.” MetLife expects to expand in agriculture, which accounts for about 3 percent of its $493 billion portfolio, with growth outside the U.S., Chief Investment Officer Steven Goulart told investors in December. The company reported a 2.9 percent gain in agricultural investments in the 12 months ended in September, while holdings of residential mortgage-backed securities fell 8.7 percent in the same period. “We continue to see ag lending as a good opportunity for us,” Robert Merck, senior managing director of real estate and agricultural investments at MetLife, said in a telephone interview. “It has performed well.” To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net ; Brian Louis in Chicago at blouis1@bloomberg.net ; Christine Harvey in New York at charvey32@bloomberg.net. To contact the editors responsible for this story: Rob Urban at robprag@bloomberg.net ; Dan Kraut at dkraut2@bloomberg.net ; |
2024-04-24 | Bloomberg | Abu Dhabi’s Wealth Fund Said to Hire Axa Private Equity’s Florin | Christophe Florin, chief operating officer of Axa Private Equity, has left to join the Abu Dhabi Investment Authority, according to three people with knowledge of the matter, as it seeks to expand its staff for acquisitions. Florin, who was also a member of the executive board of French insurer Axa SA (CS) ’s private-equity unit, will head ADIA’s emerging markets private-equity team, said the people, who declined to be identified because the appointment has yet to be announced. He’ll be based in Abu Dhabi, they said. ADIA, one of the world’s biggest sovereign wealth funds, is boosting its private-equity team as it seeks to increase its ability to invest in buyout funds and deals. It has mandated two London-based recruitment firms to find about 40 private-equity professionals in London and Europe , two of the people said. Florin’s hire follows the December appointment of Benjamin Weston, chief executive officer of Helvetica Wealth Management Partners, as global head of alternative investments. Officials for Axa Private Equity and ADIA declined to comment. Florin, who joined Axa Private Equity in 1998, was head of the firm’s Asian operations between 2005 and 2008, before returning to Paris to take on his latest position. He is leaving just as Dominique Senequier, Axa Private Equity’s CEO, works on a spinoff of the Paris-based firm, which manages $28 billion of assets. Abu Dhabi, capital of the United Arab Emirates and home to about 7 percent of the world’s proven oil reserves, is trying to diversify away from oil by investing globally. It set up ADIA in 1976 to manage proceeds from its oil wealth. ADIA, which doesn’t invest in the U.A.E. or typically in the Gulf Arab region, had assets valued at $328 billion at the end of 2008, according to economists at the New York-based Council on Foreign Relations, the latest available data. ADIA, in March, appointed Eduardo Favrin as head of Latin America in its internal equities department from HSBC Global Asset Management. It named Pascal Duhamel as head of its European real estate investments a month earlier. Duhamel joined from Carrefour Property in Paris, where he was the chief executive officer since 2008. To contact the reporters on this story: Anne-Sylvaine Chassany in London at achassany@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-06-18 | Bloomberg | Treasury to Gain Expanded Powers in U.S. Financial Overhaul | The U.S. Treasury Department under Secretary Timothy F. Geithner is coming out of the worst economic crisis since the Great Depression with expanded powers to guard against future threats to financial stability. Geithner, who has managed taxpayer bailouts of companies from Citigroup Inc. to General Motors Co. , would lead a council to monitor large financial firms under legislation House and Senate negotiators aim to complete by July 4. Lawmakers confirmed the council’s basic functions yesterday and may approve final language next week. Geithner would also get a research unit that could demand data from banks and regulators and a new national insurance office. The Treasury-led council’s role includes identifying companies that might be shut down because they pose a risk to the financial system. That authority, even if well-intentioned, could be used for political ends, said Phillip Swagel , a former Treasury economist who’s now a professor at Georgetown University in Washington. “It’s such an open-ended grant of power,” said Swagel, who worked for Republican Treasury Secretary Henry Paulson. “Do we really want to give that to every future administration?” Tom Quaadman , vice president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said the legislation will give Treasury “enormous new powers.” The Treasury would also be required to approve any emergency lending by the Federal Reserve. The Fed used its emergency powers during the crisis to rescue American International Group Inc. and Bear Stearns Cos. The Treasury’s new powers are one element of legislation that Geithner has called “the most sweeping financial reform that we’ve considered in generations.” Council Members The council, which also includes the chairmen of the Fed, Securities and Exchange Commission and the FDIC, would have the authority to recommend that the central bank and other agencies toughen rules to reduce risk at financial institutions. Some of its decisions, such as ruling that a non-bank financial company should be subject to Fed supervision, couldn’t be made without the Treasury secretary’s approval. “While it mostly has powers of recommendation, it clearly has the ability to affect regulation and set the agenda,” said Chuck Muckenfuss , a partner at Gibson, Dunn & Crutcher LLP in Washington who specializes in financial regulation and policy. The council would include, as a non-voting member, the director of a new Treasury financial research office. While the office isn’t intended to “snoop on people,” it would have broad power to ask companies for information, Swagel said. Large Banks The office would obtain data and conduct research on systemic risk and require banks with assets of $50 billion or more to give information not otherwise available about its financial condition and internal systems. The success of the research office depends on how its work is used, said Mark Calabria , director of financial regulation studies at the Cato Institute in Washington and a former aide to Republican Senator Richard Shelby of Alabama. “It’s an open question whether the financial research done at Treasury will end up serving the policy goals of the Treasury secretary, or will they actually build a strong, independent function,” Calabria said. Geithner, 48, will be gaining authority after being the target of a public and political backlash over the $700 billion Troubled Asset Relief Program. Lawmakers including Senator Maria Cantwell , a Democrat from Washington state, and Representative Jeb Hensarling , a Texas Republican, said the Treasury favored Wall Street banks over Main Street. Fed Scrutiny As companies including Citigroup and Bank of America Corp. repaid bailout funds last year, the Treasury escaped the ire of lawmakers debating whether to curb central bank’s independence and increase scrutiny of its actions. Lawmakers yesterday agreed to require greater disclosure by the central bank while rejecting a provision to make the New York Fed chief a political appointee. Geithner met with more than a dozen senators in the weeks before the Senate’s May 20 vote and urged them to support the regulatory changes. The Obama administration’s proposal, released in June 2009, included a financial services oversight council to be led by Treasury. “What’s important is to have true accountability for the responsibilities granted to each government agency,” Treasury spokesman Andrew Williams said. The President’s Working Group on Financial Markets, formed in response to the October 1987 stock market crash, is likely to be supplanted by the council, said Eugene A. Ludwig , chief executive officer of Promontory Financial Group and a former comptroller of the currency. The working group, led by the Treasury secretary, includes the chairmen of the Fed, SEC and Commodity Futures Trading Commission. Insurance Office The Treasury’s authority would also be extended to the insurance industry. A proposed National Office of Insurance, whose director would be appointed by the Treasury secretary, will identify regulatory weaknesses that could contribute to an industry crisis and recommend to the council of regulators that an insurer be supervised by the Fed. The legislation falls short of proposing a so-called optional federal charter for insurance companies that allow firms to choose between the current system of state regulation or a federal overseer. Large insurers such as Allstate Corp. have supported an optional federal supervision while smaller firms and states oppose it. “This is the first toe in the water for federal government into insurance,” said Robert Litan , a senior fellow at the Brookings Institution and a former Office of Management and Budget official. “It could prepare the ground for an optional federal charter.” Inspectors Under the legislation, the Treasury’s inspector general, or internal investigator, would lead a council of IGs from government agencies to share information that could improve financial oversight. “The Treasury Department has been one of the primary battalions in our economic army,” Ludwig said. “In times of war the army grows in strength and authority. The question is, how will this army change in times of peace, or what it will evolve into.” To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net. Enlarge image Tim Geithner Andrew Harrer/Bloomberg Timothy Geithner, U.S. treasury secretary, poses for a portrait in Washington. Timothy Geithner, U.S. treasury secretary, poses for a portrait in Washington. Photographer: Andrew Harrer/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); } }); }); //]]> |
2024-04-22 | Bloomberg | Nippon Life Insurance Plans to Invest $12 Billion, Mainly in Japan Bonds | Nippon Life Insurance Co., Japan ’s biggest life insurer, plans to invest about 1 trillion yen ($12 billion) this financial year, with as much as 80 percent of the money to buy yen-denominated bonds for stable returns. Nippon Life, with 47 trillion yen in assets, will focus on Japanese government bonds with longer maturities and corporate debt in the year ending March 31, said Yosuke Matsunaga, general manager of the finance and investment planning department. Nippon Life joins rivals Dai-ichi Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co. in betting on the relative safety of fixed-income investments as Japan struggles with the aftermath of a record earthquake. Nippon Life’s unrealized gains on investments last fiscal year slid to 1.91 trillion yen from 2.4 trillion yen in the previous 12 months amid falling stocks and a stronger yen, Matsunaga said. “The bulk of our planned new investments this financial year will continue to be in fixed-income securities, mostly in yen-denominated bonds that provide stable income,” Matsunaga said at a press briefing in Tokyo yesterday. “We will actively adjust our portfolio by looking at the relative attractiveness among the yen-denominated bonds.” Prime Minister Naoto Kan today proposed a 4 trillion yen extra budget that is likely to be the first of several packages to rebuild areas devastated by the March 11 quake and tsunami. The government plans to fund the budget without increasing the 44.3 trillion yen in new bond issuances set for the year ending March, according to a statement. Japan’s public debt is about twice the size of the economy. Increase Loans Nippon Life may increase loans to companies by several tens of billions of yen to about 50 billion yen this fiscal year, while overseas bonds with currency hedges will probably be unchanged or decrease, Matsunaga said. Domestic stock holdings will probably be unchanged, while Nippon Life may increase investments in foreign equities with a focus on emerging markets that have higher growth prospects, Matsunaga said. The insurer also plans to increase holdings of overseas bonds without currency hedges when the yen strengthens, reducing the cost, he said. Real estate investments may rise slightly. Japan’s Nikkei 225 (NKY) Stock Average tumbled 12 percent in the year ended March 31. In contrast, holders of Japan’s bonds earned 1.9 percent on their investments, as measured by indexes compiled by Bank of America Corp.’s Merrill Lynch & Co. unit. In the fiscal year ended March 31, Nippon Life boosted investments in Japanese bonds by 1.16 trillion yen and overseas bonds with currency hedges by 900 billion yen, Matsunaga said. It also increased loans by 30 billion yen, he said. Foreign bonds without currency hedges increased 390 billion yen last fiscal year, domestic equities rose 10 billion yen and real estate investments climbed 40 billion yen, he said. Holdings of overseas equities declined 10 billion yen. Following are Nippon Life’s market forecasts for the current fiscal year through March 2012. The ranges refer to where the insurer expects securities to trade during the period. To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net ; Komaki Ito in Tokyo at kito@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net . |
2024-10-07 | Bloomberg | Ex-Ernst & Young Executive Rebuffed in Tax Shelter Case | The U.S. Supreme Court turned away an appeal by Robert Coplan, a former Ernst & Young LLP executive convicted of selling illegal tax shelters that cost the federal government as much as $2 billion. The justices today left intact Coplan’s seven-count conviction and three-year prison sentence. His appeal, which challenged one of the seven counts, sought to narrow the scope of the federal law that criminalizes conspiracies to defraud the U.S. government. Coplan, a tax lawyer, is one of four Ernst & Young executives convicted in 2010 for developing and marketing tax shelters sold from 1999 to 2001. Two of the men, Richard Shapiro and Martin Nissenbaum, have since won reversals. Prosecutors said Coplan also took steps to conceal the shelters from the Internal Revenue Service , lied to the IRS in audits and encouraged clients to do likewise. In his appeal, Coplan pointed to a 2010 Supreme Court decision that limited the reach of a separate federal fraud law in the case of former Enron Corp. Chief Executive Officer Jeffrey Skilling. A federal appeals court upheld Coplan’s conviction last year, along with that of Brian Vaughn, a former Ernst & Young accountant. The case is Coplan v. United States , 12-1299. To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net |
2024-09-06 | Bloomberg | Lloyds ‘Incentive’ Probe, Bankers’ Board Vote: Compliance | Lloyds Banking Group Plc (LLOY) is being investigated by a U.K. regulator over how bonuses and other incentives were used to motivate staff to improperly sell some products to consumers, a person familiar with the case said. The Financial Services Authority referred the bank to its enforcement division for further proceedings, according to the person, who asked not to be identified because the probe is confidential. An FSA review of 22 firms found that incentive programs for bank staff “were likely to drive people to mis-sell in order to meet targets and receive a bonus, and these risks were not being properly managed,” Martin Wheatley, a managing director of the regulator, said in a speech in London yesterday. The failings at one firm were “so serious” that they merited further investigation, the FSA said in a statement. That company is Lloyds, said the person. “We have made significant changes to our incentive schemes,” Lloyds said in a statement. “We reward behaviors that are focused on achieving correct customer outcomes and excellent service as well as monitoring sales to ensure that colleagues have met customer needs appropriately.” Lloyds has set aside 4.3 billion pounds ($6.8 billion) to compensate customers who were mis-sold payment protection insurance, more than any other U.K. bank. British regulators said last year that consumers may receive as much as 9 billion pounds in compensation as a result of improper sales of PPI. Toby Parker, a spokesman for the FSA, declined to comment. The probe was reported earlier yesterday by the Financial Times. Compliance Policy Banker Plan Would Fund Super-PACs to Influence Senate Races A banking trade group is preparing to set up a political fund that would allow members to funnel money anonymously to pro-industry candidates in the final months of the U.S. election campaign. The American Bankers Association board is set to vote today on a plan to create a nonprofit that would donate to super- political action committees, or super-PACs, that can spend unlimited amounts on TV ads and other campaign activities. ABA officials, during a conference call Sept. 4 to brief member firms, said they intend to raise several million dollars in the next few weeks and concentrate their contributions on six to 12 fiercely contested U.S. Senate races. Attempts in the Republican-controlled House to roll back regulation of the financial industry, particularly the 2010 Dodd-Frank Act, have so far run aground in the Democratic-controlled Senate. The ABA’s effort comes only two months before elections for president and Congress. Craig Holman , a lobbyist for Public Citizen , which tracks the influence of money on politics, said donations from the nonprofit could affect some races. A series of court decisions and regulatory changes in 2010 unraveled previous federal limits on political donations. The donors pool their money in nonprofits, which keep contributor names secret, and super-PACs, which have amassed $350 million through the end of July. The ABA’s proposed fund would be a nonprofit, or 501(c)(4), which would allow the organization to disburse money into key Senate races and fund advocacy efforts. The Washington-based trade group represents about 5,000 banks of all sizes, from community lenders to large Wall Street firms like JPMorgan Chase & Co. (JPM) The association also donates to candidates through a more stringently regulated political action committee that has given more than $2.8 million this election cycle to candidates from both parties. For more, click here. Barnier’s Banker Bonus Compromise Rejected by EU Lawmakers European Parliament lawmakers rejected a compromise proposal on measures to regulate banker bonuses, saying the plans are too weak. Legislators rejected the proposal, advocated by European Union Financial Services Commissioner Michel Barnier , during a meeting yesterday on a draft Basel bank-capital law, said Philippe Lamberts, the lawmaker leading the work on the measures for the parliament’s Green group. While EU lawmakers have called for a ban on bonuses that exceed fixed pay, governments are concerned that the measure may harm competitiveness. Barnier has advocated an alternative approach based on empowering shareholders. Members of the parliament at the meeting said that the compromise plan “wasn’t even a basis to start discussions,” Lamberts said in an interview in Brussels. Haldane Says Macroprudential Policy Expectations Must Be Limited Andy Haldane, Bank of England executive director for financial stability, wrote in an article published on Risk Magazine’s website. Global financial regulators are turning to macroprudential tools to address systemic risk; development of “this regulatory edifice has gone from architect’s drawing board to builder’s construction site” at “warp speed,” he wrote. “Provided macro-prudential frameworks are operated flexibly and an undue weight of expectations is not placed on their shoulders, they offer a route to avoiding some of the sins of the recent past,” Haldane wrote in Risk Magazine. Macroprudential policy is at a “similar stage to monetary policy in the 1950s.” He sees “enormous scope for further research into regulatory instruments to support macro-prudential ends” and says “it may be necessary to look beyond the set of instruments typically used for micro-prudential purposes.” Work is also needed on legal entity identifiers and product identifiers to improve risk management, he said in the magazine article. EU Seeks Views on Libor Overhaul Plans in Rate-Rigging Response The European Commission is seeking views on possible rules to overhaul Libor, Euribor and other so-called market benchmarks in the wake of the scandal over interbank lending rates. European Union regulators are weighing options such as forcing banks to provide real transaction data rather than estimates and increasing the number of lenders involved in the rate setting, according to an e-mailed statement from the commission. Confidence in Libor, the benchmark interest rate for more than $500 trillion of securities, plummeted following Barclays Plc (BARC) ’s admission that it submitted false rates. The revelations have provoked renewed calls for tougher oversight of the financial system and pushed regulatory probes of interbank lending rates to the top of the political agenda. Barclays, the U.K.’s second-largest bank by assets, was fined 290 million pounds ($460 million) in June for its role in rigging Libor for profit. The commission will seek views on possible measures until Nov. 15, it said. Separately, Barclays Plc said some employees that were involved in the Libor scandal are no longer employed by the bank. “It would be inappropriate to comment about specific individuals, although the employees involved no longer work at Barclays,” the bank said in an e-mailed statement. “The firm undertook a thorough and robust internal disciplinary process promptly following the regulatory review which was completed in late July.” Compliance Action U.K. Competition Regulator to Review Retail Gasoline Prices The U.K. Office of Fair Trading said it would investigate pricing in the 32 billion-pound ($50.8 billion) market for gasoline and diesel fuel amid concerns about high retail prices. The U.K. antitrust regulator said in a statement yesterday it wants to identify whether or not there are competition problems that it can take on in the market as it asked consumer and industry groups to provide information to the agency over the next six weeks. Andy Peake, ASDA Group Plc’s director of petrol trading, said in an e-mail that the group’s preference would be a “national price” for fuel that everyone would charge. The regulator said it will look at four areas to understand how prices are set, including whether a reduction in the price of crude oil is passed onto consumers and if major supermarkets and oil companies make it harder for independent retailers to compete. Between June 2007 and June 2012 the pump price of gasoline rose 38 percent from 97 pence a liter to 1.34 pounds, while diesel climbed 43 percent from 96 pence a liter to 1.39 pounds, according the Automobile Association Fuel Price Report. Katherine Edwards, Tesco Plc (TSCO) ’s group regulatory affairs director said the group has brought real competition into the petrol market.’’ William Morrison Supermarkets Plc and J. Sainsbury’s Plc (SBRY) said in e-mailed statements they would also provide information to the agency. Macquarie Private Wealth Probed By Regulator, AFR Says Macquarie Group (MQG) ’s private wealth division is being investigated by Australian Securities and Investments Commission over possibly breaching laws aimed at upholding client interests, the Australian Financial Review reported, without saying where it obtained the information. ASIC is examining whether Macquarie’s retail stockbroker provided full information required in statements of advice as to whether advisers were acting in the best interests of clients and bank’s compliance systems, AFR reported. The ASIC team is in dialog with Macquarie and has asked for more information, according to AFR. Andre Khoury, a spokesman at ASIC, declined to comment on the report. Lisa Jamieson, a spokeswoman at Sydney-based Macquarie, declined to comment. Courts Former MAN Executives Samuelsson, Hornung Probed Over Corruption Former MAN SE (MAN) Chief Executive Officer Hakan Samuelsson and former Chief Financial Officer Karlheinz Hornung are being investigated on corruption allegations by German prosecutors. The probe was opened after the former head of MAN’s audit department testified in a related trial last month that both knew about “possible corrupt practices” regarding business deals in Slovenia, Thomas Steinkraus-Koch, spokesman for prosecutors in Munich, said in an e-mailed statement yesterday. The office “opened a probe because the two former MAN managers are suspected of aiding in bribery in business relations,” Steinkraus-Koch said. He said the case is not barred by the statute of limitations. MAN, Europe’s third-largest truckmaker, agreed to pay 150 million euros ($189 million) in 2009 to resolve an inquiry into alleged bribes paid by its truck and turbo units. “Of course I haven’t done anything,” Samuelsson said by telephone, denying any corruption allegations. Hornung didn’t immediately return a call seeking comment. MAN spokesman Andreas Lampersbach declined to comment, saying this concerns individuals who haven’t worked for the Munich- based manufacturer for years. The men resigned in 2009. Siemens spokesman Alexander Becker declined to comment. Interviews/Commentary EU’s Barnier Seeks Financial-Overhaul Completion by End-2013 Michel Barnier, the EU’s financial services chief, said that he’s targeting an end-2013 deadline for completing the EU’s overhaul of financial rules. Barnier was speaking at an event in Brussels today. Barnier plans to meet today with European Commission President Jose Barroso to discuss plans for a banking union in the euro area. Barnier also said at the conference in Brussels that an expert group, which is weighing options for overhauling bank structure, will complete its work this month. Separately, Barnier, said that he will seek views by the end of the year on the financial industry’s role in supporting growth. Barofsky Says Bank Bailout Presumption Still Exists Neil Barofsky , former special inspector for the U.S. Treasury ’s Troubled Asset Relief Program, a Bloomberg Television contributing editor and author of the book “Bailout,” talked about the U.S. banking industry and government bailouts. He spoke with Betty Liu on Bloomberg Television’s “In the Loop.” (For the video, click here.) U.S. SEC Needs to Investigate Short Sellers, Xinhua Says Short sellers made “unjustified attacks” on China-based companies using “unreliable and ludicrous reports,” Xinhua wrote in a signed commentary. Therefore, the U.S. Securities and Exchange Commission needs to “seriously investigate” short sellers,’’ the paper said in the commentary. The U.S. “cannot afford” a capital market that doesn’t attract Chinese companies, the Chinese newspaper said in the commentary. While a “small number” of Chinese companies have falsified data and reports, the “majority” comply with rules and laws, according to Xinhua. The commentary was issued in response to the Citron Research report on Qihoo 360 (QIHU) , which Xinhua called “inaccurate.” Comings and Goings BOE Struck by Lure of Banks as Economics Team Manager Leaves Bank of England official Robert Wood resigned as London’s finance industry lured a U.K. economic analysis manager from the central bank for the second time in less than a year. Wood, who led analysis of British data for policy makers, will join Berenberg Bank in London this month, said two people with knowledge of the matter who declined to be identified because the appointment isn’t yet public. He follows a string of economists who held the position known inside the central bank as Head of the U.K. Team, using it as a springboard for jobs in London’s finance industry. The move coincides with a second year of pay freezes for Bank of England staff, adding to the lure of more lucrative City posts. Governor Mervyn King , who implemented the salary policy last year, thanked employees in this year’s annual report for their forbearance and singled out the struggle to hire and keep staff as a potential risk to its monetary-policy analysis. Wood couldn’t be reached for comment. A Bank of England spokeswoman confirmed yesterday that Wood has resigned and said that he will be replaced by Venetia Bell. A spokesman for Berenberg couldn’t immediately comment. The Bank of England’s annual report, published in July, said that a strategic priority was to “ensure the bank has the right people and processes to carry out its core purposes --- in particular during this period of transition,” referring to the transfer of bank-regulation powers from the Financial Services Authority. The report discussed the importance of retaining and nurturing talented bank staff. The central bank’s pay freeze is set to be reviewed in March 2013. King asked in May to keep his pay frozen until he leaves in June 2013. OCC Names Warwick as Director for Enforcement and Compliance The U.S. Office of the Comptroller of the Currency named Ellen M. Warwick to serve as the agency’s director for enforcement and compliance, overseeing a unit that conducts investigations and recommends administrative actions. The OCC, which supervises national banks and federal savings associations, announced Warwick’s appointment in a statement yesterday. She will replace Richard Stearns, who is retiring, said Bryan Hubbard , an OCC spokesman. 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 . |
2024-12-03 | Bloomberg | Junk Bonds Revive as Sales Soar, Spreads Shrink: Credit Markets | The market for junk bonds is reviving, after at least seven companies pulled sales last week, signaling investors are gaining confidence that Europe’s sovereign debt crisis won’t infect the global economy. International Lease Finance Corp. and Clearwire Corp. led speculative-grade companies selling $2.4 billion of debt yesterday, according to data compiled by Bloomberg. Relative yields have narrowed 29 basis points since Nov. 30 to 593 basis points, or 5.93 percentage points, the biggest two-day decline since May. Junk bond issuance, which declined in November following the busiest two-month period on record, is returning amid reports retail sales rose the most since March and the number of Americans signing contracts to buy existing houses jumped by a record 10 percent in October. The European Central Bank extended an emergency loan program and President Jean-Claude Trichet pledged to fight “acute” financial market tensions. “The risk environment’s better, and you’ve got few places to go, so we’re seeing people come into high-yield,” said Peter Ehret , head of high-yield investments and a senior money manager at Invesco Ltd., which oversees $621 billion in assets. “This week, things are certainly back open. There’s a lot to do between now and Christmas, so those of us in high-yield are going to have a pretty busy month.” ‘Can’t Earn Nothing’ The average yield on junk debt of 8.04 percent compares with the 4.01 percent on investment-grade bonds and 1.7 percent on Treasury notes , Bank of America Merrill Lynch index data show. The asset class has returned 13.6 percent this year, beating the 9.5 percent on higher-rated corporate and 6.9 percent on U.S. government debt. “There’s a lack of alternatives,” said Ehret, who’s based in Houston. “You can’t earn nothing forever. Just try running an insurance company or pension fund earning nothing.” Elsewhere in credit markets, the extra yield investors demand to own global company bonds instead of similar-maturity government debt was unchanged at 176 basis points, after reaching a 12-week high of 177 on Nov. 30, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. Yields averaged 3.84 percent. The cost of protecting corporate bonds from default in the U.S. climbed after a Labor Department report showed unemployment unexpectedly jumped. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 0.2 basis point to a mid-price of 92.6 basis points as of 9:39 a.m. in New York, according to index administrator Markit Group Ltd. Unemployment Rate Climbs The jobless rate rose to 9.8 percent, the highest since April, while hours worked and earnings stagnated, the Labor Department said today in Washington. Payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg News. Credit-default swaps typically rise as investor confidence deteriorates and fall as it improves. Credit swaps 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. Sales of junk bonds, rated below Baa3 by Moody’s Investors Service and lower than BBB- by S&P, have reached $3.9 billion this week, compared with $1.56 billion in the period ended Nov. 26, which was the least since the five days ended Sept. 3, Bloomberg data show. Junk’s Record Year Speculative-grade issuance, which surpassed the annual record in September, has reached $269 billion this year, Bloomberg data show. Borrowers sold $73.1 billion of the debt in September and October, the most in a two-month period. “The risk trade is already showing signs of coming back,” said Bonnie Baha , head of the global developed credit group at DoubleLine Capital LP, which manages $6.8 billion in Los Angeles. “If you were going to see another bout of wholesale contagion, it would be affecting lower-quality issues in a more serious way, and we’re not seeing that.” As concern about the euro-region fiscal crisis abated in Europe, investors turned their attention to U.S. reports. Pending sales of existing houses jumped following a 1.8 percent drop in September, the National Association of Realtors said yesterday. Overall, retail sales at the more than 30 chains tracked by Retail Metrics, led by Abercrombie & Fitch Co. and J.C. Penney Co., surpassed estimates last month. Sales rose 5.3 percent for a 14th straight gain, compared with a prediction of 3.5 percent. Europe Slower Overall corporate bond sales this week of $20.6 billion, including $16.6 billion of investment-grade issuance, compare with $2.9 billion in the prior period, the slowest five days since May, Bloomberg data show. In Europe, investment-grade bond sales fell to the lowest in almost a decade this week. Issuance plummeted 80 percent to 1.2 billion euros ($1.6 billion), the least outside of a holiday period since Dec. 17, 2000, Bloomberg data show. Dong Energy AS, Denmark’s biggest power generator, terminated its offer to buy back hybrid capital bonds and postponed a plan to issue new hybrid securities citing volatile market conditions. “It’s been a tug-of-war between news coming out stronger on the U.S. front and weaker news on the European front,” said Rajeev Sharma , a money manager at First Investors Management in New York who helps oversee $1.5 billion of investment-grade credit. ILFC, American International Group Inc. ’s aircraft-leasing unit, sold $1 billion of 8.25 percent 10-year notes in its third bond offering this year, Bloomberg data show. Clearwire Sells Debt Clearwire Corp. , the Kirkland, Washington-based high-speed wireless network carrier 54-percent owned by Sprint Nextel Corp., sold $675 million of debt after saying last month it may not have enough funding to keep operating. S&P rates the company CCC. The company issued $175 million of first-priority senior secured notes due December 2015 and $500 million of second- priority secured debt due December 2017, according to data compiled by Bloomberg. Clearwire sold the debt after disclosing in a Nov. 4 filing that continued losses and funding uncertainty “raises substantial doubt about our ability to continue.” A default could trigger a contract provision pulling Sprint, the third- largest U.S. mobile phone carrier, into default as well. “Those lower-rated deals are getting a little more traction than they got six months ago,” said Andrew Feltus , a money manager at Pioneer Investment Management Inc. in Boston whose $2.8 billion Pioneer High Yield Fund has outperformed 91 percent of its peers in 2010, Bloomberg data show. “It’s just a little more life for the CCC type paper.” Pulled Deals High-yield volume has also been driven by a power shift to investors from borrowers, after Performance Food Group Co. and Bain Capital LLC’s Burlington Coat Factory Warehouse were among at least seven canceled offerings last week. “The buy side has a little bit of an advantage now given what’s happened in the past few weeks in global markets,” said Sabur Moini , a money manager who oversees $1.7 billion of high- yield debt at Payden & Rygel in Los Angeles. “People seem more keen on playing the markets now than they did in the past three weeks.” Hindalco Industries Ltd. unit Novelis Inc. , Skillman, New Jersey-based ConvaTec Inc. and at least a dozen other high-yield companies are planning as much as $8.5 billion of debt sales, Bloomberg data show. “You buy a risky asset class, you’re going to get corrections,” said Feltus, referring to last week’s drop in junk sales. “The question is ‘are they being driven by what’s going on in the market or external influences?’ As long as it’s external influences, you expect to see that market bounce back, which we have in the last 48 hours.” To contact the reporters on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net ; Tim Catts in New York at tcatts1@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-07-21 | Bloomberg | Ecobank Ghana Rises to 1-Week High After Merger Statement | Ecobank Ghana Ltd. (EBG) , a unit of Lome- based Ecobank Transnational Incorporated, rose to a one-week high after saying it may merge with Trust Bank Ltd. of Ghana. The shares advanced 1 pesewa, or 0.3 percent, to 3.44 cedis as of the 3 p.m. close in the capital, Accra, the highest since July 13. The companies are in talks which “may lead to the merging of the two businesses,” according to a joint statement published in the Ghanaian Times newspaper today. “The news that the bank may merge with the Trust Bank to become a bigger business is spicing some investor interest in the stock,” Hilary Lomotey, an equity trader at Renaissance Capital , said in a telephone interview from Accra. The talks are supported by Ghana’s state pension fund, the Social Security and National Insurance Trust, which owns shares in both banks, according to the statement To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net . |
2024-05-22 | Bloomberg | MetLife Seen Scaling Back Annuities as CEO Narrows Focus | MetLife Inc. (MET) may target annuities and U.S. retail life insurance for cost cuts as Chief Executive Officer Steven Kandarian unveils his plan to improve returns. “I think they’re going to announce some expense-reduction initiatives in those lines of business and maybe announce that they’re cutting back on sales,” Sean Dargan, an analyst at Macquarie Group Ltd., said in an interview. “The products there are commoditized, the environment there is very competitive and the company can probably achieve higher returns elsewhere.” Kandarian 60, is seeking to reverse a stock slide after the New York-based company declined 30 percent in 12 months through yesterday. Kandarian, who became CEO last May, has said that his firm, the largest U.S. life insurer, will announce its strategy tomorrow. The insurer already has started scaling back annuity sales and is exiting banking to limit U.S. oversight as it seeks to expand in emerging markets. “We will fix or exit businesses that cannot consistently clear their hurdle rates,” Kandarian wrote in a March letter to shareholders. Christopher Breslin , a company spokesman, declined to comment. MetLife may target as much as $400 million in expense reductions, a goal that could be reached by eliminating jobs and advertising less at units it’s scaling back, said Randy Binner , an analyst at FBR Capital Markets. MetLife reduced expenses by $700 million annually in an initiative announced in 2008, William Wheeler, who was then chief financial officer, said in 2010. The company expanded outside the U.S. with the purchase of American Life Insurance Co. from bailed-out American International Group Inc. (AIG) for about $16 billion in November of that year. ‘More Complex’ “We now have Alico, which makes more complex something we just simplified, and we’re going through another exercise in our review,” Kandarian said Feb. 15. Dargan said the focus on emerging markets may persuade the company to cut expenses in the U.S. Industrywide, individual life insurance policy sales increased in just four of the past 30 years, according to trade group Limra. They climbed 2 percent in 2011. MetLife has said it’s working to sell more insurance to households making less than $100,000 a year by offering quotes on its website, which may lower costs. MetLife is planning for variable annuity sales of about $18 billion this year, after exceeding $28 billion in 2011, when it was the largest seller of the equity-linked products. The head of U.S. distribution was reassigned as Kandarian sought to cut risk tied to stock market declines. Industrywide, total annuity sales slid 8 percent in the first quarter to $54.8 billion, Limra said. Emerging Markets Revenue from emerging markets will grow by about 20 percent a year through 2015, the insurer said in December. Kandarian hired Christopher Townsend from AIG this month to lead operations in Asia. MetLife generated more than a quarter of its revenue outside the U.S. last year, compared with less than 15 percent in 2008. International operating profit almost tripled last year to $2.2 billion. MetLife is among the bidders for ING Groep NV’s Asian life insurance business, people familiar with the matter said. ING planned to sell the business in one piece, though some bidders are seeking to acquire certain operations, the people said. “My personal impression is that they don’t want more exposure to Japan , but that the Southeast Asia portion of that business would be attractive” to MetLife, Dargan said. He rates MetLife the equivalent of buy. Mortgage Unit MetLife freed up $1 billion in capital by striking deals to sell operations in nations including Venezuela , Kandarian has said. The firm said in January it would shut its home mortgage origination operation and cut most of the 4,300 workers. The insurer had about 67,000 employees as of Dec. 31. That compares with 66,000 at the end of 2010 and 54,000 a year earlier, before the Alico deal. Hartford Financial Services Group Inc. (HIG) has narrowed its focus by agreeing to sell its individual annuities-distribution business. It’s also seeking to sell Woodbury Financial Services and its retirement-plan and individual-life units to focus on property-casualty coverage. Prudential Financial Inc. (PRU) , the No. 2 U.S. life insurer, is also expanding in Asia after the purchase of a business from AIG. The Newark , New Jersey-based insurer struck deals in 2011 to sell a commodities business and its real estate brokerage and relocation unit. Kandarian has been unable to say exactly when MetLife will resume share buybacks and increase its dividend after the Federal Reserve twice rejected the company’s capital plans. He declined last month to reiterate an earlier prediction that the insurer would no longer have bank status by June 30, after he agreed to sell deposits to General Electric Co. (GE) “The driver of the stock is not going to be what happens with expense savings,” Binner said. “The driver of the stock is what happens with capital deployment and the macroeconomic environment.” MetLife will make an announcement on its dividend in October, Kandarian said April 27. 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 |
2024-03-01 | Bloomberg | MBIA Settles $19 Billion in CDO and Mortgage-Debt Guarantees | MBIA Inc ., the company that backed some of Wall Street’s most toxic debt securities, settled $19 billion in guarantees with five financial institutions since September, resolving the obligations with a one-time payment. Its MBIA Insurance Corp. unit paid the firms to tear up contracts insuring against losses on corporate, residential and commercial-mortgage bonds and derivatives, the Armonk, New York- based company said in a statement that didn’t disclose the settlement amounts. The deals terminated guarantees on $15.7 billion of debt in the fourth quarter and $3.3 billion during the first two months of 2011, the company said. “Our insurance companies continue to have adequate resources to meet all expected future claims obligations,” MBIA President Chuck Chaplin said in the statement. “The commutations and terminations of $15.7 billion of exposure in the fourth quarter improved the balance sheet position of MBIA Corp. and eliminated the volatility associated with the commuted policies.” Chief Executive Officer Jay Brown has settled $28 billion of MBIA’s guarantees on mortgage-linked debt and other devalued securities since 2008. The company is also seeking to compel banks to buy back soured home loans. The insurer was stripped of its AAA credit ratings in 2008 and shut out of the business of guaranteeing municipal bonds as the housing market collapsed and debt markets froze. Fourth-Quarter Profit MBIA said fourth-quarter net income available to common shareholders was $451 million, or $2.24 a share, compared with a net loss of $240 million, or $1.16 a year earlier. The profit hinged on a $1.1 billion pre-tax unrealized net gain on the fair value of insured derivatives, a provision that reversed previously recorded market value losses tied to the debt contracts it settled in the fourth quarter. Without that and other adjustments, MBIA would have recorded a net loss of $311 million compared with a net loss of $541 million for the same period in 2009. The company increased its expected losses on debt tied to commercial real estate by $604 million after a “modest” deterioration in the performance of the securities and a change in the way it models future performance. MBIA dropped 50 cents, or 4.5 percent, to $10.55 a share as of 5:21 p.m. in trading after the close of regular U.S. markets. The cost to protect against a default by MBIA Insurance Corp. jumped 3 percentage points to a mid-price of 41 percentage points upfront, according to broker Phoenix Partners Group. That’s in addition to 5 percentage points a year, meaning it would cost $4.1 million initially and $500,000 annually for credit-default swaps protecting $10 million of MBIA-backed debt for five years. (The company will hold a conference call tomorrow at 8 a.m. New York time. To listen, dial 1-877-694-4769 or go to http:// www.mbia.com.) To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-11-28 | Bloomberg | Money Transfers, EU Credit Reports, SEC Post: Compliance | The U.S. Consumer Financial Protection Bureau said it will revise rules for international money transfers after banks complained that the agency’s current plan could push some of them out of the business. The bureau, which had said final regulations governing so- called remittances would take effect on Feb. 7, now plans to issue a revision in December for a comment period, according to a statement released yesterday. The changes will address what should happen if a consumer provides an incorrect account number for a transfer and how remittance providers must disclose third- party fees and foreign taxes, the bureau said. Bureau Director Richard Cordray had rebuffed bank lobbyists’ request for a delay in the effective date during an Aug. 10 meeting to discuss the rule. Industry groups then outlined what they saw as problems with the rule in an Oct. 17 letter. The change announced yesterday may have been prompted by the Federal Home Loan Bank of New York saying it would stop processing international wire transfers for members as a result of the rule, according to Robert Rowe, vice president and chief counsel of the Washington-based American Bankers Association. The question is whether the changes come in time to keep other banks from exiting the business, Rowe said. The remittance rule, required under the Dodd-Frank Act, is designed to improve consumer understanding of costs. The bureau issued a revision on Aug. 7, to exempt companies that handle 100 or fewer remittances per year. The new effective date will be some time in the spring of 2013, according to the bureau’s statement. Compliance Policy U.K. Government Starts Public Consultation on Libor Rules The U.K. government began a public consultation on its plans to overhaul Libor, the benchmark used to set rates for more than $300 trillion of securities, the Treasury said. The exercise seeks the views of industry and the public on legislation to implement Financial Services Authority Managing Director Martin Wheatley’s recommendations, the Treasury said in a statement in London today. Under the proposals , which are expected to become law early next year, the Treasury will give legal force to the way the London interbank offered rate is set, create a criminal offense for those who misreport it and give regulators the power to oversee the setting of the rate and other financial-industry benchmarks. The British Bankers’ Association, the industry lobby group that compiles Libor, will give way to a new rate-setting panel. Wheatley began the review after Barclays Plc (BARC) paid a record 290 million-pound ($464 million) fine in June for manipulating Libor. At least a dozen banks are being probed worldwide over allegations they colluded to manipulate the benchmark to profit from bets on derivatives. The public consultation ends on Dec. 24, the Treasury said. Credit-Rating Companies in EU to Face Sovereign-Debt Curbs Credit ratings companies face curbs on when they can assess government debt and restrictions on their ownership under draft plans agreed on by European Union officials and legislators. Lawmakers from the European Parliament and Cyprus, which holds the rotating presidency of the EU, also agreed yesterday to allow investors to sue ratings companies if they lose money because of malpractice or gross negligence. Michel Barnier proposed the tougher ratings rules after warnings from nations including France and Germany that downgrades of sovereign debt had deepened the bloc’s fiscal crisis. He said last year that ratings companies were guilty of “serious mistakes” and shouldn’t be allowed to “increase market volatility” through ill-timed or unjustified downgrades. The European Commission has said that tougher regulation is needed to boost competition for the so-called big three ratings companies of Fitch Ratings Ltd., Moody’s Investors Service Inc. and Standard & Poor’s. The draft deal brokered yesterday must be formally approved by governments and by the full parliament before they can be implemented. For more, click here. Compliance Action First Foreign Bank Junior Islamic Bonds Sold in Malaysia National Bank of Abu Dhabi PJSC completed Malaysia ’s first sale of sukuk by a foreign lender that rank below other securities in terms of claims on assets, taking advantage of the Asian nation’s more-advanced rules. The government-owned entity sold 500 million ringgit ($164 million) of 15-year subordinated Islamic bonds at 4.75 percent last week, according to a Nov. 23 statement. That’s less than the 4.9 percent it paid Malaysian investors in December 2010 for sukuk due in 2020 that has a higher priority in the event of liquidation, and 183 basis points more than average rates on global Shariah-compliant debt in the Gulf Cooperation Council. The Southeast Asian nation has the regulatory framework in place and legal recourse in the event of a default that may encourage more of these types of products, according to CIMB Islamic Bank Bhd. in Kuala Lumpur. Sales of bonds that comply with religious tenets by Gulf Investment Corp. GSC and Abu Dhabi National Energy Co. helped propel issuance to a record 90 billion ringgit this year. Malaysia, which pioneered Islamic finance 30 years ago, is also seeing interest from international names to sell debt in the world’s biggest sukuk market. Ireland’s Electricity Supply Board and National Australia Bank Ltd. are planning to tap the market, while Singapore’s Noble Group Ltd. and Bahrain’s Mumtalakat Holdings Co. have already issued ringgit-denominated notes this year. For more, click here. Libor Lending Rates Were Probably Fixed, German Regulator Says Banks probably fixed the London Interbank Offered Rate, or Libor, said Raimund Roeseler, chief of banking supervision at German financial regulator BaFin. Probes are continuing into the alleged manipulation, Roeseler said before a parliamentary hearing in Berlin today. Regulators from Canada to Switzerland are investigating whether more than a dozen banks including Deutsche Bank AG (DBK) , Barclays Plc, UBS AG (UBSN) and Royal Bank of Scotland Plc were colluding to rig Libor, the benchmark for more than $300 trillion of securities, or hiding their true cost of borrowing. Barclays Chief Executive Officer Bob Diamond resigned in July after the bank admitted to manipulating the rate. Separately, Deutsche Bank co-Chief Executive Officer Anshu Jain is facing criticism from politicians and his own predecessor for a decision not to attend the German hearing on rate rigging. Josef Ackermann, Jain’s predecessor as CEO, criticized him, saying two days ago that he should have accepted parliament’s invitation. For more, click here. Big Banks More Apt to Impose Arbitration on Checking Accounts Large banks are more likely to force checking-account customers to forgo their right to sue over a dispute, according to a new study by the Pew Charitable Trusts released yesterday. More than half -- 56 percent -- of the 50 largest banks by domestic deposits, including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) , require checking account holders to submit disagreements to arbitration. Of the next group of 50 banks, 30 percent do so. The study found that the top five U.S. banks -- JPMorgan, Wells Fargo, Bank of America Corp. , Citigroup Inc. (C) and U.S. Bancorp (USB) -- all include arbitration clauses in their checking account agreements, according to Cora Hume, one of the researchers. Bank of America uses a process known as “judicial reference,” which functions in a similar manner, Hume said. Consumer advocates argue that mandatory arbitration limits redress of customer grievances. The U.S. Consumer Financial Protection Bureau is conducting a study on the use of arbitration. Interviews/Hearings Barofsky Says Party Split May Slow SEC’s ‘Glacial Pace’ Neil Barofsky , former special inspector for the U.S. Treasury’s Troubled Asset Relief Program and Bloomberg Television contributing editor, talked about the selection of Elisse Walter to head the Securities and Exchange Commission. Barofsky, speaking with Tom Keene and Sara Eisen on Bloomberg Television’s “Surveillance,” also discussed U.S. banking regulations. Stephen Roach, a professor at Yale University, also spoke. For the video, click here. For audio, click here. Pitt Says U.S. SEC Still ‘Absolutely Essential’ Harvey Pitt, former Securities and Exchange Commission chairman, said there is a real need for the SEC to find new ways to “achieve its ever-increasing workload. It is absolutely essential for American investors and for our economy.” Pitt spoke with Bloomberg’s Carol Massar on “Bloomberg On the Economy.” For the audio, click here. Block Giving Up on China Shorts, Says State Protects Frauds Carson Block , founder of Muddy Waters LLC, said he’s lost interest in betting against Chinese stocks and speculates the government is protecting fraudulent companies. “ China has gotten harder in the sense that the government has really taken the side of the fraud,” Block said in an interview on Bloomberg Television’s “Market Makers” program yesterday. “The government is working with a number of these companies to try to conceal records that are public. When you are up against that sort of strength of the ability to revise history, it becomes difficult. That is one of the reasons we’re not that interested in China anymore.” A phone call to the State Administration for Industrial and Commerce , which compiles corporate records in China, wasn’t answered after business hours in Beijing. An official at China’s consulate in New York, who asked not to be identified because it’s against their policy, said that she’s not in a position to respond to Block’s comments. China began limiting access to corporate filings this year after short sellers used them to highlight accounting discrepancies in companies listed abroad. For more, click here. HSBC Compliance Would Now Catch Improper Sales, U.K. Head Says HSBC Holdings Plc (HSBA) ’s updated compliance procedures would weed out products such as wrongly sold loan insurance because they would be identified as too profitable, said Antonio Simoes, head of the bank’s U.K. unit. A reputational risk committee scrutinizes very profitable trades and products, Simoes said. He made the remarks before a panel of the Parliamentary Commission on Banking Standards yesterday. Payment protection insurance “would have been picked up currently through our product approval procedures,” Simoes said. “One of the key issues we looked at was the profitability of the product and a product which is disproportionately profitable in our current processes would not have been approved.” HSBC has set aside $2.1 billion after regulators ordered banks to compensate clients who were forced to buy, or didn’t know they had bought insurance to cover their repayments on mortgages, credit cards and other loans. British banks have made provisions of about 11 billion pounds ($17.6 billion) to redress consumers. Bonuses in London to Trail New York Amid Tougher Rules Bankers in London, the hub for securities firms in Europe , are bracing for lower bonuses compared with New York counterparts as earnings from the region plummet and pressure to tighten compensation rises. Bloomberg’s Ben Priechenfried reports. For the video, click here. Comings and Goings Elisse Walter Steps Out of Schapiro Shadow Into SEC Chairmanship Elisse Walter, who has spent the past four years as Securities and Exchange Commission Chairman Mary Schapiro’s closest confidant and behind-the-scenes adviser, will soon step into the spotlight that she has mostly shunned in trying to help her close friend succeed. Designated to become SEC chief by President Barack Obama when Schapiro leaves in December, Walter, 62, is little known outside of Washington. She was already confirmed by the Senate as a commissioner, which allows her to become chairman without going through a second confirmation. Walters can stay in the job as long as the end of next year. Still, by not immediately naming a replacement for Schapiro’s commission seat, the administration will leave the panel evenly split with two Democrats and two Republicans -- making it harder to enact controversial policies, including the Volcker proprietary trading ban from the 2010 Dodd-Frank law and new strictures for money-market funds. An administration official said Nov. 26 that Obama will nominate a new commissioner in the near future. The official, who spoke on condition of anonymity because the deliberations were private, didn’t say how soon a nomination might come, and whether the nominee would also be designated for the chairman position. For more, click here. Deutsche Boerse’s Rainer Riess to Leave Exchange After 24 Years Rainer Riess, managing director of Deutsche Boerse AG and deputy chairman of the Frankfurt Stock Exchange, will leave after 24 years at the company. Riess, 46, will hand over responsibility for the firm’s equity-markets business on Dec. 31, the Frankfurt-based company said in an e-mailed statement yesterday. Andreas Preuss , deputy chief executive officer of Deutsche Boerse, will oversee the unit in addition to derivatives. The executive, who ran the equities business on a day-to- day basis, represented Deutsche Boerse at international conferences and at the Federation of European Securities Exchanges, the industry’s trade group. Riess’s departure follows the announced retirement of Frank Gerstenschlaeger, an executive board member who will leave on March 31. Riess will formally depart on June 30 next year, the exchange said, adding he “leaves the company in best mutual consent in order to devote more time to pursue his personal interests.” Libor Scuppers Tucker BOE Bid as Carney Takes Governor Job Paul Tucker, whose three-decade career at the Bank of England marked him out as the leading candidate to become the next governor, failed to secure the top post after the Libor scandal undermined his bid. His chances were tainted after he was forced to deny accusations from lawmakers that he pressed Barclays Plc to lower Libor submissions, and defend himself against criticism he ignored warnings from other regulators on flaws in the rate. Tucker, the BOE deputy governor for financial stability, said he “warmly” congratulated Bank of Canada Governor Mark Carney, who was chosen by Chancellor of the Exchequer George Osborne yesterday. Osborne said he hopes Tucker will continue at the central bank. Barclays Plc lost its three most senior executives and incurred a record 290 million-pound fine in June for manipulating the London interbank offered rate, the benchmark for more than $300 trillion of securities. The probe into Libor practices has spread among more than a dozen banks worldwide. For more, click here. To contact the reporter on this story: Carla Main in New York at cmain2@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-06-26 | Bloomberg | Bank of America Sued Over Force-Placed Insurance Costs | Bank of America Corp. was sued in a Florida federal court by homeowners who allege the company overcharged them for so-called force-placed insurance. Force-placed insurance, which mortgage companies can purchase for homeowners when their policies lapse, is a “financial windfall” for Bank of America, according to a complaint filed yesterday in West Palm Beach. “A substantial portion of the premiums are refunded to Bank of America or its affiliates and subsidiaries through various kickbacks, reinsurance and/or unwarranted commissions,” according to the homeowners, who seek to proceed on behalf of a U.S. borrowers who were charged for the insurance by Bank of America or an affiliate. In April, New York’s Department of Financial Services, saying it was seeking a basis for “consistently high profits” at the expense of homeowners and investors, said it was investigating whether force-placed insurance rates are excessive. It said that it was requiring information from insurers including Balboa Insurance Co., which is also a defendant in the Florida case. The New York regulator said there are “serious concerns” that premiums for the insurance have been “artificially inflated.” The inquiry was also looking into relationships among the insurers, banks, mortgage servicers and insurance agents and brokers. Already Insured Joseph Gallagher, one of the Florida plaintiffs, was charged $4,491 annually for his force-placed policy even though he already had insurance, according to the complaint. The force- placed policy, which only covered wind and hail damage, was twice as expensive as Gallagher’s regular, comprehensive insurance policy, according to the complaint. The premium payments for the force-placed policy were added to Gallagher’s monthly mortgage payment, which contributed to his home going into foreclosure, according to the suit. The Florida plaintiffs are seeking unspecified damages. Rick Simon , a spokesman for Charlotte , North Carolina-based Bank of America, said the company hasn’t been served with the complaint and doesn’t usually comment on pending litigation. Paula Symons of Sydney-based QBE Insurance Group Ltd. (QBE) , which bought Balboa from Bank of America last year, had no immediate comment. The case is Gallagher v. Bank of America, 12-cv-8068l, U.S. District Court, Southern District of Florida (West Palm Beach). To contact the reporter on this story: David Beasley in Atlanta at dbeasley4@yahoo.com To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-10-18 | Bloomberg | Buy Bank Options Before Earnings Reports, Decision by Fed, MF Global Says | Investors should buy U.S. bank options for protection against bigger price swings over the next month spurred by elections, a Federal Reserve meeting and earnings reports, MF Global Holdings Ltd. said. An options strategy known as a straddle is worth buying on the Financial Select Sector SPDR exchange-traded fund, which tracks companies including Bank of America Corp. and Goldman Sachs Group Inc., according to Dan Bystrom , head of derivatives trading at MF Global in New York. The trade involves buying a November $15 call and November $15 put to profit from increasing volatility whether the shares rise or fall. “When people get complacent, the price of insurance keeps dropping because there’s no demand for it,” Bystrom said in an interview. “It’s dropped to a point, especially in the shorter maturities, that it makes a lot of sense to insure your portfolio given what’s coming over the next four weeks.” The fund reached its 2010 high in April, having gained 18 percent from Dec. 31, then tumbled 20 percent through August amid concerns about the strength of the U.S. economic recovery and sovereign-debt problems in Europe. The XLF, as the security is known, is down 0.4 percent this year, while the Standard & Poor’s 500 Index has gained 5.5 percent. Volatility Catalysts Volatility may be increased before next month’s options expire on Nov. 19 as 75 of the ETF’s 81 constituents report earnings, midterm elections are held and Fed policy makers hold a meeting in two weeks. Implied volatility , the key gauge of option prices, for at-the-money contracts expiring in 30 days is 27.47 and fell by almost half from this year’s peak in May to a six-month low of 24.39 last week. Fed Chairman Ben S. Bernanke said on Oct. 15 that there’s a case for “further action” by the central bank in the form of additional monetary stimulus because inflation is too low and unemployment is too high. While he said the central bank could expand asset purchases, he didn’t offer new details on how the Fed would undertake those strategies or give assurances the central bank will act at its Nov. 2-3 meeting. The economy remains a central issue in the Nov. 2 midterm elections, in which Republicans are poised to pick up seats in the Senate and possibly win control of the U.S. House of Representatives. While the economy is no longer in a recession, the Bureau of Labor Statistics reported last month that unemployment remained relatively high at 9.6 percent. The Labor Department reported that 95,000 jobs were cut in September. Insuring Portfolios “Even if you’re not bearish, the cost of insuring your portfolio is pretty cheap,” Bystrom said. “It doesn’t have to be an outright bear play but even for the bulls the downside protection cost is coming cheaper than it has in a while.” The fund fell 2.4 percent to $14.35 last week for the biggest loss in two months amid growing legal scrutiny of foreclosure practices. Home seizures reached a record of 102,134 properties in September and the National Association of Attorneys General said it will conduct an inquiry into whether banks used false documentation to justify foreclosures. The November $15 straddle trade Bystrom recommends profits as bank-stock price swings increase and makes money if the XLF is below about $13.91 or above about $16.09 at expiration, according to data compiled by Bloomberg. It loses the most if the stock finishes at $15. Bank of America, the largest U.S. lender, lost 9.1 percent for last week’s biggest drop in the Dow Jones Industrial Average. Goldman Sachs, the world’s most-profitable securities firm, slumped 1.3 percent to $150.69. Both release results tomorrow, while rivals Morgan Stanley and Wells Fargo & Co. report on Oct. 20. Rising Profits Third-quarter earnings at U.S. banks and brokers in the S&P 500 are expected to increase 123 percent from a year earlier, according to analyst estimates compiled by Bloomberg. Non- financial companies are expected to boost profit by 21 percent. Calls give the right to buy a security for a certain amount, the strike price, by a set date. Puts convey the right to sell. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility , or stock swings, will rise or fall. “Anyone interested in buying downside protection should look at the XLF, because if there’s any market volatility, there’ll certainly be volatility in the financials.” Bystrom said. If you’re going to buy volatility anywhere, that’s the place that makes the most sense.” To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net. To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net . |
2024-06-04 | Bloomberg | Bank Regulators to Coordinate Oversight Under Dodd-Frank | The Federal Reserve and four other U.S. financial regulators said they agreed to coordinate supervision of federally insured banks with assets exceeding $10 billion under the Dodd-Frank Act tightening supervision. The agencies will coordinate examinations and share information about how the largest banks comply with consumer protection laws , the Fed said today in a joint statement. The Federal Deposit Insurance Corp., the National Credit Union Administration , the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau also signed the statement. “These coordination undertakings should lead to greater uniformity and efficiencies in supervision and help to minimize regulatory burden on covered depository institutions,” the agencies said in the statement. The coordination will reduce regulatory burdens, prevent duplicate efforts and avoid conflicting directives, the agencies said. To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-02-11 | Bloomberg | Most Swiss Stocks Rise as Ministers Discuss Cyprus Aid | Most Swiss stocks advanced, after two straight weeks of losses for the benchmark index, as ministers from the 17-member euro region met to discuss aid to Cyprus and Greece. Zurich Insurance Group AG and Swiss Re Ltd., Switzerland’s largest insurer and reinsurer respectively, paced gains. Nestle SA, the world’s largest food company, climbed after Natixis recommended buying the shares. Gategroup Holding AG slumped the most since November 2011 after saying profit fell in 2012 and it won’t pay a dividend. The Swiss Market Index advanced 0.2 percent to 7,407.6 at the close in Zurich, paring an earlier advance of as much as 0.5 percent. Thirteen shares on the gauge rose, while six fell. The number of shares changing hands on the index was 28 percent lower than the average of the past 30 days, according to data compiled by Bloomberg. The broader Swiss Performance Index added 0.1 percent. “Market sentiment isn’t bad,” said Alessandro Fezzi , senior market analyst at LGT Bank Schweiz AG in Zurich. “In general, liquidity will be favorable. This won’t lead to insecurity in the market. This week, with China out and no major economic data, it will be hard to find direction.” Euro-area finance ministers met in Brussels today as a tightening election contest in Italy and a political scandal in Spain threatened to revive concern about the region’s debt crisis. Group of 20 finance chiefs and central bankers will gather in Moscow on Feb. 15. Insurance Companies Zurich Insurance advanced 1.3 percent to 259 Swiss francs. Swiss Re climbed 1.4 percent to 71.35 francs, while Swiss Life Holding AG added 1.4 percent to 141.80 francs. Nestle added 0.4 percent to 64.20 francs. Natixis raised its recommendation on the stock to buy from neutral. Gategroup slumped 8.3 percent to 21.45 francs. The airline- catering company released provisional figures for 2012 showing full-year earnings before interest, taxes, depreciation and amortization fell to 170.8 million francs ($186 million), from 201.7 million francs in 2011. The company said it won’t propose a dividend. Meyer Burger Technology AG, a solar-equipment maker, rallied 5.7 percent to 8.15 francs after Wacker Chemie AG boosted polysilicon output on growing solar demand. Cie. Financiere Richemont SA, the owner of the Cartier brand, slid 1.3 percent to 73.40 francs for the biggest drop in the SMI. To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-05-10 | Bloomberg | China Assures Move Toward a More Flexible Yuan Policy, U.S. Official Says | China assured the U.S. that it will continue moving toward a more flexible yuan exchange rate , a U.S. Treasury official said. Chinese officials meeting with their U.S. counterparts in Washington also agreed to allow U.S. and other foreign banks to sell mutual funds and provide financial custodial services in China, the official said in a telephone briefing with reporters today. No specific target or number for the yuan’s value will be part of formal agreements between the two nations, the Treasury official said. The currency has been a focal point of the two-day talks among U.S. Treasury Secretary Timothy F. Geithner , Chinese Vice Premier Wang Qishan and other officials. Geithner said yesterday on the “Charlie Rose” program airing on PBS and Bloomberg Television that China was “moving carefully” in appreciating the yuan. The U.S. also expects China to allow foreign insurers to sell auto insurance there for the first time, the Treasury official said. The official couldn’t be further identified under rules of the briefing. China also agreed to inspections to try to ensure that Chinese companies are using only legitimate software, the official said. To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-04-08 | Bloomberg | Covington, Morgan Lewis, Shearman: Business of Law | Covington & Burling LLP sought to overturn a judge’s ruling disqualifying the firm from working for Minnesota on a lawsuit alleging 3M Co. polluted state waters. In oral arguments April 4 before a state appeals court panel, the parties faced off over whether Covington’s previous work for 3M on perfluorinated (PFC) compounds was substantially related to its work for Minnesota. “Disqualification of Covington would be a devastating and quite possible fatal blow to the state’s case,” Minnesota’s lawyers wrote in court filings. Covington lawyer William Greaney is representing Minnesota in the environmental suit. Peter Hutt, former chief counsel of the U.S. Food and Drug Administration and a senior counsel at Covington, advised 3M on matters involving PFC’s in microwave food packaging beginning in 1992. “Mr. Hutt largely ended his work for 3M in 2000, when he transitioned his files to another Covington partner, Marialuisa Gallozzi,” Washington-based Covington said in court papers. “Like Mr. Hutt, Ms. Gallozzi provided no environmental advice to 3M nor was she asked to do.” 3M, based in Maplewood, Minnesota, said in court papers that Covington’s representation was in conflict with a prior agreement that the firm not undertake representation on “substantially related matters.” 3M claims Covington misled them about conflicts, which was why the firm didn’t object to Covington’s counsel until 16 months into the case, when the pretrial exchange of evidence was almost complete. While the state and Covington have argued that the two matters were separate, 3M said that in taking on the Minnesota environmental matter, Covington had to change its claims about the chemical’s safety. “In representing the state, Covington was required to attack positions it had espoused a few years earlier on 3M’s behalf,” 3M said in its court filings. A district court judge sided with 3M, finding a conflict and disqualifying Covington in an October ruling. The law firm, which has worked on behalf of Minnesota on environmental matters over the past 17 years, has already spent 20,000 hours in the 22 months since the case was first filed and has developed the factual legal and scientific basis for the case, according to court papers. Disqualifying Covington could derail the proceedings because the firm took the case on a contingency basis, allowing the state to afford to bring the suit. Covington referred calls for comment to Benjamin Wogsland in the Minnesota Attorney General’s Office. Wogsland didn’t return a phone call seeking comment on the dispute. A 3M spokeswoman, Jacqueline Berry, also didn’t return a phone call seeking comment. The appeals panel included judges Randolph Peterson, Edward Cleary and John Smith , according to Lissa Finne, a spokeswoman for the court. The court has 90 days to issue an opinion. The lower-court case is Minnesota v. 3M Co., 27-CV-10-28862, Hennepin County District Court ( Minneapolis ). Law Firms ResCap Investigation Costs Expected to Rise to $82.75 Million A court-ordered investigation in Residential Capital LLC’s bankruptcy case is estimated to cost $82.75 million, more than double an earlier calculation by the ex-judge leading the probe. Arthur Gonzalez , a former Manhattan bankruptcy judge who was appointed as examiner last year to run the investigation, estimated the fees for advisers in a filing April 5 in U.S. Bankruptcy Court in Manhattan. “The investigation has proven to be an enormous undertaking,” lawyers for Gonzalez said. Gonzalez is represented by Chadbourne & Parke LLP. His conflicts counsel is Wolf Haldenstein Adler Freeman & Herz LLP. He was appointed in July in the mortgage company’s bankruptcy to investigate transactions between ResCap and parent Ally Financial Inc. (ALLY) as well as Cerberus Capital Management, claims ResCap proposes to release, and claims against officers and directors. Gonzalez estimated in August that the report would cost $29 million to $36 million. In the April 5 filing, Gonzalez said his lawyers will cost $44 million, with financial professionals making $38.2 million in fees. His own fee would be $550,000. He said the report should be completed in early May. The case is In re Residential Capital LLC, 12-bk-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan). News Admiral Plans Legal Venture After Government Bans Referral Fees Admiral Group Plc (ADM) , the U.K. auto insurer that owns confused.com, started joint ventures with two law firms after the government banned the practice of selling details of customers who have been in accidents. Admiral will form the partnerships with Lyons Davidson and Cordner Lewis Solicitors beginning May 1, the Cardiff, Wales-based company said April 5 in a statement. The government on April 1 banned so-called referral fees paid to insurers. Prime Minister David Cameron outlawed the fees as part of an attempt to bring down the cost of motor insurance, which has climbed by more than a third over the past four years as claims soared due to the success of lawyers working on contingency fees and spurious injuries. By bringing the legal services in-house, Admiral gets to maintain revenue from successful legal claims against other insurers. “This is about protecting a revenue stream from law firms that has just become outlawed,” said Kevin Ryan , a London-based analyst at Investec Plc (INVP) with a sell rating on the stock. “The challenge will now be to charge the customer for using the service.” The ventures won’t make a “material contribution” to Admiral’s profit in the foreseeable future, the insurer said. Lehman Brokerage Trustee Seeks $25 Million in Fees, Expenses Lehman Brothers Inc. brokerage trustee James Giddens asked a judge to approve almost $25 million in fees and expenses for the period from March to June 30, according to a filing in federal court in Manhattan. Giddens and his law firm, Hughes Hubbard & Reed LLP, have so far received $212.7 million in fees and expenses for work on liquidating the brokerage since September 2008. After 4 1/2 years, the defunct firm’s hedge fund and bank creditors are still awaiting their first payment. This month, Giddens will ask a bankruptcy judge to let him put $15.7 billion into a fund for customers, out of the $25.7 billion he is holding. He has said that customers will be paid in full. NYU School of Law Picks Columbia’s Trevor Morrison as New Dean New York University School of Law named constitutional law expert and Columbia Law School professor Trevor Morrison as its new dean. He succeeds Richard Revesz, who will step down from the position on May 31, according to a statement. “I am very pleased that Trevor Morrison will be NYU Law’s next dean,” NYU President John Sexton said in the statement. Sexton, who was dean of the law school from 1988 to 2002, picked Morrison from a slate of candidates prepared by a search committee. Revesz, who held the post for 11 years, will remain on the law school faculty and direct NYU’s newly formed Marron Institute on Cities and the Urban Environment, according to the statement. “It gives me great comfort and confidence to know that leadership of the Law School is passing into Trevor’s very capable hands. He has the talent, energy, and vision to take an already exceptional institution to new levels of excellence,” Revesz said in a statement. Virginia Lawyer Pleads Guilty in $100 Million SBA Loan Fraud A Virginia lawyer pleaded guilty in a fraud scheme that prosecutors said resulted in more than $100 million in losses in loans guaranteed by the U.S. Small Business Administration. Seung E. Oh, 44, of Great Falls, entered her plea to money laundering and conspiracy to commit bank fraud April 5 in federal court in Baltimore. Oh used her law firm and a settlement company she owned to “facilitate loan closings for deals that would otherwise fail to meet the lending parameters of the banks making the loans,” according to her plea agreement. Oh and other conspirators misrepresented to banks and to the SBA the true amount of money involved in loan closings, “and/or the true names of the parties taking part in the transactions,” the plea agreement says. Taxpayers, through the SBA, guaranteed 75 percent to 90 percent of each loan, leaving the lenders on the hook for the rest, according to an e-mailed statement from U.S Attorney Rod Rosenstein’s office. Oh collaborated with Joon Park and Loren Park, brothers who owned Jade Capital, a Virginia loan brokerage, in arranging for the fraudulent loans, according to Rosenstein’s statement. Oh faces a maximum penalty of 30 years in prison for the bank fraud conspiracy charge and as many as 20 years for money laundering. Joon Park pleaded guilty to bank fraud conspiracy and is scheduled for sentencing on May 28. Four other participants in the scheme already have been sentenced. The case is U.S. v. Park, 11-cr-00600, U.S. District Court, District of Maryland (Baltimore). Deals Morgan Lewis Advises MetLife on Sale to Cetera Financial Group Cetera Financial Group Inc., the brokerage backed by private-equity firm Lightyear Capital LLC, agreed to buy two of MetLife Inc. (MET) ’s broker-dealer affiliates with $25 billion under management. Morgan, Lewis & Bockius LLP was MetLife’s legal counsel. Law firm Sutherland Asbill & Brennan LLP advised Cetera. The Morgan Lewis team was led by business and finance partner R. Alec Dawson and included business and finance partner Sheryl Orr and investment management and securities industry partner John Ayanian. Sutherland’s attorneys on the deal include partners B. Scott Burton and Douglas Leary. MetLife agreed to sell Tower Square Securities and Walnut Street Securities, which have about 850 advisers, the New York-based insurer said April 5 in a statement. After the deal is completed, El Segundo, California-based Cetera will have more than $130 billion in client assets, the firm said in a statement. The companies didn’t disclose the price. Lightyear Capital, founded by former Paine Webber Group Inc. Chief Executive Officer Donald Marron , 78, is among firms building brokerage businesses as they seek stable revenues from advising individual investors on their portfolios. The New York-based private-equity firm started Cetera about three years ago when it bought the ING Advisor Network. The deal allows MetLife, the largest U.S. life insurer, to focus on its “core distribution relationships, including its affiliated broker-dealer organization,” Eric Steigerwalt, the company’s executive vice president, said in the statement. The insurer still owns the New England Securities Corp. and MetLife Securities broker-dealers. For more, click here. Moves Lateral Moves Round-Up: Shearman, Lowenstein, Nelson Mullins Shearman & Sterling LLP expanded its financial regulatory practice with the addition of David L. Portilla, who recently served as a senior policy adviser to the U.S. Treasury Department’s Financial Stability Oversight Council office. He will join as counsel in the firm’s New York office on April 8, Shearman said in a statement. Christopher C. Loeber has joined law firm Lowenstein Sandler LLP as partner in the firm’s insurance coverage practice in Roseland, New Jersey. Previously, he was a partner at Morgan, Lewis & Bockius LLP. Barnes & Thornburg LLP announced that Peter M. Reyes Jr. has joined the firm’s Minneapolis office as a partner in the intellectual property department. He was previously at Cargill, Inc., the firm said. In Washington , Nelson Mullins Riley & Scarborough LLP announced that Dwight Smith joined the firm as a partner to counsel clients on financial and regulatory issues. A former deputy chief counsel for business transactions at the Office of Thrift Supervision, he was previously senior of counsel at Morrison & Foerster LLP , the firm said. Banking and mergers and acquisitions lawyer Annette L. Tripp joined Thompson & Knight LLP as a partner in the finance practice group of the firm’s Houston office. Prior to joining Thompson & Knight, she was a partner at Sutherland Asbill & Brennan LLP in Houston. In Boston , Saul Ewing LLP added Peter Lauro and Melissa Hunter-Ensor as partners in the business and finance, life sciences and intellectual property and technology practices. Lauro and Hunter-Ensor are registered patent attorneys. Both lawyers were previously at Edwards Wildman Palmer LLP. To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-06-17 | Bloomberg | Cmic, J. Front, KRS, Rakuten, Seiko, Takeda, Teac: Japanese Equity Preview | The following companies may have unusual price changes in Japanese trading today. Stock symbols are in parentheses, and share prices are as of the latest close. The information in each item was released after markets shut, unless stated otherwise. Cmic Co. (2309 JT): The provider of medical research reached a license agreement with Arizona-based Ucyclyd Pharma Inc. to develop treatment for urea cycle disorders in Japan. The stock was unchanged at 25,780 yen. Eiken Chemical Co. (4549 JT): Japan’s health ministry approved Eiken Chemical to make and sell a kit that tests for the H1N1 influenza virus, the company said in a release. The stock slipped 0.4 percent to 805 yen. J. Front Retailing Co. (3086 JT): The clothing retailer said its May sales fell 2.9 percent from a year earlier. The stock slid 0.2 percent to 472 yen. JVC Kenwood Holdings Inc. (6632 JT): Victor Co. of Japan and parent JVC Kenwood Holdings may be fined around 1.5 billion yen ($16.5 million) by a Japanese regulator for allegedly misstating earnings, Nikkei English News said. JVC Kenwood was unchanged at 39 yen. Kewpie Corp. (2809 JT): The mayonnaise maker said in a preliminary statement that first-half net income totaled 6.2 billion yen, beating its profit forecast by 32 percent, citing stable ingredient purchases and cost cuts. The stock was unchanged at 995 yen. K.R.S. Corp. (9369 JT): The transportation-services company raised its operating profit forecast 25 percent to 1.5 billion yen, with better-than-expected sales. K.R.S. slashed its net income outlook 65 percent to 90 million yen for the period. The stock fell 0.6 percent to 844 yen. Mitsubishi Motors Corp. (7211 JT): The automaker wants to reduce the price of electric vehicles by 30 percent to about 2 million yen by fiscal 2012, Nikkei English News reported. The stock fell 0.9 percent to 117 yen. MS&AD Insurance Group Holdings Inc. (8725 JT): Mitsui Sumitomo Insurance Co., a unit of MS&AD Insurance, has agreed to acquire a 30 percent stake in Hong Leong Group Malaysia’s insurance unit for 25 billion yen, Nikkei English News reported. MS&AD lost 0.3 percent to 2,109 yen. Nisshinbo Holdings Inc. (3105 JT): The textile maker will invest as much as 500 million yen to raise its stake in China- based Yawei Nisshinbo to between 51 percent and 59 percent, aiming to start selling solar-battery manufacturing equipment. Nisshinbo now holds a 25 percent stake in Yawei, it said in a release. The stock slid 0.2 percent to 906 yen. Rakuten Inc. (4755 JQ): The shopping website operator said it will acquire PriceMinister SA of France for about 200 million euros ($245 million). Rakuten sank 0.9 percent to 63,800 yen. Seiko Holdings Corp. (8050 JT): The watchmaker aims to double net income by improving the profitability of its watchmaking and electronic-component divisions and expanding into new industries. The stock soared 8 percent to 285 yen. Showa Shell Sekiyu K.K. (5002 JT): The oil refiner will roll out a residential solar power-generation system priced about 20 percent less than similar products from Japanese competitors, Nikkei English News reported. The stock dropped 0.5 percent to 651 yen. Suncity Co. (8910 JT): The real-estate company will likely receive a debt waiver of about 1.8 billion yen from a debt servicing company, Nikkei English News said. The stock slid 0.3 percent to 2,019 yen. Takeda Pharmaceutical Co. (4502 JT), CanBas Co. (4575 JT): The drugmakers will end collaboration on a cancer medication because of a disagreement on how to develop it. Takeda rose 0.1 percent to 3,885 yen. CanBas lost 0.9 percent to 793 yen. Toyoda Gosei Co. (7282 JT): The autoparts maker’s workers in Tianjin, China, went on strike at a plant that makes automobile interior parts, the Tokyo Shimbun newspaper reported. The stock slumped 3.2 percent to 2,420 yen. Toyota Motor Corp. (7203 JT): The world’s largest automaker said it’s resuming construction of its Mississippi plant, which will soon hire 2,000 employees and build the Corolla sedan in the second half of 2011. Toyota slipped 1.1 percent to 3,295 yen. Teac Corp. (6803 JT): The maker of computer peripherals aims for operating profit of 3.6 billion yen for the year ending March 2013 through cutting its costs, Teac said. The stock lost 4.1 percent to 47 yen. To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net . |
2024-06-25 | Bloomberg | JPMorgan, Citigroup, Morgan Stanley Shares Rise on Bank-Reform Agreement | Bank of America Corp. and JPMorgan Chase & Co. , the two largest U.S. banks, drove a measure of financial stocks to the biggest daily gain in a month after Congress agreed to ease proposed curbs on trading and investing. Bank of America and JPMorgan each rose more than 3 percent, in line with a 3.1 percent advance in the Standard & Poor’s Diversified Financials Index , as the Dow Jones Industrial Average fell. It was the financial index’s largest one-day increase since May 27. “The market is sort of celebrating the fact that the largest banks’ operations are largely left intact,” said Nancy Bush , founder of NAB Research LLC in Annandale, New Jersey, who covers JPMorgan, Bank of America and Wells Fargo & Co. Even so, future expansion of the biggest banks may be limited, she said. The so-called Volcker rule to ban banks from investing in hedge funds and private equity was “watered down a bit,” allowing lenders to invest as much as 3 percent of their capital, Deutsche Bank analysts Matt O’Connor and Michael Carrier said in a note to clients. A ban on derivative-trading by commercial banks proposed by Senator Blanche Lincoln of Arkansas was amended to allow trades on interest rates and foreign-exchange swaps, which made up about 92 percent of their total notional trading volume in the first quarter. Banks will have as many as two years to comply. “What Senator Lincoln wanted to do didn’t come to pass and that’s a major win for the big banks,” said Gerard Cassidy , an analyst at RBC Capital Markets. 20-Hour Session Bank of America, based in Charlotte, North Carolina, rose 2.7 percent to $15.42. JPMorgan, based in New York, advanced 3.7 percent to $39.44. Lawmakers from the House and Senate worked through the night in a 20-hour session to reach deals on a ban on proprietary trading by banks and oversight of the derivatives market. The legislation, which also seeks to protect consumers from abusive lending practices, still needs to be approved by the full House and Senate. Congressional leaders aim to hold votes next week and send it for Obama’s signature by July 4. Obama today praised lawmakers for agreeing on what he called the “toughest” consumer reforms in history. The bill is “not as bad as it looks,” FBR Capital Markets analyst Paul Miller wrote in a report. “The conference committee avoided adopting the worst-case scenario.” For example, congressional negotiators removed language that would have required banks to act as a fiduciary when selling derivatives to states, municipalities and pension funds, Miller said. Instead, a code of conduct was adopted. To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net ; Dawn Kopecki in New York at dkopecki@bloomberg.net. Senator Blanche Lincoln, a Democrat from Arkansasl. Photographer: Alex Wong/Getty Images June 25 (Bloomberg) -- Richard Bove, an analyst at Rochdale Securities LLC, discusses the impact of legislation overhauling the financial regulatory system on U.S. banks. Lawmakers from the House and Senate worked through the night in a 20-hour session to reach deals on a ban on proprietary trading by banks and oversight of the derivatives market. Bove talks with Betty Liu and Jon Erlichman on Bloomberg Television’s “In the Loop.” (Source: 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); } }); }); //]]> |
2024-11-12 | Bloomberg | Europe Seen Nearing Insurance Rules Accord After 13 Years | Europe may be nearing an agreement on rules that aim to make insurance companies safer after 13 years of wrangling between politicians, companies and regulators. Insurers and European Union officials are working out a compromise on the capital they need to ensure they can make good on long-term products such as annuities, according to Ralph Koijen, professor of Finance at the London Business School , citing recent draft accords he has studied. Insurers from countries including Germany , the U.K. and France have criticized the so-called Solvency II proposal, saying the rules could make savings products excessively costly as more capital would be required to cover risks for longer-term investments. ``The rules for discounting insurers’ long-term liabilities seem to have been watered down, allowing calculation on the basis of a risk-free rate with a liquidity premium , rather than actual marked to market valuation,'' Koijen said in a telephone interview from London yesterday. Representatives from the European Commission, European Parliament and Council of the European Union convene for talks starting in Brussels today that firms including Allianz SE (ALV) , the continent’s biggest insurer, say could bring an accord for implementing Solvency II. Insurers are Europe’s biggest institutional investors with 8.4 trillion euros ($11.3 trillion) under management. They are lagging behind banks in adopting a framework to help them withstand losses in any repeat of the 2008 financial crisis. Aegon NV (AGN) , the owner of U.S. insurance firm Transamerica Corp., and reinsurance company Swiss Re (SREN) were among firms that received financial support after the collapse of Lehman Brothers Holdings Inc. and the U.S. bailout of AIG. ‘Half-Implemented’ Solvency II, intended to harmonize the way firms allocate capital against risk, was scheduled to come into force last year. Its introduction was delayed several times over issues such as calculating capital needed for liabilities for products with long-term guarantees such as annuities and investments such as government bonds. Insurers and regulators now plan to implement the rules on Jan. 1, 2016 with a transitional period, should an agreement be reached in time. “I very much hope that a compromise can be reached now -- we can’t keep this project in a half-implemented state,” Dieter Wemmer, chief financial officer at Allianz, said on a call with journalists last week. “We now either get it right or we should leave it. It has been in the works for too many years and it has cost too many billions of euros.” Deals reached in so-called trilogue meetings such as today’s talks on Solvency II require approval by parliament and the council, which represents the EU’s 28 member states. Further meetings are often held at short notice before draft agreements are reached. Capital Compromise Solvency II is important for Europe’s financial stability as insurers such as Allianz, with 1.81 trillion euros under management, control more than half of all institutional investments on the continent. Pension funds follow with a 24 percent share, according to Insurance Europe, a federation of 34 national insurance associations. UBS AG (UBSN) , the world’s biggest manager of money for the rich, manages 1.4 trillion euros at its wealth unit. As Europe continues to debate Solvency II, global regulators are developing a common framework for supervising internationally active insurance groups. The International Association of Insurance Supervisors, or IAIS, is creating a risk-based global insurance capital standard to be introduced by the end of 2016, with full implementation scheduled for 2019. Agreement Near “We are not quite there yet but we are very close to an agreement,” Chantal Hughes , spokeswoman for Michel Barnier , the EU’s financial services chief, said by telephone from Brussels. “We’ve made a lot of progress, and are urging all sides to work together in a spirit of compromise to take this over the finish line.” The IAIS’s discussions “are probably also putting a bit more pressure now on the European institutions to come to an agreement,” Aegon Chief Executive Officer Alex Wynaendts said in a call with analysts last week. That would “make the discussions in the context of a global framework easier.” Regulatory Uncertainty Last year, speculation increased that the regulations would be sidelined by some EU countries as they prepared to introduce some of the rules piecemeal. National regulators, who are developing Solvency II led by the Frankfurt-based European Insurance and Occupational Pensions Authority, or Eiopa, are urging politicians to complete the accord now. “An agreement on the final shape and on the date of implementation of Solvency II is urgently needed to enhance consumer protection, increase financial stability and avoid market fragmentation,” Gabriel Bernardino, Eiopa’s chairman, said. “We cannot continue with the current regulatory uncertainty.” Policy makers intend Solvency II to be for Europe’s insurers what the Basel Committee on Banking Supervision ’s global capital rules are for the continent’s banks -- a common set of rules applied across the EU. They will replace regulations developed in the 1970s that had been superseded by a patchwork of national laws. Current Solvency I rules concentrate mainly on insurance risks, while Solvency II also takes account of investment risks. Bonds Lead Insurers invest 42 percent of their money in bonds and other fixed income securities, 30 percent in shares and other variable-yield securities and 11 percent in loans, according to Insurance Europe. To cope with low interest rates that are pushing down returns, insurers have increased their exposure to higher-yielding real estate and infrastructure projects such as renewable energy plants. Like Basel III, the levels of capital reserves required under Solvency II can either be determined by the regulator’s so-called standard model or a firm’s internal model, which must be approved by the regulator. Nearly all of the biggest EU-based insurers have opted for internal models. The new rules are made up of three key parts, or pillars: capital requirements for individual companies, a regulatory assessment of a particular firm’s risk, as well as principles for the regulators’ broader supervision of the marketplace. Seventy-eight percent of German insurers expect they will need to make further “significant investments” to comply with new reporting standards including the so-called Own Risk and Solvency Assessment, which requires each insurer to calculate its own risk capital needs based on individual stress tests, according to a survey by consulting firm Steria Mummert. ‘More Optimistic’ Europe’s 40 largest insurers spent as much as 4.9 billion euros last year complying with new regulations, according to estimates by Deloitte. The consulting firm said that the total cost of compliance from 2010 to 2012 may be as much as 9 billion euros, with the average cost for each insurer exceeding 200 million euros. “I’m more optimistic now about the date of Jan. 1, 2016,” Aegon’s Wynaendts said. “Everybody now knows that if by the end of November there is no agreement, then the target date becomes really impossible.” To contact the reporters on this story: Oliver Suess in Munich at osuess@bloomberg.net ; Maud van Gaal in Amsterdam at mvangaal@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-05-23 | Bloomberg | Florida Outperforms as Hurricane Forecast Improves: Muni Credit | With the Atlantic hurricane season days away, bonds of Florida ’s largest real-estate insurer are rallying the most in nine months as forecasters assess a below- average chance the state will be hit by a major storm. Buyers are demanding the smallest yield penalty since August on tax-exempt debt from state-owned Citizens Property Insurance Corp. No hurricane has made landfall in Florida since 2005, and investors such as Michael Schroeder at Wasmer, Schroeder & Co. said they’re adequately compensated for the risk as the season gets under way June 1. Schroeder said Citizens and the Florida Hurricane Catastrophe Fund, which sells protection to every in-state insurer, will be able to finance cleanup costs through municipal debt and policyholder fees. Citizens plans to sell as much as $1.5 billion of bonds next month to boost reserves, and the fund is also considering a sale. “The state continues to be supportive of these programs, because they have to,” Schroeder, president of Naples, Florida- based Wasmer, which manages $4.3 billion, said in an interview. “Most of the heavy population centers are on the coast,” said Schroeder, whose firm owns Citizens debt. “If you don’t have a mechanism for supporting the ability to insure property, then you don’t have an economy.” Bond Gains The gains in the Citizens securities, which have the sixth- highest investment-grade rating from Moody’s Investors Service, show the risks investors are willing to take to boost returns as municipal yields remain close to four-decade lows. A Citizens bond maturing in June 2017 yields about 2.4 percent, or about 1.6 percentage points above AAA debt, Bloomberg BVAL data show. The 10-day average of the yield gap is the smallest since August. Securities due in 2013 and 2019 have also strengthened relative to benchmark debt in that period, BVAL data show. The Citizens board has authorized a municipal debt sale, a deal Chief Financial Officer Sharon Binnun said may be sold by the end of June. Jack Nicholson , director of the state-run catastrophe fund, said he will ask Governor Rick Scott and other trustees next month for clearance to sell at least $1.8 billion in bonds. Scott, a 59-year-old Republican who prepares for storms by storing a full set of roof tiles for his Naples beachfront home, said the state’s financial cushion may be insufficient. ‘Not Comfortable’ Citizens has a $12 billion surplus with as much as $510 billion at risk, he said. The catastrophe fund, which backstops Citizens and every other Florida insurer, has $17.3 billion in obligations, more than double its cash on hand. “I’m not comfortable that they can borrow the money that they would have to borrow,” Scott said about the catastrophe fund in a May 3 interview in his Tallahassee office. “There’s risk there.” Nicholson estimates his fund will have $8.5 billion in cash by the end of 2012. That means it may need to borrow as much as $8.8 billion if it were required to meet all its obligations. Investors would probably only buy $7 billion in bonds from the fund after a major storm, Kapil Bhatia, director of public finance for Raymond James & Associates, said in an interview. The St. Petersburg , Florida-based company prepared the estimates for the fund. For Florida, the fourth-most populous state, the benchmark of destruction is Hurricane Andrew. The storm struck in 1992 as a Category 5, the most powerful intensity, according to the National Hurricane Center. It caused about $46 billion in damage in the U.S., according to an inflation-adjusted NHC estimate. Category 3 This year, there is a 16 percent chance a Category 3 hurricane, with winds of at least 111 miles per hour (179 kph), will hit Florida, Colorado State University researchers forecast in April. That’s down from 21 percent in an average year. The state doesn’t backstop Citizens or the catastrophe fund. Both can add fees to private policyholders to help pay for debt. The fund was created after Andrew as an incentive for insurers to sell policies in the state. To drive down insurance prices after a combined eight hurricanes made landfall in Florida in 2004 and 2005, lawmakers in 2007 expanded the fund and let Citizens compete with the private market. Citizens, which had insured only the riskiest properties, now has 1.45 million policies, about 33 percent more than in 2008 and about 150 percent more than Universal Property & Casualty, the second-biggest insurer in Florida. The amount of potential claims Citizens faces has grown 25 percent since 2009. Cat Bond This year, Citizens struck a deal for its first catastrophe bond. If a major storm hits the state, investors would lose $750 million, the largest such bond ever rated by Standard & Poor’s , said Gary Martucci, an analyst at the company. If not, the bonds, rated four levels below investment grade, will yield 17.75 percent. That’s a lower rate than what Citizens paid last year in the re-insurance market, Binnun said. “If we have no storm, that’s their rate of return and it’s a great investment,” Binnun said. If a storm triggers the bond, “they would pay $750 million and take a fairly sporty loss,” she said. Following is a pending sale: VIRGINIA TRANSPORTATION BOARD plans to borrow $600 million of revenue debt as soon as this month via competitive bid. Proceeds will help finance capital projects, according to documents from the board’s April 18 meeting. (Updated May 23) To contact the reporter on this story: Michael C. Bender in Tallahassee at mbender10@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-12-27 | Bloomberg | Job Creation Is Price for New U.S. Health Law: Andrew Puzder | I am not an expert on health-care policy, but I do know something about job creation. So when a House Oversight and Government Reform subcommittee asked me to testify about the effect on employers of the Patient Protection and Affordable Care Act, sometimes known as Obamacare, I thought I could offer some insights. As I told the committee in a July 28 hearing, it is critical that Congress does a good job of balancing the benefits of new legislation against the costs of that legislation. That process begins with recognizing that laws like Obamacare come at a price. Our company, CKE Restaurants Inc. , employs about 21,000 people (our franchisees employ 49,000 more) in Carl’s Jr. and Hardee’s restaurants. For months, we have been working with Mercer Health & Benefits LLC, our health-care consultant, to identify Obamacare’s potential financial impact on CKE. Mercer estimated that when the law is fully implemented our health-care costs will increase about $18 million a year. That would put our total health-care costs at $29.8 million, a 150 percent increase from the roughly $12 million we spent last year. The money to cover our increased expenses will have to come from somewhere. We are a profitable company and, after paying our obligations, we reinvest our earnings in the business. Reinvesting in the business is how we grow, create jobs and opportunity. This is true for most U.S. businesses. Cutting Spending To offset higher health-care expenses, we will have to cut spending on new restaurant construction , one of our largest discretionary spending areas. But building new restaurants is how we create jobs. An $18 million increase in our costs would more than consume the $8.8 million we spent on new restaurant construction last year, leaving nothing for growth. We will also need to reduce our general capital spending , which also creates jobs and allows us to improve our infrastructure and maintain our business. In summary, our ability to create new jobs could vanish. To reduce the financial impact of Obamacare, many businesses, including ours, will have to consider increasing the number of part-time employees (those who work less than 30 hours a week as defined under the health-care law) and reducing the number of full-time employees. So, some individuals seeking full-time work will need to find two jobs. Automation will also become more appealing. For example, although we value the personal touch, electronic ordering kiosks will become more economically desirable. Nationwide, 63 percent of our employees are minorities and 62 percent are female. Unfortunately, these cuts will affect them the most. The complexity of this legislation makes it hard to anticipate costs in the future. Our investments pay off -- when they are successful -- over the long term. Because we don’t know what our health-care expenses will be in two or three years, we are unable to determine with any certainty how much our investments will have to return for us to be profitable. All of that counsels in favor of holding off on new investments and saving our funds. We want to grow. But we are unable to do so knowing that large and undetermined liabilities will absorb funds we otherwise would invest for expansion. My testimony was followed by that of Grady Payne, chief executive officer of Connor Industries Inc., a supplier of cut lumber and assembled wood products for shipping and crating needs. Based in Fort Worth , Texas , it has plants and employees in eight states and employs 450 people. He laid out the options open to his company under the health-care law, each of which would cost $1 million or more. According to Payne, that amount is “more than the company makes.” He concluded that his company’s goals have turned “from ‘hire-and-grow’ to ‘cut-and- survive.’” Scaling Back Victoria Braden, the president and CEO of Braden Benefits Strategies Inc., a corporate employee-benefits adviser based in Johns Creek, Georgia , also testified. She said adoption of the law led to immediate job cuts at her company as she scaled back an expansion into a new line of business. Obamacare “is devastating to my business, expensive for me and my clients to administer, and works against our goals of helping businesses to expand, and putting people back to work,” she said. I understand that many members of Congress believe providing everyone with health insurance is a top priority. Several committee members said so at the hearing, and I respect them for caring about the uninsured. My point to them was this: Everyone has a stake in job creation. As far as I am aware, no one in Washington -- Republican or Democrat, liberal or conservative -- can achieve their goals unless our economy prospers and creates jobs. Washington needs to understand that legislation like the health-care law has costs as well as benefits, that the costs suppress job growth, and that when too much legislation kills too many jobs, everyone suffers. Chief executives have responsibilities to their existing employees, customers and shareholders. We simply cannot risk their jobs and their money by investing when we know that legislation like Obamacare will make it so much harder to earn a profit. The sooner both parties in Washington understand this, the sooner we can all begin looking for ways to strengthen the social safety net without hurting the economy. (Andrew Puzder is the chief executive officer of CKE Restaurants Inc. and co-author of “Job Creation: How It Really Works and Why The Government Doesn’t Understand It.” The opinions expressed are his own.) To contact the author of this article: Andrew Puzder at APuzder@CKR.com. To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net . |
2024-01-23 | Bloomberg | Greek Farmers Protest High Insurance Costs, ANA Reports | A group of Greek farmers gathered in Tripoli, southern Greece , to protest the government’s agricultural insurance costs, Athens News Agency reported. The farmers met outside the offices of the Greek Agricultural Insurance Agency to protest against the cost of insuring agricultural products, the state-run News agency reported, citing secretary of Pan-Hellenic Agricultural Alliance, Dimitris Kolovos. They are also requesting a 100 percent guarantee for their products from the Greek state, the news service reported. -- Editor: Tim Farrand To contact the reporter on this story: Eleni Chrepa in Athens at echrepa@bloomberg.net To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net |
2024-08-23 | Bloomberg | Boehner Tells Caucus House Will Keep Fighting Health Law | House Speaker John Boehner assured his Republican caucus last night that the House will continue its bid to stop implementation of President Barack Obama ’s health-care law, while not addressing a push from some in his party to simply not fund the measure. Boehner also told lawmakers on a telephone conference call that across-the-board government spending cuts, known as sequestration, will stay in place until Obama proposes a replacement package, according to a person who was on the line and wasn’t authorized to speak publicly about it. Congressional Republicans and the Obama administration are gearing up for battles starting in early September over federal spending, the health-care law and the nation’s debt limit -- with the risk of a government shutdown and a downgrade of the U.S. credit rating hanging over the debates. The health-care law “remains broadly unpopular across America,” 80 Republicans out of 233 in the chamber wrote in a letter to their leaders. “Most Americans still believe that health-care should be controlled by patients and doctors, not by the government.” They’re seeking to withhold money for the health-care law - - Obama’s signature domestic policy achievement in his first term -- from the must-pass stopgap spending measure to keep the government running after Oct. 1. Spending Cuts Boehner, of Ohio , and his lieutenants have made no final decisions on whether to support the defunding as part of the stopgap funding measure or through another means, such as the debt-limit debate. Their decision will affect deliberations on government funding, as well as the need to increase the debt limit later this fall. Boehner portrayed Obama as desperate to replace the automatic spending cuts known as sequestration, according to the person on the call. Republicans have consistently opposed Obama’s push for tax increases to replace parts of the roughly $1 trillion in automatic cuts that started March 1 and are to continue over the next decade. Obama and Congress agreed to sequestration in 2011 to resolve that year’s dispute over raising the debt limit, and Treasury Department officials say the next increase in U.S. borrowing authority will be needed during the fall. Senators’ Group A group of Republican senators who’ve been meeting periodically with Obama since March to discuss a possible budget compromise planned to gather at the White House during the five-week congressional recess that began in August, Tennessee Republican Bob Corker told reporters late last month. The meeting hasn’t occurred, and could be scheduled for as soon as next week. When lawmakers return to Washington on Sept. 9, their first task will be to negotiate a 60-to-90-day measure to fund the government for the start of the fiscal year on Oct. 1. The legislation is expected to continue this year’s funding level of $988 billion -- a move that would gain enough bipartisan votes to pass both the House and Senate. On the call, Boehner told lawmakers that he wanted the House to move quickly to pass the funding measure and confirmed that it would continue the current spending levels. On health care, Boehner said the House will hold votes aimed at chipping away at the support from Democrats that is helping the president keep the 2010 law in place. Individual Mandate In bills that passed the House in July to delay two of the law’s main provisions, 35 Democrats voted with the Republican majority to delay the so-called employer mandate and 22 voted to postpone the so-called individual mandate. Democrats who control the Senate have declined to bring up either bill. The White House announced July 3 that it would postpone for a year the requirement that companies with 50 or more workers provide health insurance to employees. The administration is moving ahead with the individual mandate requiring most Americans to carry health insurance. The administration in the past has said it would veto legislation that would withhold money for carrying out the measure, raising the specter of a government shutdown if congressional Republicans attached it to a measure funding government operations. Congressional Republicans are divided over the political wisdom of risking a government shutdown. North Carolina’s Republican Senator Richard Burr has called it “the dumbest idea I’ve ever heard of.” Since Republicans took control of the House in 2011, the chamber has voted 40 times to repeal, defund or delay the health-care law. To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-08-02 | Bloomberg | U.S. to Keep Health Premium Subsidy for Lawmakers, Staff | The U.S. government will keep paying the medical-insurance premium subsidy for members of Congress and thousands of legislative branch employees who starting next year will be forced off the federal civilian benefits plan by the 2010 health-care law. The Office of Personnel Management has told Congress that premium subsidy payments would continue, according to two Senate aides who asked not to be identified discussing the matter. U.S. lawmakers and other congressional workers will be required to purchase coverage starting Oct. 1 from health-care exchanges set up under the law, House Democratic Leader Nancy Pelosi of California said in a statement last night. While President Barack Obama has pledged that Americans could keep their health plan under the Affordable Care Act, that promise didn’t extend to Congress. The OPM move would ease the potential pay cut from obligating legislative-branch workers to buy insurance outside the federal civilian plan , which pays 75 percent of the premiums’ cost. Oklahoma Republican Senator Tom Coburn has been holding up the nomination of Katherine Archuleta to be the next director of OPM, the government’s personnel agency, until he gets an answer to that question. If he gets an answer he doesn’t like, Coburn said he’ll propose legislation to make sure that congressional aides -- not lawmakers -- are kept in the government’s health-care plan. The measure would state that congressional aides and employees would remain in the federal employee health-care program. ‘Second Class’ “I am not going to punish federal employees because they happen to work for Congress,” Coburn said in an interview. They shouldn’t be part of a “second class because they work here rather than somewhere else” in the government, he said. Without such a change in the law, if needed, “we are going to lose too many employees and they are too good and they work too hard.” The personnel agency will announce its decision today, the Washington Post reported, citing an unnamed administration official. Pelosi said in her statement that the law would reduce health-care costs, hold insurance companies accountable and strengthen patients’ rights. “We will continue our efforts this August to educate consumers on the law’s provisions and tout the critical benefits already in place for millions of Americans,” Pelosi said. To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net To contact the editor responsible for this story: Katherine Rizzo at krizzo5@bloomberg.net |
2024-01-06 | Bloomberg | Greek Shipowner Bombed in 1980s Says Gulf Oil Flow Will Withstand Crisis | A Greek shipowner whose family’s oil tankers were hit by missiles during the 1980s Iran-Iraq war said he expects Persian Gulf crude exports to continue after Iran ’s threats to block shipments through the Strait of Hormuz. Stable prices of oil, gold and the dollar are a sign to investors the Islamic republic won’t halt shipments in response to a proposed European Union ban on its crude exports, Polys Haji-Iannou, 52, said. Iran’s Vice President Mohammad Reza Ramimi threatened on Dec. 27 to block the transit point for a fifth of oil traded worldwide if sanctions are imposed in response to the country’s nuclear program. “Things will calm down within the next one or two weeks,” Haji-Iannou, whose brother is EasyJet Plc founder Stelios, said by phone from Athens today. “Even if there are EU sanctions, they will calm down.” Iran’s Islamic Revolutionary Guard Corps is planning to hold naval exercises in the Persian Gulf near the strait, Brigadier General Ahmad Vahidi was cited as saying by the Fars news agency today. The drills would be held in Iran’s southern waters in the “near future,” he said. European foreign ministers aim to announce harsher penalties on the Persian Gulf nation’s energy and banking industries at a meeting Jan. 30, according to EU spokesman Michael Mann. The region moved closer to banning oil imports from the country yesterday after Greece lifted objections to an embargo. The U.S. also supports further measures on Iran over its nuclear program, which the U.S. and several allies say poses a nuclear weapons threat. The Islamic republic says its nuclear efforts are for civilian purposes and to generate electricity. New York Crude Since Rahimi’s threat, New York-traded crude has gained 0.9 percent to $102.24 a barrel, gold for immediate delivery has advanced 1.9 percent to $1,623.07 per ounce, and a euro buys 78 cents compared with 77 cents. Haji-Iannou, whose father Loucas had 52 oil-carriers as part of the Troodos Shipping and Trading Ltd. fleet during the so-called Tankers War, said 20 of them were shipping crude from the Persian Gulf during the conflict, which ended in 1988. In total the ships were hit by missiles 28 times, he said. Polys started learning the family business as a child in the 1970s. While several ships were hit twice, none sank because the missiles targeted their engine rooms and not their hulls, he said. Seven sailors on the family’s tankers died during the conflict. The vessels that were struck were taken to Dubai and were repaired or scrapped. The shipowner has a fleet of 25 tankers, after selling 30 in 2009, Haji-Iannou said, adding prices have declined by about 40 percent since then. Tanker Industry “The Haji-Iannou family has a history of shrewd investment in the tanker industry,” said Halvor Ellefsen, a shipbroker at Galbraith’s Ltd. in London who has worked with shipowner. “Polys has made great decisions, ahead of the market consensus, just like his father did in the 1980s, when many other owners were suffering.” An escalation in the Persian Gulf would be financially beneficial to tanker owners even if insurance costs rose as oil companies (XOM) would have to pay a premium to hire vessels at risk of damage, he said, adding that Iran wouldn’t be able to enforce a blockade. “I don’t think they can achieve that,” Haji-Iannou said. “I think it will be a passage going through there with navy escorts of frigates, going and loading the oil from the oil terminals and taking it out.” To contact the reporter on this story: Alaric Nightingale in London at anightingal1@bloomberg.net To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net |
2024-05-17 | Bloomberg | South Korea Revives Woori Sale Process, Sets June Deadline for Fresh Bids | South Korea will begin accepting fresh bids for Woori Finance Holdings Co. tomorrow as the government tries to revive the sale of its 57 percent stake in the country’s largest financial company by assets. Bidders should submit letters of interest by June 29 with offers to buy a minimum 30 percent stake, the Public Fund Oversight Committee said today. Woori Finance will be sold in a package with its units, the committee said in a statement. State-run Korea Deposit Insurance Corp. aims to divest the stake, valued at about 6.3 trillion won ($5.8 billion) as President Lee Myung Bak sheds control of state-run companies to boost their global competitiveness. The plan follows the government’s suspended attempt in December to privatize Woori Finance amid a lack of buyer interest. Woori shares fell 1.5 percent to 13,350 won at the 3:00 p.m. close of trading in Seoul , reversing earlier gains. They have tumbled 14 percent this year, compared with the Kospi Index’s 2.5 percent increase. Final bids for Woori will be taken in September, Min Sang Kee, who heads the committee, told reporters today in Seoul. The committee is jointly run by the government’s Financial Services Commission and private experts including professors. Luring Bidders To lure more bidders, the government may consider easing rules requiring financial holding companies to own more than 95 percent after buying a peer, Shin Je Yoon, vice chairman of the Financial Services Commission, told reporters today. State-run KDB Financial Group Inc. may seek to buy a stake in Woori Finance if the government eases the requirement, Yonhap News reported May 5. KDB Financial will talk with South Korean financial authorities about making a possible bid for Woori Finance, Park Chan Ho, a spokesman at KDB, said by phone today. Shin and Min declined to comment on a specific bidder. The government is also trying to privatize KDB and aims to sell an unspecified number of shares by May 2014. “The key concern is whether there will be bidders other than KDB and the outlook isn’t bright,” said Hyun Shim, a banking analyst at KB Investment & Securities Co., who has a “buy” rating on Woori. Hana Financial Group Inc. Chairman Kim Seung Yu, who’s seeking to extend a 4.7 trillion won bid to buy Korea Exchange Bank from Dallas-based Lone Star Funds, said on May 12 that he wasn’t considering acquiring Woori Finance if his attempt to buy Korea Exchange Bank fails. KB Financial Group Inc. Chairman Euh Yoon Dae said on May 11 that the owner of South Korea’s largest lender won’t bid for Woori Finance. ‘Last Resort’ Financial Services Commission Chairman Kim Seok Dong had said the country may reorganize roles of state-run financial companies to better support South Korean companies in overseas infrastructure projects. “Combining KDB with Woori may be the last resort for the government as it fails to find a buyer at all,” said Choi Jung Wook, a banking analyst at Daishin Securities Co. “That’s far from the government’s earlier stance of making financial companies more competitive through privatization.” Woori Finance had total assets of 346 trillion won at the end of March and operates three banks including Woori Bank , the country’s second biggest. It also runs a securities unit Woori Investment & Securities Co. as well as asset management and private equity units. The company was created in 2001 as a holding company for banks that the government rescued following the Asian financial crisis in 1997 to 1998. The government spent 12.8 trillion won to aid Woori Finance and has recouped 5.3 trillion won so far though block sales of shares. JPMorgan Chase & Co. (JPM) , Samsung Securities Co. and Daewoo Securities Co. were hired in September to help Korea Deposit sell its stake. To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net To contact the editor responsible for this story: Peter Hirschberg in Hong Kong at phirschberg@bloomberg.net |
2024-11-22 | Bloomberg | Newtown Prompts Flood of Mental-Health Spending by U.S. States | Most U.S. states boosted spending this year on mental-health programs as lawmakers reacted to the slaughter of 20 Connecticut schoolchildren and six adults at the hands of a gunman. Thirty-seven states increased spending in 2013, while another eight kept spending at the previous year’s level, according to a report by the National Alliance on Mental Illness. Alaska , Wyoming , Nebraska , Louisiana, North Carolina and Maine cut spending. The Newtown, Connecticut, shooting in December prompted state lawmakers to begin restoring mental-health budgets that were reduced by $4.35 billion between 2009 and 2012 as the recession’s aftermath sapped income- and sales-tax revenue. Spending also is up as states bring health programs in line with the federal Affordable Care Act. “A tipping point on the heels of several recent mass shootings, the Newtown tragedy shaped the debate about the lack of access to mental health services and the barriers that many families and individuals face in light of the nation’s fragmented and grossly inadequate mental health system,” the Arlington, Virginia-based organization said in its Oct. 28 report. Swelling Revenue In the shooting’s wake, legislatures began passing laws to help better screen and identify people who are mentally ill, particularly children and teenagers. States such as New York passed laws that link mental-health records to background checks for gun purchases. Arkansas now requires mental-health service providers to warn law enforcement about any credible threat by a patient. Texas lawmakers agreed to spend $259 million more for mental health in the current biennial budget, the single largest such increase in the state’s history, according to the report. California lawmakers agreed to spend $143 million more to add 2,000 beds at clinics and hire 600 triage workers to staff 25 new crisis centers. States have been able to spend more as revenue grew an estimated 5.3 percent in 2013, according to the National Conference of State Legislatures. The mental-health spending met with little resistance in comparison with efforts to pass tougher gun-control laws. Lawmakers in New York, Colorado, Connecticut Maryland and elsewhere approved tighter restrictions on firearms, though federal efforts stalled amid opposition from groups such as the National Rifle Association. As many as 2.65 million people with mental illness in the U.S. will qualify for subsidies to buy health insurance under the initial enrollment period of the Affordable Care Act. The federal law allows state to expand Medicaid, the state-federal health program for low-income people so that more people are covered. Medicaid already pays for about 27 percent of all mental-health financing in the U.S. Twenty-five states expanded Medicaid coverage in 2013, according to the study. To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-07-26 | Bloomberg | Goldman Sachs `Constructive' on China's Yuan-Denominated Shares After Gain | Goldman Sachs Group Inc. said it’s still “fundamentally positive” on China’s yuan-denominated stocks even after a surge in the CSI 300 Index , given their valuations and the emergence of several “catalysts.” The Hong Kong-listed shares of Chinese insurers are a “convenient, yet fundamentally appealing, way” for foreign investors to gain access to the A-share market, Goldman Sachs analysts led by Kinger Lau and Timothy Moe said in a report. “We stay fundamentally positive on A shares,” the analysts wrote. “Although we do not expect policy to ease immediately, we believe any further positive development on this front can re-rate the market further.” The CSI 300, tracking yuan-denominated shares on the Shanghai and Shenzhen exchanges, has surged 12 percent since this year’s low set on July 5, on speculation cooling economic growth and property-price gains will spur the government to ease its policy tightening. Chinese stocks are still the worst performers in Asia this year, with the CSI 300 and the Shanghai Composite Index both slumping 22 percent. Even after the gains, A shares are trading at 13 times estimated profits with per-share earnings growth of 29 percent in 2010 and 22 percent in 2011, according to Goldman Sachs estimates. “The low valuations have already discounted a pessimistic macro/micro growth scenario and several catalysts are emerging, including receding concerns over liquidity drain and potential normalization of investors’ positioning,” the analysts wrote in today’s report. ‘Stable’ Policies The CSI 300 fell 0.5 percent to 2,778.68 at the 11:30 a.m. break, snapping a five-day, 6.8 percent rally. The Shanghai Composite lost 0.4 percent following last week’s 6.1 percent advance. Premier Wen Jiabao last week said in comments published by Xinhua News Agency on a government website that stable policies should be the main theme in the second half. He also highlighted the importance of expanding domestic demand, saying that China would “improve” stimulus measures for boosting consumption. China’s economic growth slowed to 10.3 percent in the second quarter from an 11.9 percent increase in the January to March period, prompting economists from Morgan Stanley to JPMorgan Chase & Co. to cut their gross domestic product forecasts for this year. Data released this month also showed property prices in 70 Chinese cities fell 0.1 percent in June from the previous month and banking lending cooled last month. Monetary Easing The recent stock-market gains represent a “tradable rebound, not yet a reversal,” driven by speculation about an easing in mortgage policy, lower-than-expected inflation and the completion of stress test for European banks, according to China International Capital Corp. Still, “with GDP growth of 10.3 percent and lower-than- expected inflation, property prices showing few signs of giving back, and labor shortages in some regions, it is difficult to convincingly argue for a general monetary easing,” CICC analysts Hao Hong and Mei He said in a report today. The Goldman Sachs analysts said they favored China Pacific Insurance (Group) Co. for its “above-peer” new business value growth potential and China Life Insurance Co. , the nation’s largest insurer, for its investments in A shares. China Pacific has climbed 0.5 percent in Hong Kong trading this year while China Life has dropped 10 percent. The H shares of insurers have had a “high directional correlation” and this relationship is likely to remain in the near term give their holdings of A shares, according to the analysts. They also said the industry’s “fundamentals remain strong,” with premiums growing at 34 percent in the first half and long-term growth prospects looking “promising.” -- Shiyin Chen in Singapore and Chua Kong Ho in Shanghai. Editors: Linus Chua , Allen Wan To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net ; Chua Kong Ho in Shanghai at kchua6@bloomberg.net July 26 (Bloomberg) -- Steve Bernstein, chief executive officer of Oppenheimer Investments Asia Ltd., talks with Bloomberg's Haslinda Amin about his investment strategy for Asian stocks. Bernstein, speaking in Hong Kong, also discusses the outlook for Chinese banks and initial public offerings. (Excerpt. Source: 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); } }); }); //]]> |
2024-03-20 | Bloomberg | Osborne Should Be Fired, Voters Say in Pre-Budget Poll | George Osborne should be replaced as Britain’s chancellor of the exchequer, almost half of those questioned in a poll said, with a similar number urging him to ease his austerity program as the economy struggles to grow. The poll by ComRes Ltd. for ITV News showed 44 percent of voters want Osborne, who announces his annual budget today, to be removed, while 18 percent said he should stay in his job. ComRes found that 41 percent of respondents said he should borrow more money to spend on infrastructure, while 61 percent said the economy is heading back into recession. Osborne outlined further cuts to departmental spending to fund extra capital investment yesterday to the Cabinet, a day before his statement at 12:30 p.m. to Parliament in London. He has vowed to stick to his austerity plans. Even amid the new spending reductions, criticism from ministers has been muted, suggesting Osborne may have found money to fund a tax cut in today’s announcement. “The government insists it is sticking to fiscal responsibility and monetary activism, but this does not preclude some modest tax cuts and investment spending,” said Ross Walker , an economist at Royal Bank of Scotland Group Plc in London. Investors are losing confidence in the coalition government’s plans as the economic slump lingers. Gross domestic product fell 0.3 percent in the fourth quarter of 2012 and a contraction this quarter would mark an unprecedented triple-dip recession. Labour Ideas The Labour Party ’s Treasury spokesman, lawmaker Ed Balls , told BBC television on March 17 Osborne should cut value-added tax, reduce National Insurance (ANAT) contributions for small companies and reintroduce a 10 percent starting rate of income tax, compared with the current 20 percent basic rate. “First of all, we would be seeking to boost demand,” Labour’s business spokesman, Chuka Umunna, told Bloomberg Television’s Guy Johnson this morning. He said cutting VAT to 17.5 percent from 20 percent would be “the quickest way -- actually, even quicker than giving an income-tax cut -- of getting money into the economy.” While such a step would incur “a bit of short-term borrowing,” increased, growth, employment and tax receipts would compensate in the longer term, Umunna said. The poll showed that 54 percent of voters said the way Osborne is reducing the budget is unfair and 56 percent said he is cutting too much and too quickly. ComRes interviewed 2,032 adults online from March 15 to March 17. It didn’t specify a margin of error. Spending Cuts Government departments’ current spending will be reduced by 1 percent a year in the three years starting in April 2013, Prime Minister David Cameron ’s spokesman, Jean-Christophe Gray, told reporters in London yesterday. The effort will raise 2.5 billion pounds ($3.8 billion) over two years, which will go into capital projects to be announced by Osborne in Parliament today. Osborne will have at his disposal 2.2 billion pounds from bringing forward by a year to 2016 plans for a flat-rate state pension. The chancellor will outline how he will use that money in his statement to lawmakers. Liberal Democrats in the coalition government such as Business Secretary Vince Cable have been urging more spending on infrastructure, while some in Cameron’s and Osborne’s Conservative Party have called for a tighter squeeze on spending. Calls for greater action to aid growth from both Tories and Liberal Democrats have subsided in recent days, suggesting Osborne’s budget will include measures to appease critics such as Cable. To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-08-24 | Bloomberg | Emerging-Market Stocks Fall on Corporate Profits, Growth Concern | Emerging-market stocks fell, with the benchmark index dropping for the fourth day in five, as companies reported disappointing results and investors weighed what the Federal Reserve may do to bolster the economy. The MSCI Emerging Markets Index retreated 0.8 percent to 978.21 at 4:31 p.m. in New York , following yesterday’s 2 percent gain. The Hang Seng China Enterprise Index declined 3.1 percent as China Life Insurance Co. tumbled on a drop in first-half earnings. India ’s Sensex Index lost 1.3 percent. Brazil’s benchmark was little changed and Mexico’s fell 0.1 percent. China Life, the nation’s biggest insurer, sank 12 percent in Hong Kong after reporting a 28 percent slump in earnings while Malaysian Airline System Bhd. (MAS) , the national carrier, retreated 4.9 percent after posting a second-straight quarterly loss. Fed Chairman Ben S. Bernanke and other central bankers meet this week in Jackson Hole , Wyoming, amid signs of a slowing global recovery. Data today showed German business confidence fell to its lowest in more than a year. “Market attention is now focused more on the U.S.,” said Fadlul Imansyah, who helps manage about $199 million at PT CIMB Principal Asset Management in Jakarta. “Even if the Fed announces a third round of quantitative easing, there’s still concern about growth in Europe,” he said, referring to an asset-purchase program by the U.S. central bank. Valuations The MSCI emerging-market index has retreated 19 percent from this year’s high on May 2 after worse-than-estimated U.S. economic data, the unprecedented downgrade of America’s top debt rating and signs that Europe’s most-indebted countries may struggle to repay obligations shook investor confidence. The gauge is valued at 8.9 times analysts’ estimates for 12-month earnings, near the lowest level since March 2009. Most emerging-market currencies fell against the dollar, led by the Mexian Peso with a 1.4 percent decline. South Africa’s rand weakened 1.1 percent while the Brazilian real depreciated 1.1 percent. China’s yuan rose 0.2 percent. The extra yield investors demand to own emerging-market debt over U.S. Treasuries plunged 15 basis points, or 0.15 percentage point, to 358, according to JPMorgan Chase & Co.’s EMBI Global Index. Most stocks on the Bovespa index fell. Hypermarcas SA (HYPE3) , Brazil’s fifth-largest consumer-goods company by market value, sank 4 percent in Sao Paulo, the most among member stocks of the gauge. Usinas Siderurgicas de Minas Gerais SA (USIM5) , Brazil’s second- largest steelmaker, fell after its shares were cut to “underweight” from “equal weight” at Barclays Capital. Fomento Economico Mexicano SAB, Latin America’s largest Coca-Cola bottler, tumbled 4.6 percent on the Mexican Stock Exchange on concern profit from its 20 percent stake in beermaker Heineken NV will be lower than forecast. India Inflation India’s benchmark stock index fell for the first time this week on concern the central bank’s measures to curb rising prices have started to cool demand and hurt corporate earnings. Coal India Ltd. (COAL) , the world’s biggest producer, declined 4.7 percent and Tata Consultancy Services Ltd. (TCS) , India’s largest software services exporter, dropped 1.9 percent. The Reserve Bank of India is watching for signs of any slowdown in demand as it seeks to tame “inflation drivers” that are “very much in play,” Deputy Governor Subir Gokarn said yesterday. CLSA Asia-Pacific Markets lowered its target on the Sensex index to 18,200 from 19,500, citing slower growth and earnings downgrades, according to a note sent today. The index dropped 1.3 percent to 16,284.98 today. Samsung SDI Co. tumbled 6.7 percent in Seoul trading after Robert Bosch GmbH said it plans to build a pilot factory to make lithium-ion batteries, a move that could raise competition for the South Korean company. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe , the Middle East and Africa climbed seven basis points to 271, according to CMA in London. 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 |
2024-10-14 | Bloomberg | Beijing Capital Shares Fall After China Life Stake Reduction | Beijing Capital Development Co. fell for the first time in three days in Shanghai trading after China Life Insurance Co. and its parent company cut their combined stake in the company to 5.23 percent from 10.44 percent. Beijing Capital, a Chinese property developer, fell 2.1 percent to 8.27 yuan as of 9:50 a.m. local time. China Life and China Life Insurance (Group) Co. sold 77.85 million Beijing Capital shares from July 20 to Oct. 11 and may continue to sell their shares in the company in the next 12 months, according to a statement from a China Life unit to Shanghai’s stock exchange today. To contact the editor responsible for this story: Gregory Turk at gturk2@bloomberg.net |
2024-08-16 | Bloomberg | Banks Block Obama’s Mortgage Stimulus Plan | A U.S. program to help as many as 5 million homeowners refinance their mortgages is being hindered by reluctant lenders, suffering a similar fate to the government’s main foreclosure-prevention effort. The Obama administration introduced the plan in April 2009 in a bid to prevent defaults among borrowers who were current on their payments but had little or no equity after the average home price had tumbled 33 percent since the July 2006 peak. The Home Affordable Refinance Program, known as HARP, was designed to allow these homeowners, who usually can’t qualify for new loans, to benefit from the lower rates engineered by the Federal Reserve to help stimulate the economy. About 810,000 homeowners refinanced through HARP as of May, according to the Federal Housing Finance Agency, far short of the administration’s goal. The program’s limited impact threatens to prolong the nation’s foreclosure crisis while keeping billions of dollars out of consumers’ hands -- money that could flow into the economy in the form of additional spending or investment. “Of all the policy ideas to help the housing market in the very near term, juicing up HARP has the most potential for success,” Mark Zandi , chief economist at Moody’s Analytics Inc. in West Chester , Pennsylvania , said in an e-mail. The program is open to borrowers with loans owned or backed by Fannie Mae or Freddie Mac and who have equity ranging from negative 25 percent of their home’s value to positive 20 percent. Negative equity, known as being underwater, is when the mortgage is bigger than the value of the property. Risk Avoidance HARP has fallen short of targets because banks are focusing on borrowers with the most equity and the least risk, said Derek Chen, a mortgage-bond analyst at Barclays Capital in New York. From the start of the program through May, 57,171 HARP- refinanced loans, or 7 percent, were more than 5 percent underwater, according to the Federal Housing Finance Agency in Washington, which regulates Fannie Mae and Freddie Mac. The rest ranged from negative 5 percent to positive 20 percent equity. HARP, which was scheduled to expire in June, was extended by the housing finance agency for another year in March. “I don’t think by most measures that it’s a success,” said Guy Cecala , publisher of Bethesda, Maryland-based trade publication Inside Mortgage Finance. “It’s a combination of reluctance by lenders to embrace the program and a number of borrowers who don’t qualify for some reason or the other.” Mortgage Insurance Obstacle Shannon and Keith Kinder, a suburban Atlanta couple, meet HARP guidelines. They’re current on their mortgage, which is about 15 percent underwater after they put down 15 percent in 2006 to buy their $228,000 custom home in Social Circle, Georgia, according to Shannon Kinder. She said OneWest Bank, which services their loan, refused to qualify them for HARP because they have mortgage insurance, which is required for homebuyers with less than 20 percent equity. That’s left them stuck in a 30-year mortgage at 6.75 percent. The average 30-year rate was 4.32 percent as of Aug. 11, the lowest since reaching a record 4.17 percent in the week ended Nov. 11. “It’s frustrating,” Kinder, 44, said in a telephone interview. “My mortgage company knows my name because I’ve talked to so many people there.” David Isaacs, a spokesman for Pasadena , California-based OneWest, declined to comment on the Kinder’s effort to refinance. Program Rationale The idea behind HARP was that Fannie Mae and Freddie Mac, which were taken over by the government in 2008 to prevent their failure, wouldn’t be taking on additional risk because they’re already guaranteeing the mortgages they’d refinance. Borrowers - - especially those with adjustable mortgages that may reset to higher rates -- are less likely to walk away from their obligations if they can reduce their costs, Zandi of Moody’s Analytics said. Banks have been reluctant to offer new loans to underwater homeowners because of worries that Fannie Mae and Freddie Mac will seek to force lenders to buy back mortgages that go into default soon after refinancing, Chen of Barclays Capital said. Homeowners with private-mortgage insurance are also being turned down because of the cost and delays associated with transferring the policy to the new loan, he said. Petition Drive Mortgage originators are less likely to approve a HARP refinancing if they’re not servicing the loan because of the complicated process involved and the perceived risks, according to Michelle Murphy, senior policy analyst for housing and regulatory policy at the Federal Housing Finance Agency. Keane Ng, a loan officer with Cobalt Mortgage Inc. in Kirkland, Washington, has collected about 300 virtual signatures since starting an online petition last October to pressure banks to approve borrowers with mortgage insurance for HARP refinancing. “Some of the banks are just cherry-picking the easy ones, and the HARP loans with insurance are not easy,” Ng said. While the Mortgage Bankers Association hasn’t taken a position on proposals to boost refinancings, the Obama administration should reconsider them given the weaker-than- expected economy, said David H. Stevens, president of the Washington-based trade group and head of the Federal Housing Administration until March. “We are not recommending a mass refi without consideration of the associated risk,” Stevens said. “We are hearing there has been an increase in HARP activity and more demand for the program with some of the major institutions. It takes time for any new product to get off the ground.” Increasing the number of people who can refinance would be a cost-efficient way to pump up the economy, said Chris Mayer, a professor at Columbia Business School in New York , who advocates making more underwater borrowers eligible for new loans. $400 Monthly Savings “This is a stimulus for the economy,” Mayer said in a telephone interview. “If we’re successful in doing a mass refi, it could reduce payments for 25 million households. It’s like a permanent tax reduction with a minimal impact on the deficit.” The Federal Reserve pledged on Aug. 9 to hold interest rates at current levels through at least mid-2013 to counter the weaker-than-expected economic recovery. A homeowner with a $300,000 mortgage at 6.5 percent could save about $150,000 over 30 years by refinancing at current interest rates, or more than $400 a month. “The Fed is running a very accommodative monetary policy and market rates have declined significantly,” David Greenlaw , chief financial economist at Morgan Stanley in New York. “But the economy is not reaping the benefits of the low-rate environment.” Boxer Bill Zandi supports a bill introduced in January by Senator Barbara Boxer of California to expand HARP, removing the cap on negative equity and exempting the program 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. The fees, which are imposed to compensate for lower credit scores and other credit-risk characteristics, can add as much as 2 percent to the cost of a loan, according to a statement from Boxer, a Democrat. The bill would help up to 2 million more borrowers lower monthly payments and pump $2.2 billion annually into the economy, the senator’s office said. The House of Representatives, dominated by Republicans, voted in March to abolish the Treasury’s loan-modification program, which has been criticized by members of both parties for being ineffective. The Home Affordable Modification Program, or HAMP, pays banks and servicers to modify monthly payments for delinquent borrowers. It’s yielded about 657,000 permanent modifications, fewer than the initial projections of as many as 4 million. Republican Resistance HAMP has been plagued by consumer complaints about lost paperwork and servicer delays and restrictive eligibility requirements. Republicans in Congress are unlikely to allow a proposal such as Boxer’s to advance because it injects the government more deeply into business, said Jaret Seiberg, a financial- services policy analyst at MF Global Holdings Ltd.’s Washington Research Group. Seiberg said the bill could backfire and push up rates for all borrowers. Investors in mortgage-backed securities would demand higher yields to compensate for added uncertainty caused by the increase in HARP homeowners refinancing and paying off their original loans early, he said. “There are real questions whether there would be any benefits and we know there will be a lot of costs,” Seiberg said. The Boxer proposal, which was co-sponsored by Republican Johnny Isakson of Georgia, could also be passed as an amendment to a larger bill or be implemented by the Obama administration without legislation, said Zachary Coile, a spokesman for Boxer. Addressing Concerns Mayer said Fannie Mae and Freddie Mac could eliminate investors’ concerns by including in newly issued bond contracts a restriction on future mass refinance programs. Lenders could be appeased by indemnifying them for the underwriting problems inherited from the original loans, Mayer said. A streamlined refinance program proposed by Mayer and fellow Columbia professor Glenn Hubbard was the model for a bill first introduced by Representative Dennis Cardoza of California in 2009. Appraisals, income verification and other paperwork that is now bogging down HARP wouldn’t be required and closing costs could be wrapped into the interest rate that borrowers pay, Mayer said. Fannie Mae and Freddie Mac could face a one-time loss of $40 billion to $60 billion because the new HARP loans would pay lower interest rates, Mayer said. The cost would be offset by fewer defaults and it would put $50 billion to $70 billion a year in homeowners’ pockets, he said. “Nothing else has really succeeded,” Mayer said. “So why not try to provide a stimulus at a moderate cost to the government and do something to benefit homeowners?” Broker’s View Kirk Chivas, chief operating officer for First Commerce Financial, a mortgage broker in Wixom, Michigan , said HARP’s success is vital because it’s one of only a few lifelines for responsible borrowers. “When people who have great credit and pay bills on time complain to me, ‘Where is my bailout?’ I say this is your program,” said Chivas, who’s helped more than 100 borrowers refinance through HARP. To contact the reporter on this story: Prashant Gopal in New York at pgopal2@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net ; |
2024-04-25 | Bloomberg | Arizona’s Immigration Crackdown Gets Support at Top Court | U.S. Supreme Court justices spanning the ideological divide signaled they were prepared to uphold the core of Arizona’s trailblazing crackdown on illegal immigrants in what would be a blow to President Barack Obama. Both Republican and Democratic appointees, hearing arguments today in Washington in a case with ramifications for this year’s elections and for laws across the country, aimed skeptical questions at U.S. Solicitor General Donald Verrilli as he argued that the measure would lead to the harassment of U.S. citizens and legal residents. “You can see it’s not selling very well,” Justice Sonia Sotomayor , the first Hispanic named to the high court, told Verrilli half way through his presentation. Like the health-care case argued last month, the immigration dispute pits the Obama administration against Republican-controlled states over the federal-state balance of power. The court’s decision, likely to come in June, may affect laws enacted during the past two years in Alabama , South Carolina , Georgia , Utah and Indiana. Both cases have placed the court in the middle of a campaign. Mitt Romney , who along with Obama is vying for Hispanic votes, has taken a tough stance on illegal immigration in his bid for the Republican presidential nomination even with a report this week that the wave of illegal immigrants from Mexico has ended as many return to their native country. Activists on both sides demonstrated outside the court as the justices heard the case. Defending the Borders Inside, court members voiced skepticism about parts of the Arizona law, including penalties on illegal immigrants who seek jobs. Still, the justices made clear they see states as having a role to play in addressing the presence of what the government has estimated is 11.5 million unauthorized aliens in the U.S. “What does sovereignty mean if it does not include the ability to defend your borders?” Justice Antonin Scalia said during the 80-minute session, which ran 20 minutes beyond its scheduled time. The central legal question is whether the U.S. Immigration and Nationality Act, which says states may cooperate in enforcing federal law, pre-empts the Arizona law. The administration sued to challenge four provisions in the 2010 Arizona law, known as S.B. 1070. Probably the measure’s most contentious part says police officers must check immigration status when they arrest or stop someone and have “reasonable suspicion” that the person is in the U.S. illegally. The disputed provisions haven’t taken effect. Playing Down Impact Early on, Paul Clement , representing Arizona, sought to minimize the provision’s impact. Answering questions from Sotomayor, Clement -- who argued against Verrilli in the health- care case as well -- said if federal officials said they didn’t want to take custody of an illegal immigrant, Arizona police officers would have to release the person unless they had a basis under state law for making an arrest. That statement set the tone for much of the rest of the session, undercutting Verrilli’s contention that the law encroaches on the exclusive federal right to set immigration policy. Chief Justice John Roberts repeatedly said federal officials would make the final call about whether a person should be deported or prosecuted for violating federal law. “All it does is notify the federal government, ‘Here is someone who is here illegally,’” Roberts said. “The discretion to prosecute for federal immigration offenses rests entirely with the attorney general.” Don’t Want to Know Later, Roberts said, “It seems to me that the federal government just doesn’t want to know who is here illegally or not.” Two Democratic appointees -- Sotomayor and Justice Stephen Breyer -- joined in that line of questioning. Breyer raised the possibility of upholding the provision with the understanding that it wouldn’t cause people to be detained “significantly longer” than they would have been previously. “If that were the situation, and we said it had to be the situation, then what in the federal statute would that conflict with?” Breyer asked Verrilli. The Obama administration says the measure would undermine its efforts to give highest priority to illegal aliens who threaten public safety and those who belong to gangs that smuggle other aliens, drugs and weapons. “These decisions have to be made at the national level,” Verrilli argued. ‘Unusual Theory’ Clement said many Arizona police officers already are routinely checking immigration status when they stop a person or make an arrest. The new law would simply extend those “ad hoc” checks into a statewide policy, he said. “The government’s rather unusual theory that something that’s OK when done ad hoc becomes pre-empted when it’s systematic, I think that theory largely refutes itself,” Clement argued. One issue not directly before the justices is the contention that the law will lead to racial profiling by police officers. That claim is part of a separate lawsuit being waged by civil rights advocates against the Arizona measure. ‘Probable Cause’ In addition to the status-check provision, Arizona’s law would authorize officers to arrest anyone they have “probable cause” to believe is eligible to be deported. The law also would bar aliens without proper papers from seeking or performing work. It would be a state criminal offense for a foreigner to be in Arizona without correct documentation, subjecting violators to as much as 30 days in prison. Roberts suggested he was skeptical about the employment provision. Federal law punishes employers that hire illegal aliens rather than focusing on workers seeking jobs. The Arizona employment provision “does seem to expand beyond the federal government’s determination about the types of sanctions that should govern the employment relationship,” he said. Verrilli was making his first appearance before the justices since he argued the health-care case in March, squaring off again against Clement, the former solicitor general who represented 26 states challenging the health-care law. Justice Elena Kagan didn’t take part today’s case. She played a role in the litigation as Obama’s top Supreme Court lawyer before her 2010 appointment to the court. 4-4 Split? Her disqualification creates the possibility that the court might divide 4-4 on some aspects of the law. That would leave intact a lower court ruling blocking those provisions, without setting a nationwide precedent. Arizona says its 370-mile border with Mexico is the crossing point for half the nation’s illegal immigrants, giving it the right to tackle a problem the national government has failed to address. Arizona had 360,000 unauthorized immigrants in 2011, according to the U.S. Homeland Security Department. During the last four decades, 12 million immigrants came to the U.S. from Mexico, most illegally, according to a report released April 23 by the Pew Hispanic Center, a nonpartisan research group in Washington. Net Mexican migration to the U.S. has now stopped and may have reversed, the report said. The court last year upheld a separate Arizona law that threatens companies with loss of their corporate charters if they hire illegal immigrants. The 5-3 ruling said a federal law governing immigrant hiring leaves room for states to impose their own penalties for non-compliance. The current case is Arizona v. United States , 11-182. To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net |
2024-02-02 | Bloomberg | U.S. Stocks Erase Gains as Merck Slump Offsets Economic Data | U.S. stocks swung between gains and losses as Merck & Co. led drugmakers lower after sales trailed forecasts and investors awaited tomorrow’s employment report to gauge the outlook for the economy. Merck, the second-largest U.S. drugmaker, slumped 1.2 percent. Abercrombie & Fitch Co. (ANF) , the teen apparel chain, tumbled 12 percent as its preliminary earnings missed analysts’ forecasts. MasterCard Inc. (MA) , the second-largest payments network, jumped 5.4 percent as profit climbed 24 percent. Gap Inc. (GPS) surged 9.3 percent after the biggest U.S. specialty apparel chain forecast earnings that beat estimates. The Standard & Poor’s 500 Index declined 0.2 percent to 1,321.96 at 12:39 p.m. New York time, after rising as much as 0.4 percent earlier. The Dow Jones Industrial Average fell 36.21 points, or 0.3 percent, to 12,680.25. “We’ll probably continue with a modest amount of job creation ,” Matthew DiFilippo, who helps manage $1 billion as chief portfolio strategist at Stewart Capital in Indiana , Pennsylvania , said in a telephone interview. “The earnings season hasn’t been that positive, but it hasn’t necessarily been negative either.” A report tomorrow may show that employment grew by 145,000 after rising by 200,000 in December, according to the median forecast of economists surveyed by Bloomberg News. The jobless rate may have held at an almost three-year low of 8.5 percent. Earlier today, Labor Department figures showed applications for unemployment insurance payments dropped by 12,000 to 367,000 in the week ended Jan. 28. The median forecast of 46 economists in a Bloomberg News survey projected 371,000. Earnings Season Earnings beat projections at 67 percent of the 246 companies in the S&P 500 that reported results since Jan. 9, according to data compiled by Bloomberg. The S&P 500 is trading for about 13.8 times its companies’ earnings and has been stuck below its five-decade average multiple of 16.4 since May 2010, the longest stretch since a 13-year period beginning in 1973. “It’s a great time to be placing your bets, seeding your garden, because we’re fixing the problems,” John Manley , chief equity strategist for Wells Fargo Advantage Funds in New York, said in a telephone interview. His firm oversees $211.5 billion. “If you believe the U.S. economy is going to get better, you want to own stocks.” Merck lost 1.2 percent to $38.15. Revenue rose 1.7 percent to $12.3 billion, less than the analyst estimates of $12.5 billion. Abercrombie & Fitch tumbled 12 percent to $41.31. The teen apparel chain reported preliminary fourth-quarter earnings that trailed analysts’ estimates as holiday promotions narrowed profit margins. MasterCard Rallies MasterCard advanced 5.4 percent to $377.03. The results cap a year in which the company, led by Chief Executive Officer Ajay Banga , surged 66 percent. The firm repurchased stock as the global shift from cash and checks to electronic payments continued. New U.S. regulations on swipe fees charged to merchants for debit-card purchases also may help Banga wrest market share from larger rival Visa Inc. The S&P 500 Diversified Financials Index jumped 0.7 percent, following gains in Europe ’s lenders. European Union Economic and Monetary Affairs Commissioner Olli Rehn said he expects a debt-swap agreement between Greece and its private bondholders “by the end of this week.” Citigroup rose 1.3 percent to $31.99. Morgan Stanley (MS) advanced 0.8 percent to $19.54. Gap rallied 9.3 percent, the biggest gain in the S&P 500, to $21.27. The company forecast fourth-quarter earnings to be at least 41 cents a share, exceeding the 35-cent estimate by analysts on average. K-Cups Green Mountain Coffee Roasters Inc. (GMCR) surged 22 percent to $65.19. The maker of Keurig brand single-cup pods and brewers reported profit that beat analysts’ estimates as sales rose. “A positive attitude toward equity investing is now in order” because U.S. bank stocks are doing relatively well and volatility is fading, according to Donald Coxe, a strategy adviser to Bank of Montreal. Coxe recommended that U.S. pension funds lift holdings of domestic stocks by 6 percentage points, to 20 percent of assets. The Chicago-based strategist also called for a 2-point increase in dividend-paying shares, to 12 percent. KBW Inc.’s regional-bank gauge jumped 37 percent from Sept. 21, when its ratio reached last year’s low, through yesterday. The S&P 500 rose 13 percent during the same period. Similarly, the KBW Bank Index (BKX) gained more than twice as much as the S&P 500 during the past two months. “It is good for the stock market that they are thriving,” Coxe wrote in his report, dated Jan. 27. He added that the VIX (VIX) , the Chicago Board Options Exchange Volatility Index, signals the market “isn’t skating on a pond whose ice is about to crack.” The VIX has closed below 20 for the past 10 trading days, the longest streak since June. When stocks slumped last August, the index rose as high as 48. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-02-27 | Bloomberg | HSBC Shuns Formosa Debut as Taiwan Funds Cut Yield: China Credit | Taiwanese investors accepted such a low yield on the first yuan bonds sold on the island that global funds including HSBC Global Asset Management stayed away. Chinatrust Commercial Bank, a unit of Taiwan ’s fourth- biggest lender by market value, sold 1 billion yuan ($161 million) of three-year notes at 2.9 percent on Feb. 25. The yield on the debt, a class dubbed Formosa bonds to be regulated by the island’s government, compares with the 3.35 percent on similar-maturity Royal Bank of Scotland Group Plc yuan paper in Hong Kong. Both lenders are rated A by Standard & Poor’s. “For global investors who already have access to the Dim Sum bond market, Formosa bonds lack appeal,” said Steven Huang, a Taipei-based fund manager at HSBC Global, which manages $417 billion of assets worldwide. “With Taiwan’s existing low-yield environment, local banks and securities firms are happy to buy anything that has better returns than Taiwan dollar bonds.” The debut yuan sale follows an August pact on cross-strait currency clearing with China ’s central bank, which allowed the island’s lenders to offer yuan deposits onshore from Feb. 6 and compete with rivals in Hong Kong, Singapore and London for a share of renminbi business. Taiwan’s 1.21 percent 10-year sovereign yield is the lowest in the world after 0.68 percent in Japan and 0.72 percent in Switzerland , supporting demand for debt with higher interest rates among managers of the island’s NT$34 trillion ($1.15 trillion) in savings. Trade Volume “The Taiwanese were very enthusiastic about the renminbi when we visited there,” said Steve Wang , Hong Kong-based head of fixed-income research at BOCI Securities Ltd. “Taiwanese banks want to earn some more money and because returns on local- investment products are so poor they always look overseas. They are very familiar with the China market and want to expand in China using the offshore yuan as an advantage.” A lack of secondary-market transactions will make Formosa bonds unappealing to more active investors, according to Eastspring Securities Investment Trust Co. Some NT$477 billion of bonds were traded on the island in January, compared with 6.97 trillion yuan in China, according to data from Gretai Securities Market and Chinabond. “Apart from the low yields, Formosa bonds’ low liquidities will be a problem for us,” said Yichun Shi, who helps manage NT$109 billion of assets as a Taipei-based portfolio manager at Eastspring. “It makes buying and selling very difficult for portfolio managers.” Issuance Planned Activity may improve as global banks get involved. BNP Paribas SA and Deutsche Bank AG have approached Taiwan’s Financial Supervisory Commission about possible renminbi offers, according to two people familiar with the matter, who asked not to be identified because the details are private. Companies including China Construction Bank Corp. (939) and HSBC Holdings Plc (HSBA) have listed yuan-denominated debt in London. Chinatrust’s Formosa bonds yield 173 basis points more than its local dollar notes with a similar maturity. They will start trading on the Gretai Securities Market in Taipei on March 12 and the funds raised will be used for the bank’s loan operations and to replenish mid- to long-term liquidity, according to a statement from Chinatrust Financial Holding Co. Taiwan Depository & Clearing Corp. will be responsible for payments and settlements for the notes, according to its website. The renminbi is the official name of China’s currency and the yuan is the largest denomination. Locals Keen Renminbi deposits at Taiwanese lenders’ domestic and offshore units jumped more than threefold to 31 billion yuan as of Feb. 22 from a year ago, while savings of the currency at Hong Kong banks totaled 603 billion yuan at the end of 2012, according to central bank data. To tap that money, HSBC Global is planning to sell a yuan- denominated bond fund in Taiwan in the first half of 2013 investing in Dim Sum bonds, adding to its existing Taiwan dollar-denominated yuan debt fund, according to Huang. Yuan securities in Taiwan will get a boost as insurers will be allowed to invest in foreign-currency notes listed on the island, Yu-Chiung Tzeng, director general of the Financial Supervisory Commission’s Insurance Bureau, said yesterday. Insurers invested around one-third of their portfolios in local fixed-income products last year, according to the Taiwan Insurance Institute. Yuan Appreciation A 15 percent rally in the Chinese currency in the past five years outstripped a 4 percent advance in the Taiwan dollar , according to data compiled by Bloomberg. The yuan will appreciate 1.9 percent to 6.11 per dollar by the end of 2013, according to the median estimate of economists in a Bloomberg survey. The Taiwan dollar is forecast to strengthen 3.3 percent. The yuan in Taiwan has traded in line with its Hong Kong counterpart since the first day of trading on Feb. 6. The currency gained 0.06 percent to 6.2253 as of 12:35 p.m. local time, according to Taipei Forex Inc. In Hong Kong’s offshore market, it rose 0.07 percent to 6.225, while it climbed 0.04 percent to 6.2269 in Shanghai. China’s benchmark 10-year government bond yield slipped one basis point this month to 3.60 percent yesterday, according to data from Chinabond. It reached this year’s high of 3.61 percent on Jan. 29. The cost of insuring China’s debt against non-payment with credit-default swaps contracts has fallen three basis points to 66 this month, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. It is down from as high as 146 in June 2012. The indexes typically fall as investor confidence improves and rise as it deteriorates. International Competition The People’s Bank of China approved the Singapore branch of the Industrial & Commercial Bank of China (601398) Ltd. this month as the clearing bank in the city state, making it the third offshore yuan center after Hong Kong and Taiwan. “Valuation and market liquidity in Taiwan’s yuan market, as compared to other opportunities in Hong Kong, are important investment considerations,” said Angus Hui, a fixed-income fund manager at Schroder Investment Management Ltd. in Hong Kong. “In medium term, we view it as one offshore market, no matter the financing and investment activities are centered in Hong Kong, Taiwan, Singapore or London.” To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net |
2024-09-04 | Bloomberg | Services Set to Take Largest Share of GDP in Asia | Dinh Tu quit being a monk three years ago and worked in a yoga studio in Ho Chi Minh City to cater to a growing Vietnamese middle class who are finding new outlets for their money. These days, he’s selling insurance, too. “People in Vietnam have more to spend now,” said the 40-year-old agent for Tokyo-based Dai-ichi Life Insurance Co. “Because I’m no longer a monk, I have to worry about financial pressures, too. I can see that insurance is a good business.” As Tu and millions of other Asians switch from traditional occupations, farms and factories, the contribution of service industries to the region’s emerging economies is poised to exceed 50 percent for the first time, according to data compiled by Bloomberg from government statistics. The watershed marks Asia ’s shift from its role as the world’s workshop with countries led by China concentrating on building domestic economies. From Japan ’s expansion in the 1960s to the Asian tigers of the 1970s and China’s economic liberalization in the 1980s, Asia’s postwar growth has been driven by government strategies that poured investment into producing engineers and factories that made most of the world’s clothes, toys and electronics. With Asian wages and currencies rising, the investment-export model is becoming less attractive, and funds are switching to domestic consumer markets, increasing the need for banking, health care and retail workers. “This is a natural consequence of Asia becoming wealthier,” said Donghyun Park, principal economist at the Asian Development Bank who has researched the region’s transition from manufacturing. “Millions are joining the middle class every year and demanding more services.” Changing Map Rising demand in a region with almost two thirds of the world’s people is rebalancing the global economic map. As export-dependent economies led by China shift focus to Asia’s 525 million middle-income consumers, manufacturers such as General Electric Co. (GE) are choosing to locate factories in Europe and North America, while service providers including international law firm Linklaters LLP are sending staff to Asia. By 2030, two-thirds of the world’s middle class will reside in Asia-Pacific, Ernst & Young estimates. Services will account for more than 50 percent of developing Asia’s gross domestic product for the first time either this year or next, from 48.5 percent of regional output in 2010, Park said. That ratio is above 60 percent in developing Europe and Latin America and 75 percent for members of the Organization for Economic Cooperation and Development. Less Emphasis One effect will be less emphasis among Asian governments on currency levels, which are key to export-based economies. “ Interest rates will become more important than exchange rates,” said Chua Hak Bin, an economist at Bank of America Corp. in Singapore. “When an economy gets richer and the trade component becomes smaller -- the likes of the U.S., Japan and even Australia -- they don’t have a problem letting the currency slide and yet there is hardly an impact on inflation.” As Asians grow wealthier, they are using their paychecks less for buying products and more for things like holidays. Average Chinese household spending on goods will drop to about 60 percent in 2013 from 71 percent in 1993 and decline to 52 percent by 2033, according to Yuwa Hedrick-Wong, global economic adviser for MasterCard Inc., the second-biggest U.S. payments network. The pattern is similar in eight Asian economies outside Japan, he said. Buy Experiences “People now want to buy experiences, in terms of traveling or dining out or going to a concert,” said Hedrick-Wong, who has written four books on the demographics of Asian consumers. “Services in the coming decade will really take off as the real engine of income and employment generation.” Asia is following the same path the U.S. took in the last century. At the end of World War II, service work accounted for 10 percent of U.S. non-farm employment, compared with 38 percent for manufacturing. Now, it represents four out of five jobs and contributes about 68 percent of the economy, according to government data. “Asian countries are no different,” said Joseph Kaboski, professor of economics at the University of Notre Dame in Indiana, who has researched the effect of high-skilled labor in service industries. “They’ll export more technology-intensive manufacturing goods. They’ll export more high-skilled services.” The climb up the technology ladder will help developing nations in Asia create higher-skilled and better-paid non-manufacturing jobs such as lawyers and bankers to supplement traditional roles like food-stall hawkers and cleaners. Automated Factories “If you have a bigger manufacturing sector, that does not necessarily create as many jobs as in the past,” because of greater use of automation, said Changyong Rhee, the ADB’s chief economist. “But as an economy develops, the manufacturing sector can create service-sector jobs.” General Electric opened the first of a series of innovation centers in the Chinese city of Chengdu in May 2012 to research health care, energy and transportation as part of a $2 billion plan to develop technology partnerships over three years. Deutsche Post AG’s DHL courier and freight unit said in August it is adding two offices to its existing seven in Indonesia and plans more in 2014 and 2015. The growing wage disparity between the new, more-skilled employees and lower-paid workers will help spur demand for services, said the University of Notre Dame ’s Kaboski. Landscaping, Daycare “When the cost of your time is high, you buy these things on the market: daycare, landscaping, eating at restaurants rather than cooking,” he said. Average pay in Asia almost doubled between 2000 and 2011, compared with a 5 percent increase in developed countries and about 23 percent worldwide, according to the International Labour Organization in Geneva. Higher salaries lead to increased spending and borrowing, with a growing number of people able to afford insurance policies or savings plans for the first time or invest in property, said Amit Arora, head of consumer banking at Standard Chartered Plc’s Vietnam unit in Ho Chi Minh City. “Six or seven years back, credit cards were a new thing in Vietnam, but today most banks offer them,” Arora said. “Unsecured loans to the lower- and middle-income segment are picking up very fast, and about 50 percent of customers are first-time loan takers.” The contribution of services to GDP was more than 46 percent in 2011 for developing economies in East and South Asia, according to Bloomberg calculations from World Bank data. Those numbers may underreport the full contribution of services because of the many small businesses in the informal sector that “have little incentive to respond to surveys, let alone to report their full earnings,” the bank said. Developing Asia excludes Japan, South Korea, Singapore, Hong Kong and Taiwan. World’s Factory “The world’s factory is turning into an economy driven by services,” Frederic Neumann , co-head of Asian economic research at HSBC Holdings Plc in Hong Kong said in an Aug. 29 note. Service industries are “contributing to roughly 50 percent of weighted GDP and 45 percent of its labor force. This is a trend that will shape Asia’s future.” For some countries, the growth of services is hindered by structural and policy hurdles. Asia lags behind Latin America and OECD nations in road networks, phones, railways, power and clean water, according to the latest United Nations data. “There isn’t enough infrastructure to support the sector in many parts of developing Asia, such as unreliable electricity causing blackouts or no Internet,” said Aekapol Chongvilaivan, a research fellow at the Institute of Southeast Asian Studies in Singapore. “That will deter foreign direct investment.” Hamper Development Protectionism in the financial sector is also a “serious” problem for emerging Asia, he added. “That will hamper all development, not just for the service sector.” Expansion by international law firms in Asia is concentrated in the few places such as Singapore, Hong Kong and South Korea that have opened markets. Linklaters, Sidley Austin LLP Gibson, Dunn & Crutcher LLP and Jones Day won licenses to practice local corporate law in Singapore in February. The variations among countries mean the shift from manufacturing dependence won’t be even. Nations the World Bank classifies as upper middle-income such as China, Malaysia and Thailand may see the creation of jobs in insurance, technology and education. Less-developed countries will add employees at neighborhood stores, supermarkets and fuel stations. Low-income Asian economies -- those with gross national income per capita of $1,035 or less like Cambodia and Bangladesh |
2024-08-20 | Bloomberg | Asian Stocks Drop to Six-Week Low on Fed Tapering Concern | Asia ’s benchmark stock index dropped to a six-week low as investors sold riskier assets across the region amid concern that the U.S. will cut stimulus drove Treasury yields to a two-year high. QBE Insurance Group Ltd. (QBE) sank 5.5 percent as first-half net income at Australia’s largest insurer by market value plunged 37 percent. BHP Billiton Ltd. (BHP) dropped 1.4 percent in Sydney before the world’s biggest miner reported profit that missed analyst estimates. Everbright Securities Co. (601788) slumped 10 percent in Shanghai as trading resumed after an error at the Chinese brokerage whipsawed stocks last week. The MSCI Asia Pacific Index lost 1.6 percent to 131.51 at 8:47 p.m. in Tokyo , as all 10 industry groups on the gauge slid. More than five shares fell for every one that rose on the measure, which dropped to its lowest level since July 9. “It’s a very uncomfortable period,” Richard Yetsenga, head of global markets research in Sydney at Australia & New Zealand Banking Group Ltd., told Bloomberg TV. “This has further to run before we look to get back in. Asia as a whole, even though the data’s probably OK, is not going to feel like a great place for a while as we adjust to the new world order where U.S. bond yields are going up, not down.” Japan’s Topix index retreated 2.1 percent. Australia’s S&P/ASX 200 Index fell 0.7 percent as it declined a fifth day, the longest streak of losses in more than two months. New Zealand’s NZX 50 Index gained 0.1 percent. South Korea’s Kospi index slipped 1.6 percent. Hong Kong’s Hang Seng Index dropped 2.2 percent and the Hang Seng China Enterprises Index (HSCEI) sank 2.9 percent, its biggest decline since July 3. China’s Shanghai Composite slid 0.6 percent. Taiwan’s Taiex Index lost 0.9 percent, while Singapore’s Straits Times Index retreated 1.4 percent. China, Fed The Asia-Pacific measure gained 3.4 percent this year through yesterday, lagging a 15 percent surge in the Standard & Poor’s 500 Index as growth slows in China and speculation that the Federal Reserve will curb bond buying spurred investors to sell assets across Asia and emerging markets. Investors will be watching the release of the Federal Open Market Committee’s July meeting minutes tomorrow for hints as to when the stimulus draw down will begin. The Jakarta Composite Index fell as much as 5.8 percent, extending a retreat to 20 percent from this year’s peak. Thailand’s SET Index (SET) slumped 2 percent, its lowest close since June 24. India’s S&P BSE Sensex gauge lost 0.3 percent. Indonesia ’s record current-account deficit and Thailand’s recession spurred concern that capital outflows from emerging markets will accelerate. Emerging Markets Emerging markets from Brazil to Indonesia have raised borrowing costs in 2013 to try to aid their currencies as the prospect of reduced U.S. monetary stimulus curbs demand for assets in developing nations. S&P 500 futures added 0.2 percent today. The U.S. equities gauge yesterday completed its first four-day decline of the year as energy shares dropped and Treasury yields jumped to a two-year high. Japan’s Topix has gained 31 percent this year, the world’s best-performing developed equity market, amid optimism Prime Minister Shinzo Abe will push through reforms while the central bank provides record stimulus to spur an economic recovery. Trading volume on the gauge yesterday fell to the lowest level since December as investors took summer vacations. Raw Materials QBE fell 5.5 percent to A$16.10 in Sydney. Net income dropped to $477 million in the six months ended June 30, missing the $555 million median estimate of seven analysts surveyed by Bloomberg News. Raw-material shares fell as metals prices sank. Jiangxi Copper Co., China’s biggest producer of the metal, slid 4.4 percent to HK$14.84 in Hong Kong. BHP Billiton fell 1.4 percent to close at A$36.54. The miner reported after the close that net income dropped to $10.9 billion in the year to June 30 from $15.4 billion a year ago. Profit, excluding one-time items, was $11.8 billion, missing a median forecast of $12.7 billion of seven analysts surveyed by Bloomberg. The S&P GSCI index of commodities dropped as much as 1 percent today after the London Metal Exchange Index of industrial metals declined 1.3 percent yesterday. Everbright slumped 10 percent, the daily limit for losses in Shanghai, as trading resumed. The China Securities Regulatory Commission banned the state-controlled brokerage, the country’s 12th-largest by revenue, from proprietary trading for three months after 23.4 billion yuan ($3.8 billion) of erroneous buy orders on Aug. 16. To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net |
2024-05-09 | Bloomberg | Both Parties Say House Will Pass Export-Import Bank Bill | A bill to raise the Export-Import Bank’s lending cap 40 percent by 2014 will pass the U.S. House today, lawmakers of both parties predict, although Republican leaders aren’t formally urging members to support it. House Speaker John Boehner endorsed the measure. Still, many Republicans oppose it, saying the bank distorts free markets by subsidizing loans for export sales. The legislation, H.R. 2072, was negotiated by Majority Leader Eric Cantor , a Virginia Republican, and second-ranking Democrat Steny Hoyer of Maryland. “The Democrats will be overwhelmingly for it,” Hoyer told reporters yesterday. “This a part of trying to create and keep jobs in America. This is an effort to try to grow our exports. This is an issue supported overwhelmingly by the business community.” The proposal would raise the bank’s lending limit to $120 billion immediately, $130 billion in 2013 and $140 billion by the end of the 2014 fiscal year. The bank will reach its $100 billion lending cap by the end of this month unless Congress acts, bank officials have said. The vote will be conducted through an expedited procedure requiring a two-thirds majority for passage. Republicans control the House with 292 members to 190 Democrats and three vacant seats. If all members vote, the bill will need 289 votes to pass under the streamlined procedure. No Assurance Hoyer told reporters he hasn’t received assurance from Cantor that Republicans will have enough votes for passage. “My presumption is Mr. Cantor made an agreement that he believes he can pass,” Hoyer said. The Export-Import Bank, created during the 1930s in President Franklin D. Roosevelt ’s administration, provides loan guarantees, insurance and loans for foreign purchases of U.S. goods and services. In an editorial published yesterday, the Wall Street Journal urged Republicans to defeat the measure to show they are “serious about trimming the size of government.” The newspaper said the loan subsidies amount to “ job creation , French style.” After Hoyer and Cantor completed negotiations on May 4, Boehner issued a statement saying that extending the bank’s lending authority is “necessary to promote American exports and remove a threat to the creation of American jobs.” ‘Feeling Pretty Good’ “We’re feeling pretty good about it,” Washington Representative Cathy McMorris Rodgers, vice chairwoman of the House Republican Conference, said in an interview yesterday. Rodgers said House leaders aren’t pressing individual lawmakers on the issue because they are concentrating on budget legislation awaiting House action later this week. Oklahoma Republican Tom Cole predicted enough members of his party would support the measure. Cole, a member of the House Republican vote-counting team, said party leaders were “confident enough to put it out there” under the fast-track procedure. “One way or another it will pass,” he said in an interview. The bill is opposed by the Club for Growth and Heritage for Action, groups that favor lower taxes and smaller government. They say the Export-Import Bank provides unfair lending subsidies that distort free-market competition. Leaders of the Democratic-controlled Senate said they would seek quick action on the legislation after it passes the House. ‘Broad Support’ New York Senator Charles Schumer , the chamber’s third- ranking Democrat, said in an interview that he anticipated the House measure would receive “broad support” in the Senate. Senator Jim DeMint , a South Carolina Republican who opposes the bank, said he will insist that the Congressional Budget Office conduct an analysis “of the real cost based on the real risk” of the measure. He said he may push for a vote on an amendment to phase the bank out of existence. Critics of the bank dispute its leaders’ statement that it had a $3.7 billion profit in the last seven years. DeMint and other opponents say the bank wouldn’t be profitable if market- risk costs were taken into account. Georgia Republican Tom Price said he hasn’t “detected a groundswell” of support among House Republicans for the measure. Arizona Republican David Schweikert said he would vote against it because “it’s contrary to my personal finance philosophy.” The measure would require Treasury Secretary Timothy Geithner to initiate talks with other governments on eliminating export loan subsidies for aircraft. Delta Air Lines Inc. (DAL) , based in Atlanta, has said the bank undercuts U.S. airlines by giving foreign carriers better credit terms to purchase wide-bodied jets. Kevin Brady , a Texas Republican, said he would vote for the measure because it “hits the balance between ‘don’t unilaterally disarm’ in a way that costs us jobs, but we need to reform the bank.” “It’s time to tackle the Export-Import Bank,” he said. To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-03-10 | Bloomberg | Treasuries Gain as U.S. Jobless Claims Rise More Than Forecast | Treasuries rose after a government report showed U.S. first-time claims for unemployment benefits increased last week more than economists forecast, fueling concern improvement in the labor market will be uneven. Benchmark 10-year note yields touched a one-week low as Moody’s Investors Service cut Spain’s credit rating. Thirty-year bond yields dropped before today’s $13 billion auction of the securities. Yesterday’s $21 billion sale of 10-year notes drew the highest level of demand since April. “The claims number is a little elevated over expectations,” said Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “It’s within the range of the weekly volatility, so it doesn’t fall too much outside of expectations. We continue to see improvement in the labor market, although the pace is not as fast as the bond bears had hoped.” The benchmark 10-year note yield dropped three basis points, or 0.03 percentage point, to 3.44 percent at 9:31 a.m. in New York , according to BGCantor Market Data. The price of the 3.625 percent security maturing in February 2021 increased 9/32, or $2.81 per $1,000 face amount, to 101 18/32. The yield earlier slid to 3.42 percent, the lowest level since March 2. The 30-year bond yield dropped two basis points to 4.59 percent before the auction. Jobless Claims Initial applications for unemployment insurance increased to 397,000 in the week ended March 5 from 371,000 in the previous week, the Labor Department reported. The median forecast of 49 economists in a Bloomberg News survey was for an advance to 376,000 from a previously reported 368,000. Spain’s government bond ratings were cut one level to Aa2 from Aa1, and the outlook is negative, Moody’s said. The cost of shoring up Spain ’s banking industry will be 40 billion to 50 billion euros ($69 billion), more than the government expects, according to Moody’s. The “eventual cost of bank restructuring will exceed the government’s current assumptions” of 20 billion euros, while the risks to government finances remain “skewed to the downside,” the company said in a statement today. “There has been quite a big reaction to Spain,” said Peter Chatwell , an interest-rate strategist at Credit Agricole SA in London. “The market was already jittery, and it’s really pounced on that. There has not been much liquidity in the market either, hence the Treasuries move being perhaps slightly exaggerated.” Drop in Stocks The Standard & Poor’s 500 Index decreased 0.3 percent. The Stoxx Europe 600 Index fell as much as 1 percent to the lowest level since Jan. 31. Brent crude for April settlement rose as much as 0.5 percent to $116.55 a barrel in London before falling 1 percent. The price has risen 21 percent this year. Muammar Qaddafi’s forces resumed air strikes on oil hubs in the central area of Libya ’s coastline that mark the east-west dividing line in the nation’s civil war, as the U.S. and its allies discuss how to intervene. Treasuries rose earlier after a Chinese report showed exports grew at the slowest rate in 15 months, encouraging speculation that the global recovery is slowing. China ’s exports increased 2.4 percent in February from a year earlier, the lowest pace since November 2009, the customs bureau reported today. U.S. Bond Sale The 30-year bonds being sold today yielded 4.625 percent in pre-auction trading, compared with 4.750 percent at the previous auction of the securities Feb. 10. Investors bid for 2.51 times the amount of debt offered last month, versus an average of 2.66 for the past 10 sales. Indirect bidders, the investor group that includes foreign central banks, bought 43.1 percent of the securities, more than the 10-auction average of 38.9 percent. Treasuries gained yesterday as the 10-year note auction drew a yield of 3.499 percent, less than the average forecast of 3.535 percent in a Bloomberg News survey of eight primary dealers. Bids amounted to 3.32 times the amount of available debt, the highest level since April. U.S. government debt has handed investors a 0.3 percent loss this year, according to Bank of America Merrill Lynch indexes. The drop follows a 2.7 percent slide in the fourth quarter. The MSCI World (MXWO) Index of stocks has returned 4 percent. The Fed said in November it would buy $600 billion of government securities through June to pump money into the economy. The central bank bought $6.7 billion of debt yesterday. To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net ; Susanne Walker in New York at swalker33@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-06-20 | Bloomberg | JPMorgan House Hearing, EU Lending, Universal: Compliance | U.S. House members criticized regulators yesterday for failing to detect JPMorgan Chase & Co. (JPM) ’s loss of at least $2 billion on risky derivatives trades and pressed for additional measures to ensure similar losses don’t occur in other banks. The heads of the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Securities and Exchange Commission and Commodity Futures Trading Commission, along with a senior Federal Reserve official offered testimony about the loss at a House Financial Services Committee hearing in Washington. JPMorgan Chief Executive Officer Jamie Dimon, who began his testimony later, described the loss as “embarrassing.” Lawmakers pressed regulators to explain how they monitored activities U.S. banks conduct overseas. The trades that triggered JPMorgan’s loss were conducted in London, potentially beyond the reach of U.S. derivatives regulators. Dimon defended the company’s disclosures of a $2 billion trading loss as regulators and lawmakers questioned whether the largest U.S. bank misled investors. “We disclosed what we knew when we knew it,” Dimon, making his second appearance on Capitol Hill in less than a week, said yesterday at a House Financial Services Committee hearing in Washington that exceeded four hours. Comptroller Thomas J. Curry said his agency is reviewing its staffing inside JPMorgan’s London operations in the wake of the loss. SEC Chairman Mary Schapiro told lawmakers that JPMorgan could pay a penalty if the agency concludes that the bank improperly disclosed the risk that contributed to the loss. The SEC has a “wide panoply” of sanctions and penalties at its disposal in pursuing a case against JPMorgan and the bank could pay penalties if investigators find that it has violated disclosure or other rules, Schapiro said. Scott Alvarez , the Fed’s general counsel, said the central bank is reviewing JPMorgan’s risk management practices. Still, regulators didn’t provide new information about the loss and lawmakers used the hearing to reprise the broader debate over financial regulation. Committee Chairman Spencer Bachus pointed to the regulators bunched at the witness table as an example of the continued complexity of financial oversight. Dimon’s opening statement was nearly identical to his remarks in front of the Senate Banking Committee last week. During that hearing, Dimon apologized for the losses and said he felt “terrible” that shareholders would lose money because of the chief investment office’s trading strategy. Dimon also said that Congress should limit the international reach of Dodd-Frank Act swaps regulations. In addition, Dimon said that district banks of the Federal Reserve benefit by having industry leaders’ input. Dimon has been criticized by lawmakers for serving on the board of the Federal Reserve Bank of New York. Yesterday’s hearing was the first held by the House on the trading losses, which have drawn inquiries from the SEC, CFTC and Department of Justice. The SEC’s review of JPMorgan’s trading loss has focused on how JPMorgan disclosed a change to a complicated risk calculation. When companies disclose their “value at risk” or VaR, they “must speak truthfully and completely,” Schapiro said. Lawmakers on the House committee, much like those on its Senate counterpart, have benefited from JPMorgan’s campaign donations. For more, click here, and click here, and click here. For part 1 of Dimon testimony video, click here. For part 2 of Dimon testimony video, click here. For video of agency leaders, click here. JPMorgan Hedges Were Really Prop Trades, Whitney Says JPMorgan Chase & Co.’s $2 billion trading loss stemmed from profit-seeking bets rather than hedges meant to mitigate loan losses, as Chief Executive Officer Jamie Dimon has described them, banking analyst Meredith Whitney said. Whitney made the remarks yesterday in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt as the bank chief testified at a hearing of the House Financial Services Committee in Washington. “A credit hedge in banking should be a loan-loss provision, plain and simple. Anything else is a proprietary bet.” Whitney, 42, also disputed Dimon’s claim that bank regulation may curb lending. For more, click here. Himes Asks Why No One Knew About JPMorgan Trading Loss U.S. Representative James Himes, a Connecticut Democrat and a member of the House Financial Services Committee, talked about yesterday’s testimony to the panel by JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon about the bank’s $2 billion trading loss. Himes spoke with Betty Liu and Peter Cook on Bloomberg Television’s “In the Loop.” For the video, click here. Schweikert Says Dimon Did ‘Pretty Good Job’ at Hearing U.S. Representative David Schweikert, an Arizona Republican and member of the House Financial Services Committee, talked about JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon’s testimony before the panel yesterday about the bank’s $2 billion trading loss. He talked with Peter Cook on Bloomberg Television’s “Bottom Line.” For the video, click here. Arthur Levitt Says Dimon Hearing Only ‘Theater’ Arthur Levitt , former chairman of the U.S. Securities and Exchange Commission, talked about JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon ’s testimony before the Senate Banking Committee yesterday. Levitt, who spoke with Stephanie Ruhle and Erik Schatzker on Bloomberg Television’s “Market Movers,” also discussed regulations and the outlook for the banking industry. For the video, click here. House’s Frank Says JPMorgan Losses Show Need for Swaps Oversight JPMorgan Chase & Co.’s trading loss of at least $2 billion strengthens the argument against Republican efforts to cut the budget of the U.S. derivatives regulator and ease Dodd-Frank Act swaps rules, said Representative Barney Frank. Frank said that if a “very well-run bank” can sustain a loss of this size, “it’s an indication of the problems with derivatives.” Frank, a Massachusetts lawmaker, is the senior Democrat on the House Financial Services Committee. He made the remarks at a hearing yesterday looking into the bank’s trading. The House Agriculture Committee last month postponed a committee meeting to vote on measures limiting the international reach of the 2010 regulatory-overhaul law’s swaps regulations and allow more derivatives trading to occur in federally insured banks. Financial Services approved the same legislation in March, before JPMorgan’s derivatives losses were disclosed. Compliance Policy U.K. to Give Shareholders Votes on Top Pay, Boost Disclosure Public companies in the U.K. will have to give shareholders binding votes on executive-pay structures every three years, Business Secretary Vince Cable told lawmakers. Other measures in the package, to take effect in October 2013, will require companies to publish a single figure for what each director is paid in total, their pension entitlement and a chart comparing the company’s performance and the chief executive officer’s pay. When directors leave, the company will have to publish “promptly” a statement of their payoff. A study last year by the High Pay Commission, a pressure group that pushes for curbs on top earners, found British directors’ salaries increased by 64 percent over the past decade, while the average year-end share price of FTSE 100 companies fell 71 percent. The average annual bonus for directors rose 187 percent, according to the panel. “There is compelling evidence of a disconnect between pay and performance in large U.K.-listed companies,” Cable said in a statement to Parliament today. “It is right that the government acts to address this clear market failure.” Cable said he hoped that having votes on pay structures every three years, rather than annually, will encourage longer- term thinking. If a company changes its structures, it’ll be forced to have a fresh vote. The moves, which will be implemented through amendments to the Enterprise and Regulatory Reform Bill currently before Parliament, are aimed partly at ending “golden goodbye” packages for departing executives, often criticized as rewards for failure. The policy on exit payments will be part of the package that shareholders vote on, and companies won’t be able to go beyond it. Developing Economies Warn of Damage From Basel, Volcker Rules Global regulators are being urged by some developing countries to amend plans that would force banks to boost their capital and liquid assets, expressing concerns the measures may harm their economies. A survey of developing and emerging economies conducted by the Financial Stability Board revealed concerns that the measures, drawn up in the wake of the 2008 collapse of Lehman Brothers Holdings Inc., “could have adverse consequences and may ultimately impact the development of domestic financial markets in those countries.” The nations are also concerned that U.S. proposals to ban commercial banks from proprietary trading, known as the Volcker Rule, may damage their “government, corporate securities and derivatives markets,” the FSB said in the report, submitted yesterday to a meeting of the Group of 20 nations in Los Cabos, Mexico, and published on the FSB’s website. It didn’t name the countries included in the survey. Regulators and lenders have clashed over how to implement the international bank-capital and liquidity standards, which are set to become fully effective in 2019. Specific concerns named in the report include that the new rules might make it more expensive for lenders to provide so- called trade finance services, the FSB said. There is also a more general concern lenders will scale back activities outside their core markets, the board said. EU Lawmakers Seek to Scrap Credit-Ratings Rotation Plan European Union lawmakers voted to scrap most of a proposal to force businesses to rotate the credit-ratings company they hire to assess their debt, while backing tighter restrictions on sovereign-debt ratings. The European Parliament ’s economic and monetary affairs committee voted yesterday in Brussels to scale back the proposed rotation requirement so that it would apply only to securitizations and other kinds of so-called structured finance. The stance brings the Parliament’s position largely into line with that of EU national governments, which must also approve the new rules proposed by the bloc’s regulators last year. The European Commission, the 27-nation EU’s regulatory arm, proposed the rotation rule last year as part of a draft law to toughen regulation of the ratings industry amid concerns that some of its decisions exacerbated the euro-area debt crisis. The commission said rotation would boost competition and solve potential conflicts of interest. Under the commission’s original rotation proposal, companies would have been obliged to change the company that they pay to rate their credit every three years. Parliament and national governments must now begin discussions on a final compromise bill before the legislation can become law. For more, click here. EU Nations Said to Be Split Over Lending Plan for Failing Banks European Union nations are split over plans to force governments to lend to each other as a last resort to stabilize crisis-hit banks , according to two people familiar with the matter. Germany and Sweden are among nations opposing the move, part of a broader proposal to take taxpayers off the hook for bank rescues, said the people, who couldn’t be identified because the talks are private. The plan, discussed by diplomats at a meeting in Brussels June 18, received support from other nations, including Italy and France. The U.K. has previously said that it was opposed to such funds as they could encourage lenders to take excessive risks. Michel Barnier , the EU financial services chief, proposed setting up a network of national bank-financed funds to shore up crisis-hit lenders in a draft law this month. He said the measure was needed to prevent a repeat of the public bailouts that occurred in the 2008 financial crisis. Preben Aaman, a spokesman for the Danish presidency of the EU, and Stefaan De-Rynck, spokesman for Barnier, declined to immediately comment. The proposals need to be approved by nations and by lawmakers in the European Parliament before they can enter into force. Compliance Action Universal Gets EU Antitrust Complaint Citing EMI Bid Concerns Vivendi SA (VIV) ’s Universal Music Group said it received an antitrust complaint from European Union regulators citing concerns over its bid for EMI Group’s recorded-music business. The European Commission has “provided us today with a statement of objections,” Adam White , a spokesman for Universal in London, said in an e-mail yesterday. “We will continue to work closely with the commission and look forward to securing regulatory clearance.” He said Universal is preparing a detailed response to regulators’ concerns. A statement of objections sets out regulators’ case for blocking a deal. Companies may seek an oral hearing and can offer to sell assets to resolve any concerns. Regulators have a Sept. 6 deadline to rule on the bid by Universal, which they have said would create a company “almost twice the size of the next largest player” in Europe. Antoine Colombani, a spokesman for the European Commission in Brussels, declined to comment on the statement of objections. Courts Blue Index Founder Sanders Gets 4 Years for Insider Trading The co-owners of the now-defunct spread-betting firm Blue Index Ltd. and one of their wives were sentenced to a total of 68 months in prison for insider trading. James Sanders was sentenced to four years in prison while another owner, James Swallow, was sentenced to 10 months. Sanders wife, Miranda, also received a 10-month term. Sanders pleaded guilty to 10 charges, according to the U.K. Financial Services Authority. He faced as long as six years in prison if he hadn’t pleaded guilty, Justice Peregrine Simon said at the hearing in London today. Sanders’s wife, Miranda, pleaded guilty to five counts of insider trading, and Swallow to three charges before the trial, according to the FSA. A former senior trader at the brokerage, Christopher Hossain, and another man, Adam Buck, were cleared of similar charges last month after a five-week trial. Profits generated by the defendants from the inside information were about 1.9 million pounds ($2.99 million), while Blue Index clients reaped about 10.2 million pounds, the FSA has said. Interviews High-Frequency Definition Needed for New Rules, O’Malia Says High-frequency trading should be defined before the U.S. Commodity Futures Trading Commission sets rules for what amounts to about half of the volume of futures markets, said Scott O’Malia, a member of the panel. The CFTC needs a better understanding of the practices as it debates new testing and supervision rules for high-frequency and automated trading, O’Malia said in a speech prepared for a Securities Industry and Financial Markets Association conference yesterday in New York. The CFTC, with the Securities and Exchange Commission, has scrutinized such trading since May 6, 2010, when $862 billion was erased from stock values in 20 minutes in the so-called “flash crash.” The agency has been drafting a release on new rules, a regulatory step prior to proposed rules. For more, click here. Comings and Goings RBS to Cut 618 Financial-Planning Jobs, Charge for Advice Royal Bank of Scotland Group Plc , the U.K.’s biggest taxpayer-controlled lender, is eliminating 618 branch-based financial advisers as regulators force lenders to charge clients for the service. RBS is also creating 351 financial-planning jobs as a result of the rule changes, the Edinburgh-based bank said in a statement today. The Financial Services Authority’s Retail Distribution Review will from the end of 2012 prevent the payment of commissions to advisers, and lenders are preparing to charge for the service. HSBC Holdings Plc (HSBA) said in June last year it was cutting 700 employees offering face-to-face advice in branches while Barclays Plc (BARC) , Britain’s second-largest bank, said in January last year it would cut 1,000 employees as a result of the regulations. RBS Chief Executive Officer Stephen Hester has shrunk assets by more than 700 billion pounds ($1.1 trillion) and cut about 36,000 jobs since he took over from Fred Goodwin in 2008 at the bank. RBS said in January it would cut about 3,500 jobs at its investment bank, citing volatile markets and the cost of new U.K. regulation. Indonesia Central Bank’s Hadad to Head Financial Regulator Indonesia’s parliament approved Bank Indonesia Deputy Governor Muliaman Hadad to head the board of a national financial regulator due to start operating in January. The central bank may allow banks to own as much as 90 percent of commercial lenders, Hadad said in Jakarta today in response to a question from reporters. Approval would be “very selective,” he said. New ownership rules will be announced before July, Hadad added. Lawmakers chose Hadad over Achjar Iljas, who held a similar position at the central bank a decade ago, after conducting so- called fit-and-proper tests this month on the 14 people nominated by President Susilo Bambang Yudhoyono for the seven positions at the regulator. Hadad was chosen by acclamation, rather than by vote, according to a notice posted in the meeting room of Commission XI, which oversees financial institutions. The new regulator, known in the Indonesian language as Otoritas Jasa Keuangan, or OJK, will supervise capital markets, insurers, pension funds and other non-bank institutions next year and oversee commercial lenders starting from January 2014. The OJK will take over regulation of capital markets, insurers and pension funds from the Capital Market and Financial Institution Supervisory Board, and assume responsibility for bank supervision, currently handled by the central bank. For more, click here. U.S. Consumer Bureau Aide Said to Be Tapped for General Counsel Meredith Fuchs, chief of staff to Consumer Financial Protection Bureau Director Richard Cordray, will be named general counsel of the agency, replacing Leonard J. Kennedy, according to a person briefed on the change. Kennedy, a former general counsel of Sprint Nextel Corp. (S) who joined the consumer bureau in January 2011, will become an adviser to Cordray, said the person, speaking on condition of anonymity because the decision isn’t public. Jen Howard, a spokeswoman for the consumer bureau, declined to comment. 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 . |
2024-12-07 | Bloomberg | Democrats Hint at Entitlement Program Cuts in U.S. Budget | As Democrats demand tax concessions from Republicans to avert a collision over the federal budget , Senate Democratic leaders are signaling that they may be willing to trade an entitlement spending overhaul to secure a deficit- reduction deal. Dick Durbin of Illinois, the second-ranking Senate Democrat, said he might reluctantly be open to expanding means- testing for Medicare eligibility -- charging more to higher- income seniors. New York Senator Chuck Schumer said he wouldn’t rule out changing entitlements, challenging Republicans to come up with specific proposals. Republicans “want something to put up on the wall and say, ‘OK, we gave on taxes, they gave on’” entitlements, Durbin said in an interview late yesterday. “We may end up facing it as the only way out of this.” House Speaker John Boehner scheduled an 11 a.m. news conference today in Washington. The newfound flexibility could be a sign that both parties are edging toward a compromise to avert what has been labeled a fiscal cliff -- a Jan. 1 surge of more than $600 billion in automatic tax increases and spending cuts that could propel the nation into recession. Not everyone is convinced. With President Barack Obama and Boehner -- the chief Republican negotiator -- not disclosing any progress in their private talks, Jon Kyl of Arizona, the Senate’s second-ranking Republican, said: “It doesn’t appear to me that they’re going anywhere. And that’s too bad.” Senate Sparring In the Senate yesterday, Majority Leader Harry Reid , a Nevada Democrat, and Minority Leader Mitch McConnell , a Kentucky Republican, sparred over Obama’s proposal to give himself authority to raise the federal debt ceiling without approval by Congress. McConnell sought a vote on the proposal, though he retreated by threatening a filibuster after Democrats determined that they had the 51 votes necessary to pass the bill. McConnell “hasn’t learned that this is not 2010 anymore. There’s no hay to be made by playing politics with the debt limit,” said Schumer. Reid, McConnell and Representative Nancy Pelosi of California, the House Democratic leader, have been excluded from the negotiations, leaving it to Boehner and Obama alone to find a deal, said a Republican aide who requested anonymity when discussing the negotiations. According to another Republican aide, having the more partisan minority leaders from both chambers as participants in similar talks last year wasn’t constructive. Tax Rates Obama has stressed that no deal is possible without letting income tax rates rise for the top 2 percent of earners. All rates will increase without a deal as tax cuts first enacted under President George W. Bush expire in 2013. Both sides say they don’t want that to occur for 98 percent of taxpayers. In a Bloomberg Television interview this week, Obama signaled he’s ready to make concessions on entitlements, saying “I don’t expect Republicans to agree to any plan where they’re just betting on the come that entitlement reform will happen.” Yesterday’s Democratic comments coincide with signs that the once-unified opposition among Republicans on the tax-rate issue is splintering. ‘All Options’ A few dozen Republican lawmakers have signed a bipartisan letter calling for “all options” to be considered on taxes and entitlement programs in the deficit-reduction talks, even as Boehner has insisted that his party won’t agree to higher tax rates for anyone. A Republican leader of the petition to consider all revenue options, Representative Mike Simpson of Idaho, said he could accept higher tax rates for married couples earning more than $500,000 a year in exchange for an overhaul of entitlement programs. Obama wants to let tax rates increase for individuals with incomes above $200,000 annually and for married couples with incomes exceeding $250,000. Durbin expressed openness to Simpson’s suggestion to raise the income threshold for higher tax rates. “If you’ve been around here long enough, you know there’s going to be some give on both sides,” Durbin said. “As the president said, and I’ll just leave it in his words, ‘I’m open to good ideas.’” Market Reaction Stocks rose. The Standard & Poor’s 500 Index (SPX) rose 0.3 percent to 1,417.90 at 9:38 a.m. New York time. The Dow Jones Industrial Average gained 52.09 points, or 0.4 percent, to 13,126.13. Treasuries fell for the first time in four days. Ten- year note yields rose three basis points, or 0.03 percentage point, to 1.62 percent at 9:09 a.m. New York time, according to Bloomberg Bond Trader data. Boehner, in a $2.2 trillion deficit-cutting plan he offered this week, proposed using a new inflation yardstick -- the so- called chained consumer price index -- that would reduce cost- of-living increases in Social Security, as well as raising the Medicare eligibility age. Other Republicans have also advocated means-testing. Democrats have long regarded their party as the champions of preserving safety-net programs for the poor and elderly, and Reid has repeatedly said that Social Security is off the table in debt-deal talks. Failed Talks Still, raising the Medicare eligibility age and using a different Social Security inflation yardstick were on the table during failed budget talks between Obama and Boehner in 2011. Simpson cited either of those options as a way to win Republican votes for a tax rate increase on top earners. Schumer, when asked about the ways to trim entitlement costs, said, “Let them give it to us officially as an idea,” without ruling them out. Since Obama’s re-election last month, much of the public debate on a possible deal has focused on taxes. Obama yesterday visited a middle-class couple in Falls Church, Virginia, a suburb of Washington, to emphasize the need for an agreement to keep their taxes from rising. Entitlement programs are the biggest driver of the long- term debt. With the oldest of the baby-boom generation reaching retirement age , the number of people age 65 and older is projected to increase by about one-third in the next decade, according to the Congressional Budget Office. Means Tests Durbin said it would be “difficult” to change the calculation of Social Security cost-of-living increases, and raising the Medicare eligibility age could hurt impoverished seniors who retire early with health problems. Medicare is already a means-tested program, with beneficiaries earning more than $85,000 a year paying more for some of its benefits. “The question is what other means tests should apply,” Durbin said. “I think that is reasonable, and certainly consistent with the Democratic message that those who are better off in our country should be willing to pay a little more.” Republicans have “got to come through with specifics on that,” he said. Many of the options for curbing entitlements have met with fierce opposition from powerful groups including the AARP seniors’ lobby, which wrote to Congress and the president last month expressing its concerns about such proposals. The group fanned out across Capitol Hill this week to lobby against two elements in Boehner’s plan: raising the Medicare eligibility age and using the chained CPI for Social Security. Medicare’s eligibility age, 65, hasn’t been increased since the program began in 1966. Medicare Savings The Medicare change could save the federal government more than $100 billion while increasing health-care costs to senior citizens, states and employers. People age 65 and older could pay an extra $2,000 for health insurance if they are excluded from Medicare, according to the nonpartisan Kaiser Family Foundation. The chained CPI inflation method to determine annual cost- of-living adjustments for millions of Americans was a central feature of both the plan presented by the co-leaders of Obama’s 2010 debt commission and a blueprint by the Bipartisan Policy Center’s Debt Reduction Task Force. Social Security and other government benefits, along with much of the tax code , are automatically adjusted to reflect inflation. Yet economists say that exaggerates how quickly prices increase, meaning the government pays too much for annual cost-of-living gains while collecting too little tax revenue. Projected Spending Over 10 years, using the chained CPI pushed by Boehner would reduce projected Social Security spending by 1.2 percent, according to the CBO. “Every bipartisan group that has reached a conclusion has said those are the elements you have to have,” said Senate Budget Committee Chairman Kent Conrad , a North Dakota Democrat, referring to the proposed changes to entitlement programs. “It’s just as clear as it can be,” he said on Dec. 4 when asked about the need for his party to compromise. “Both sides have to move off their fixed positions in order to reach an agreement.” To contact the reporter on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-06-17 | Bloomberg | Sensex Index Completes Longest Winning Streak in 10 Months on Economy | India’s benchmark stock index completed its longest string of gains in almost 10 months as investors bought shares in companies that may benefit as the nation’s economy expands. Reliance Communications Ltd. rose to its highest level in almost eight months after Hindu BusinessLine said it may raise cash by selling stakes in a unit. Oil & Natural Gas Corp. , the nation’s largest state-owned oil explorer, gained 1.9 percent after Deutsche Bank AG advised investors to buy the stock. “Investors are buying selectively,” said D.K. Aggarwal , who oversees funds for rich individuals as chairman of SMC Wealth Management Services Ltd. in New Delhi. “The market will remain very volatile, but India is doing well.” Aggarwal, who declined to say how much the firm manages, said he prefers Larsen & Toubro Ltd. and Reliance Industries Ltd. The Bombay Stock Exchange’s Sensitive Index, or Sensex , rose 153.82, or 0.9 percent, to 17,616.69, its highest close since April 27, after swinging between gains and losses at least 14 times. The S&P CNX Nifty Index on the National Stock Exchange gained 0.8 percent to 5,274.85. The BSE 200 Index increased 0.7 percent to 2,224.10. Reliance Communications Reliance Communications advanced 2.4 percent to 191.7 rupees. The company may raise $500 million from selling a 26 percent stake in Reliance Globalcom, a private undersea cable system operator, Hindu BusinessLine reported, without saying where it got the information. Reliance Communications spokesman Gaurav Wahi couldn’t be reached for comment on his cell phone. Oil & Natural Gas Corp. , the nation’s largest state-owned oil explorer, gained 1.9 percent to 1,186.05 rupees. Harshad Katkar , an analyst at Deutsche Bank AG, rated Oil & Natural and GAIL India Ltd. as “buy” in new coverage. GAIL, a monopoly gas distributor, advanced 2.5 percent to 475.15 rupees. Larsen & Toubro Ltd., the biggest engineering company, climbed 3.2 percent to 1,777 rupees. Reliance Industries Ltd., operator of the world’s largest oil processing complex, increased 1.3 percent to 1,071.4 rupees. India’s use of diesel and gasoline increased 11 percent last month from a year earlier as the economy continued to grow, according to data by state oil companies. Industrial production increased 17.6 percent in April, close to a December record. ‘Reduce’ Unilever Hindustan Unilever Ltd. fell after its rating was cut to “reduce” from “neutral” at Nomura Holdings Inc. The unit of the world’s second-largest consumer-goods maker declined 1.1 percent to 253 rupees, retreating for a second day. Manish Jain and Anup Sudhendranath , analysts at Nomura, said in a note to investors that competition and the company’s focus on regaining lost market share will keep margins under pressure. Overseas funds bought a net 6.93 billion rupees ($148.3 million) of Indian equities June 15, increasing total purchases of stocks this year to 241.1 billion rupees, according to the nation’s market regulator. Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years ago in local currency terms, as the biggest advance in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline. The following were among the most active on the exchange: Fortis Healthcare Ltd. (FORH IN), a hospital operator, gained 1.9 percent to 154.95 percent after the Financial Express reported Reliance Industries Ltd. may buy a stake. A Fortis Healthcare spokesperson denied the report, the newspaper said. Chairman Malvinder Singh didn’t answer a call to his cell phone. Ramsarup Industries Ltd. (RAMI IN), a maker of steel wire, surged 11 percent to 81 rupees, the most in more than two months, after Business Standard said ArcelorMittal may buy a stake in the company. Ashish Jhunjhunwala , chairman of Ramsarup, couldn’t immediately be reached for comment on his office phone. Mandakini Sud, an AcelorMittal India spokeswoman, declined to comment. Religare Enterprises Ltd. (RELG IN), a financial services company, tumbled 7 percent to 393.2 rupees, its steepest slide in a year. About 1.8 percent of its equity changed hands in eight transactions on the National Stock Exchange, according to Bloomberg data. Buyers and sellers weren’t immediately known. To contact the reporter on this story: Hemal Savai in Mumbai at at hsavai@bloomberg.net . |
2024-11-08 | Bloomberg | Copper in London Gains for a Third Day; Shanghai Contract Drops | Copper in London climbed for a third day toward a 28-month high after U.S. employment data signaled that the recovery is intact and the Federal Reserve eased monetary policy, boosting demand for commodities. Three-month copper on the London Metal Exchange rose as much as 0.9 percent to $8,735 a metric ton, and was at $8,681.75 a ton at 3:44 p.m. in Singapore. Copper advanced to $8,769.50 a ton on Nov. 5, the highest price since July 2008, when the metal reached a record $8,940. December-delivery copper on the Comex in New York gained as much as 0.8 percent to $3.9815 a pound. “Copper in London and New York are still going up because of investment demand from all the liquidity that’s out there, thanks to the Federal Reserve’s move last week,” Gao Jingsong, an analyst at Hoohy Futures Co., said from Guangdong. The U.S. central bank said Nov. 3 it will expand stimulus by buying $600 billion of Treasuries to sustain growth in the world’s largest economy. Employment in the U.S. rose in October by 151,000 jobs, the first gain in five months and a climb that beat all estimates for the Nov. 5 release in a Bloomberg survey. Copper fell for the first day in four in Shanghai as high prices deterred purchases in China, the world’s largest consumer. February-delivery contracts on the Shanghai Futures Exchange fell as much as 1.9 percent to 66,090 yuan ($9,909) a ton, and ended the day 1.2 percent lower at 66,590 yuan. “Shanghai is unwillingly trying to keep up,” said Gao. “Demand destruction is taking place in China, seen from rising stockpiles and a widening contango,” said Gao, referring to a situation in which future prices are higher than current costs. Dollar Strength Earlier, copper in London fell as much as 0.2 percent as the dollar advanced for a second day against a six-currency basket. The euro also dropped for a second day against the dollar before an inspection of Ireland’s budget plan and the final results of Greece’s local elections. “The performance of the dollar will remain the main driving force for prices which are now far removed from their fundamentals,” Ye Chunyan, an analyst at Jinchang Futures Co., said from Shanghai. “We’ll continue to see slower gains in Shanghai compared to London and New York as physical demand in China starts to deteriorate.” Spot copper in Changjiang, Shanghai’s biggest cash market, traded at a 1,865-yuan-a-ton discount to futures on Nov. 5, the most since April. Copper stockpiles monitored by the Shanghai Futures Exchange stood at 106,851 tons last week, the highest level in two months. State Sales China sold almost all of the 96,000 tons of aluminum ingots that it offered from the state reserve through public auctions on Nov. 1 and Nov. 2, according to a statement on the website of the National Development and Reform Commission today. A total of 95,767 tons was sold at an average price of 15,343 yuan ($2,302) a ton, said the State Bureau of Material Reserve, also known as the State Reserve Bureau, which comes under the commission. The government will also sell 50,000 tons of zinc ingots from state reserves at an auction tomorrow, the commission said on Nov. 3. In Chile, workers at the Collahuasi copper mine, the world’s fourth-largest, remained on strike for a third day yesterday after wage talks failed. The mine, owned by Anglo American Plc and Xstrata Plc, is operating “normally,” a spokeswoman said yesterday. The dispute may reduce production, which accounts for 3.3 percent of global output, if it lasts more than a week, according to Morgan Stanley. Aluminum in London fell 0.3 percent to $2,445 a ton, zinc dropped 0.3 percent to $2,519.50 a ton, and nickel declined 0.4 percent to $24,350 a ton. Tin decreased 0.2 percent to $26,400 a ton, while lead climbed 0.4 percent to $2,515 a ton. To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net |
2024-01-27 | Bloomberg | Harvard’s Feldstein Sees Slow Growth While Doubting Fed Easing | U.S. economic growth may not top 2 percent this year and a third round of quantitative easing by the Federal Reserve would have little effect, said Martin Feldstein , a professor of economics at Harvard University. “We’re going to have a hard time reaching 2 percent this coming year,” he said in an interview on Bloomberg Television’s “InsideTrack” with Sara Eisen in New York. The economy is still in a “danger zone,” Feldstein said, even as the recession risk “is less now than it was.” The economy grew at a less-than-forecast 2.8 percent pace in the fourth quarter, with consumer spending at 2 percent, the government reported today. Inventory accumulation accounted for 1.9 percentage points of the total growth rate, setting the stage for fewer orders to factories in the first half of the year. Feldstein, a member of the committee that dates recessions, said any move by the Fed to conduct a third round of quantitative easing, known as QE3, is “not the solution.” The economy wouldn’t “get much help from more monetary stimulus,” he said. Federal Reserve policy makers this week pledged to keep their key lending rate near zero until “at least” late 2014, moving the target further back more than a year. Fed Chairman Ben S. Bernanke hinted the central bank would consider conducting QE3 through large-scale asset purchases, saying it was prepared for further “accommodation.” Feldstein, speaking before the GDP report was released, said last year’s growth in household spending was largely due to consumers drawing down their savings, which he said they won’t be able to maintain this year. Consumer Spending “The thing that made that increase in consumer spending possible was people cut their savings rate” he said. “It’s hard to believe it’s going to happen again” at the same pace. For the full year 2011, the economy expanded 1.7 percent and consumer spending grew 2.2 percent, according to Commerce Department data. The personal savings rate fell to 3.5 percent in November from 5.8 percent in June 2010, the department said. “The question is, what, if anything, is going to sustain real GDP growth in 2012,” said Feldstein. Feldstein said the second round of quantitative easing provided a temporary boost to stock prices, consumer spending and economic growth in 2010. Then, as the effect faded, the economy “fell flat on its face in the first quarter of 2011,” he said, when growth was 0.4 percent. ‘A Joke’ Feldstein said it was a “joke” to term as “voluntary” any agreement with the Greek government over lowering its debt principal and payments to avoid triggering credit default swaps. “To call that voluntary just so they can avoid triggering the credit default swaps is really dishonest,” he said. “People bought credit default swaps thinking that was a real market, it was real insurance.” Officials, including former European Central Bank President Jean-Claude Trichet , have insisted that a swaps trigger was unacceptable because traders would be encouraged to bet against indebted nations and worsen the crisis. Feldstein is a former president of the National Bureau of Economic Research and a member of the NBER committee that declared the recession ended in June 2009. He formerly served as chief economic adviser to President Ronald Reagan. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net , Sara Eisen in New York at seisen2@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-02-20 | Bloomberg | U.K. Stocks Rise Amid Jobs Data, BOE Minutes; Rexam Gains | U.K. stocks advanced, extending a five-year high, after jobless claims in the country fell more than estimated in January and Bank of England minutes showed more members voted for increasing stimulus measures. Rexam Plc jumped 5.3 percent after full-year profit beat analyst expectations. BHP Billiton retreated 2.4 percent after saying first-half profit declined 58 percent and Marius Kloppers will step down as chief executive officer. RSA Insurance Group Plc tumbled the most in almost nine years as it cut its final dividend for 2012. The FTSE 100 Index rose 0.3 percent to 6,395.37 at the close in London. The benchmark gauge has rallied 8.4 percent so far this year as U.S. lawmakers reached a budget compromise. The measure is also heading for its ninth monthly increase, its longest winning streak since 1997. The broader FTSE All-Share Index also added 0.3 percent today, while Ireland’s ISEQ Index retreated 0.2 percent. “There’s the implication that more quantitative easing might be needed to kickstart the U.K. economy,” Richard Hunter , head of U.K. equities at Hargreaves Lansdown Plc in London, said in a phone interview. “Clearly austerity and even the QE we’ve had in the U.K. haven’t gained traction yet.” Bank of England Governor Mervyn King pushed for more stimulus this month as officials considered an interest-rate cut and expanding the range of assets purchased as possible ways to help bolster the economy, according to the minutes of the central bank’s Feb. 6-7 Monetary Policy Committee meeting. Stimulus Target King, Paul Fisher and David Miles wanted to increase the target for bond purchases by 25 billion pounds ($38.2 billion) to 400 billion pounds on Feb. 7, though were outvoted by the remaining six members of the Monetary Policy. Miles had been alone in calling for more stimulus the previous month. The MPC kept both its benchmark interest rate and its target for bond purchases unchanged at the meeting. Mark Carney will leave his job as Bank of Canada Governor to replace King at the BOE on June 1. “Whether there’s any shift away from concentrating on inflation, and towards revitalizing growth; that will be the main yardstick Mark Carney will be measured against,” Hunter said. U.K. jobless claims declined by 12,500 in January, the Office for National Statistics said in a report today. The median forecast of economists surveyed by Bloomberg called for a drop of 5,500. U.S. Housing In the U.S., Britain’s biggest trading partner, housing starts dropped more than projected last month, a Commerce Department report showed. Housing starts fell at an annual pace of 8.5 percent in January, after a revised 15.7 percent gain the previous month. That compares with the median forecast in a Bloomberg survey for a 3.6 percent decrease. Rexam advanced 25.3 pence to 502 pence, its biggest advance in a year. Profit before tax was 418 million pounds in 2012 ($645 million), exceeding the 377 million-pound median estimate in a Bloomberg survey. Spectris Plc gained 0.6 percent to 2,440 pence, its highest price since at least May 1989. The U.K.’s biggest maker of production-testing gear said comparable sales grew 3 percent in 2012 and Chief Executive Officer John O’Higgins is confident for 2013, according to a statement. BHP, RSA BHP Billiton retreated 52.5 pence to 2,183.5 pence. Net income was $4.2 billion, including $1.4 billion in one-time charges, in the six months ended Dec. 31, from $9.9 billion a year ago, BHP said in a statement. This missed the $5.6 billion median estimate of five analysts surveyed by Bloomberg. The world’s biggest mining company also named copper unit head Andrew Mackenzie as chief executive officer to succeed Marius Kloppers on May 10. RSA Insurance Group dropped 14 percent to 117 pence, its biggest slide since March 2004. The U.K.’s largest non-life insurer reduced its 2012 second-half payout to 3.9 pence a share from 5.82 pence a share the previous year and forecast a similar cut in 2013. The number of shares changing hands on FTSE 100-listed companies was 31 percent greater than the average of the past three months, according to data compiled by Bloomberg. To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-08-09 | Bloomberg | KBC Sees Rising Irish Loan Losses, Writes Down Greek Debt | KBC Groep NV (KBC) , Belgium’s biggest bank and insurer by market value, said provisions for loan losses in Ireland will start rising again after reporting the smallest profit in a year because of a Greek debt writedown. Second-quarter net income increased to 333 million euros ($474 million) from 149 million euros a year earlier, when the since-blocked divestment of the private bank unit reduced profit by 338 million euros, the Brussels-based company said today in a statement. Analysts projected profit of 334.6 million euros, according to the average of seven estimates compiled by Bloomberg. Maturing structured-credit investments and divestment of CDOs and other asset-backed securities helped KBC reduce risk- weighted assets by 4.2 billion euros in the quarter, generating an additional 500 million euros of surplus capital available to reimburse state aid. KBC, which set aside 525 million euros last year to cover losses on Irish loans, forecast provisions in the country will start rising again in the second half after an increase in mortgage arrears accelerated in July. “Underlying results did beat our and consensus forecasts,” Albert Ploegh , an analyst at ING Groep NV in Amsterdam, wrote in a note. “The credit trends in Ireland are more worrisome, but do not come as a major surprise to us and confirms our view that more provisions are required.” Rescue Funds KBC advanced 2 percent to 20.94 euros at the 5:40 p.m. close of trading in Brussels, erasing earlier declines in a recovery from the lowest intraday value in two years. The shares have lost 18 percent since the start of the year. Shareholders’ equity increased to 33.80 euros a share from 32.40 euros at the end of March. That figure doesn’t include the 7 billion euros of Belgian government rescue funds, nor does it take into account a premium KBC will have to pay to reimburse the state aid received. KBC took a 139 million-euro pretax writedown on its Greek debt holdings maturing before the end of 2020 and set aside 49 million euros in the quarter to cover loan losses in Ireland. That equals 30 percent of total loan impairment in the quarter as KBC made smaller provisions for bad loans in Belgium and in central and eastern Europe. Czech, Hungarian Units The bank faces payment arrears of at least three months on more than 13 percent of its 16.9 billion euros of Irish loans. Provisions covered only 37 percent of non-performing loans at the end of June. “We don’t know yet whether this is a structural element or whether this is a temporary phenomenon,” Chief Financial Officer Luc Popelier said on a conference call of the deterioration in Ireland. “It’s too early to say what the total impact will be.” The Belgian company obtained European Union approval last month to sell its Polish bank and insurance subsidiaries and retain full ownership of banking units in the Czech Republic and Hungary. KBC earned a combined 188 million euros so far this year from its banking and insurance units in the Czech Republic and Hungary. That compares with a first-half profit of 70 million euros in Poland. The lender renegotiated the state-aid conditions with the European Commission after Basel III capital rules and a banking- industry levy in Hungary made initial public offerings of the Czech and Hungarian units less attractive options to raise capital. Including the 7 billion euros of Belgian rescue funds, KBC’s core Tier 1 ratio, a measure of financial strength, climbed to 12.1 percent at the end of June from 11.6 percent three months earlier. The bank and insurer said it now has about 5.3 billion euros of surplus capital it could use to pay back state aid. That includes the capital released by the divestment of Centea NV in Belgium , which was completed on July 1. To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net |
2024-10-23 | Bloomberg | S&P 500 Rally Pushes Index Toward Biggest Annual Gain in Decade | Five straight gains in the Standard & Poor’s 500 Index are pushing U.S. stocks toward the best year in a decade, lifted by speculation the Federal Reserve will maintain economic stimulus. The S&P 500 has advanced 23.03 percent this year, pulling within a percentage point of its 23.5 percent surge in 2009, according to data compiled by Bloomberg. The gauge will surpass that threshold should it reach 1,761, leaving it poised for the largest rise since 2003, when it climbed 26.4 percent. The U.S. equity benchmark is on track to post the 21st biggest annual increase since records began in 1927. About $4 trillion has been added to U.S. equity values this year amid speculation that the Fed will keep its bond purchases until the labor market improves. While gains in 2003 came after the technology bubble burst, this year’s rally follows a four-year advance in which the index doubled. More increases are likely because the economy is still expanding and past rallies survived higher interest rates, according to Brian Jacobsen of Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “There’s at least a firm foundation of fundamentals here, whereas during the tech bubble, that certainly wasn’t the case,” Jacobsen, who helps oversee $226 billion as his firm’s chief portfolio strategist, said by phone yesterday. “During 2004 to 2006, the market still marched higher, and I don’t see why it can’t do that this time.” Monetary Policy Stocks climbed from 2004 through 2007 as the U.S central bank tightened monetary policy by raising its Fed funds benchmark interest rate. The overnight inter-bank lending rate was increased to 5.25 percent by June 2006, from 1 percent at the end of 2003. The S&P 500 advanced 14 percent in the period. The U.S. equity benchmark rose 0.6 percent to a record 1,754.67 yesterday. The Dow Jones Industrial Average advanced 75.46 points, or 0.5 percent, to 15,467.66, the highest in a month. The average yearly gain for the S&P 500 is more than 7 percent, according to data compiled by Bloomberg. Payrolls in the U.S. climbed by less than forecast in September, indicating the economy had little momentum leading up to the 16-day shutdown of the federal government. The jobless rate fell to an almost five-year low. Progress in the labor market depends on how quickly the world’s largest economy can bounce back from the loss of business caused by the government closure. The budget dispute weighed on fourth-quarter growth and will prompt Fed policy makers to wait until March before starting to scale back the $85 billion of monthly bond purchases, a Bloomberg survey showed last week. ‘Tremendous Sigh’ “There’s a tremendous sigh of relief that monetary policy from the central bank continues to be in place,” Eric Wiegand , a New York-based senior portfolio manager at U.S. Bank Wealth Management, which oversees $112 billion, said by phone. “It really has been a tremendous support, or crutch, that’s being applied to the market.” Analysts have raised their forecasts for profits in the third quarter, predicting an average increase of 2.5 percent for all companies in the gauge, according to estimates compiled by Bloomberg. That compares with a 1.7 percent projection at the beginning of the month. Data released yesterday showed construction spending in the U.S. rose in August for a fifth consecutive month, propelled by the strongest outlays on homebuilding in five years. Tech Bubble U.S. stocks climbed in 2003 as the economy accelerated and Latin American markets led a global rally, luring investors back into equities after the S&P 500 plunged almost 50 percent during the bear market from 2000 to 2002. Avaya Inc., a maker of office-telephone equipment, soared more than fivefold for the biggest gain in the S&P 500 in 2003. The S&P 500 dropped 3.6 percent in the first three months of 2003 and then rallied 31 percent in the last three quarters as the market started to recover from the crash of Internet stocks. Gross domestic product increased 2.8 percent in 2003, the fastest pace in three years, and the economy expanded at least 3.4 percent for each of the next two years. The U.S. is now growing at a slower pace. Economists surveyed by Bloomberg forecast GDP will rise 1.6 percent in 2013, from 2.8 percent last year, and climb 2.6 percent in 2014. Stock valuations increased too much this year, a sign the best equity returns have already happened, according to Joseph Tanious , global market strategist for J.P. Morgan Asset Management. The S&P 500 trades at 16.8 times operating earnings, a 19 percent increase from the beginning of the year, data compiled by Bloomberg show. During the same period in 2003, the multiple rose 6.5 percent to 20.4. It reached a high of 31.1 in 2000. Slowing Momentum “The momentum is likely to slow down,” Tanious said by phone from New York. J.P. Morgan Asset Management oversees about $1.5 trillion. “Valuation is getting close to fair value.” While the rate of profit growth is weakening in the S&P 500, companies in the index have reported record annual earnings for more than two years, holding valuations close to the historical average even as the gauge’s price reached an all-time high in March and kept climbing. Among the 141 companies in the index that have reported so far, 74 percent exceeded analysts’ estimates, more than the previous quarter. “We feel pretty good about equities,” Michael Shaoul , the chairman and chief executive officer of New York-based Marketfield Asset Management LLC, said in an Oct. 21 interview on Bloomberg Television. “Corporate earnings point to a re-accelerating domestic economy. 1,800 is attainable.” To contact the reporters on this story: Aubrey Pringle in New York at apringle1@bloomberg.net ; Nick Taborek in New York at ntaborek@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-06-27 | Bloomberg | Apple Wins Preliminary Injunction Against Samsung Tablet | Apple Inc. (AAPL) won a court order immediately blocking U.S. sales of Samsung Electronics Co. (005930) ’s Galaxy Tab 10.1 tablet computer as the companies continue their global patent dispute. U.S. District Judge Lucy Koh in San Jose , California , issued the order yesterday after rejecting a similar request in December. Apple’s request, part of a broader patent dispute over smartphones and tablets, was based on an appeals court finding that it will probably win its patent-infringement claim relating to the Tab 10.1 tablet. The world’s two biggest makers of high-end phones have accused each other of copying designs and technology for mobile devices and are fighting patent battles on four continents to retain their dominance in the $219 billion global smartphone market. Suwon, South Korea-based Samsung will take necessary legal steps in response to yesterday’s ruling on the year-old model, the company said in a statement today. “This is an extension of their fight in the smartphone space,” Kim Young Chan, a Seoul-based analyst at Shinhan Investment Corp., said by phone. “If you look at precedents, different cases yielded different rulings. As long as smartphones aren’t blocked, Samsung’s fundamentals will stay intact.” Quarterly sales of the Tab 10.1 in the U.S. may total about 300,000 units on average, Kim said. Samsung, which doesn’t disclose shipment figures for smartphones and tablets, sold 44.5 million smartphones globally in the first quarter, according to market researcher Strategy Analytics. Apple is also the biggest buyer of Samsung chips and displays. Hague Ruling Samsung shares gained 2.5 percent to 1,167,000 won at the close of trading in Seoul , while the benchmark Kospi index was little changed. The U.S. sales ban follows last week’s ruling in The Hague that Apple has to compensate Samsung for damages caused by a breach of patents since August 2010. Apple also sought a U.S. ban on the latest model of the Galaxy S smartphone, which went on sale in the market this month. “In this case, although Samsung will necessarily be harmed by being forced to withdraw its product from the market before the merits can be determined after a full trial, the harm faced by Apple absent an injunction on the Galaxy Tab 10.1 is greater,” Koh said in yesterday’s ruling. She said a June 29 hearing to address Apple’s third request to block Samsung’s tablet computer wasn’t needed. A trial is set for July 30. The public interest “favors the enforcement of patent rights ,” Koh wrote. “Although Samsung has a right to compete, it does not have a right to compete unfairly, by flooding the market with infringing products.” Samsung Products Samsung said in a statement that it was disappointed in the ruling, while it won’t have significant impact on its business. Other Tab products will continue to be available to U.S. consumers, the South Korean company said. The ruling “will ultimately reduce the availability of superior technological features to consumers in the U.S.,” Samsung said in the statement. If Apple continues to sue based on “generic design” patent claims “innovation and progress in the industry could be restricted.” Koh yesterday rejected Samsung’s arguments that the injunction was overbroad because the infringement claim was based on one aspect of the overall product, and that it would hurt Samsung’s relationships with wireless carriers that provide the Galaxy Tab to their customers. ‘Important Driver’ Koh wrote in December that “design is an important driver in the demand for tablet sales.” “Samsung cannot be heard to complain about broken business relationships that it has established on infringing products.” On June 4, Koh rejected Apple’s second request to ban the tablet sales while the U.S. Court of Appeals for the Federal Circuit in Washington was considering her first such denial in December. Koh said then she didn’t have jurisdiction to issue a preliminary injunction because the appeals court hadn’t issued a mandate. On June 19, the appeals court reaffirmed its May determination that Apple’s patent on a design of the tablet is likely to withstand challenges to its validity. That decision allowed the Cupertino, California-based company to renew its request to block sales of Samsung’s tablet in the U.S. Kristin Huget, an Apple spokeswoman, reiterated an earlier company statement saying it must “protect Apple’s intellectual property when companies steal our ideas.” Koh required Apple to post a $2.6 million bond to cover a potential damages payment to Samsung if Apple loses the case. The case is Apple Inc. v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose). To contact the reporters on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net ; Edvard Pettersson in Los Angeles at epettersson@bloomberg.net ; Jun Yang in Seoul at jyang180@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-08-12 | Bloomberg | Health Care Reveals Daylight Between Ryan, Romney | When Paul Ryan was simply the Republican Party ’s leading light on health-care policy, having Mitt Romney say nice things about Ryan’s ideas must have seemed obvious. Now that Ryan is Romney’s running mate, the two have some differences to sort out. The first thing for Romney and Ryan to resolve is what to do with the $500 billion reduction in Medicare spending included in President Barack Obama ’s 2010 health-care overhaul. Romney would reverse those payment reductions along with the rest of the law, his campaign told Bloomberg Government. By contrast, Ryan’s latest budget proposal calls for maintaining those cuts and redirecting the savings into the Medicare trust fund. “Our budget keeps that money for Medicare, to extend its solvency,” Ryan said in July. Promising to undo the Medicare cuts may be good politics. Republicans used those cuts to help win back the House of Representatives in 2010, and Romney has cited the $500 billion number on the stump. Pledging now to keep those cuts would be an awkward policy reversal, especially for a man who can ill afford more of them. Even so, keeping the cuts may be important for Romney and Ryan, from a budget perspective. Both men’s Medicare proposals rely on vouchers to save money, but those vouchers won’t begin to be used for 10 years, and initially only for a small slice of the program’s beneficiaries. If the 2010 cuts were reversed, Romney would need to replace them or see the fiscal soundness of Medicare deteriorate during his tenure. Vouchers Another issue for the two men to work out is what, exactly, to do about Medicare in the long run. Before the Republicans took the House in 2010, Ryan had proposed replacing Medicare with a system of vouchers, or “premium support payments,” which future beneficiaries could use to buy private insurance. The approach would reduce federal spending because the value of the vouchers would increase more gradually than projected Medicare costs. Ryan has continued to advocate for Medicare vouchers, gradually winning over his party. In Romney’s campaign platform “Believe in America,” released last September, he wrote that while Ryan’s Medicare plan “makes important strides in the right direction,” his own plan will “differ.” Romney didn’t say what the differences would be, but noticeably absent from the platform’s language on Medicare was any mention of vouchers or premium support payments. By November, Romney’s hesitations about Medicare vouchers seemed to vanish. He announced a plan to give future Medicare beneficiaries a choice: they could stay on the current program or take vouchers for private insurance. There was only one catch: If the cost of traditional Medicare went up faster than that of private plans, beneficiaries would pay the difference in higher premiums. Ryan’s latest budget proposal echoes Romney’s proposal, with one important difference: It comes with a stick attached. If competition among private insurers fails to keep cost growth below the nominal gross domestic product plus 0.5 percentage points, Ryan’s plan would impose a hard cap at that level. Romney’s plan, which is otherwise described in some detail on his website, makes no mention of a hard cap on spending growth, or what that cap would be. Ryan will want to ensure that Romney’s recent conversion to vouchers is both fiscally meaningful and likely to last beyond the election. Employer Health Insurance Finally, Romney and Ryan must settle an argument over the tax treatment of employer-sponsored health insurance. To be more precise, Ryan must settle the argument with himself. Under current law, insurance premiums paid on behalf of employees are exempt from both income and payroll taxes. That policy reduces potential tax revenue ; it also drives up health- care spending by reducing the real price of insurance. In his 2010 budget proposal, Ryan called for repealing the tax exclusion on employer-sponsored insurance and replacing it with an individual tax credit for people to use to buy their own coverage. After Republicans won the House, the proposal to end the tax exclusion stopped appearing in Ryan’s budgets. Perhaps he decided he could only win so many fights at once. Romney has also avoided talking about the tax exclusion; his campaign told Bloomberg Government that he doesn’t have plans to change the current policy. But if Ryan becomes vice president, he may believe he has the political capital to revisit one of the country’s most expensive, and most distortionary, tax breaks. Conservative Credentials Who will win these disagreements is impossible to predict. Even so, Ryan may have the upper hand. Romney’s credentials on health care, at least to Republican eyes, remain suspect, following the universal health care plan he implemented as governor of Massachusetts. That plan, which included a mandate to buy insurance, became the template for Obama’s health care law, something Republicans will never let Romney forget. Ryan’s conservative credentials in this area are, by contrast, embossed in gold. After winning the support of his party, through years of persistence, it’s hard to imagine Ryan not attempting to win over Mitt Romney on the details. It’s even harder to imagine him not succeeding. (Christopher Flavelle is a health-care analyst for Bloomberg Government. The views expressed are his own.) To contact the analyst: Christopher Flavelle in Washington at cflavelle@bloomberg.net To contact the editor responsible: Kenneth Sands at kjsands@bloomberg.net |
2024-02-29 | Bloomberg | N.Z. Will Keep Record-Low Cash Rate Until Mid-2013, NZIER Says | New Zealand ’s central bank will keep the official cash rate at a record-low 2.5 percent until mid-2013 because of a sluggish economy and subdued inflation, the New Zealand Institute of Economic Research said. “The economic outlook is flat. Most indicators are moving sideways,” Shamubeel Eaqub , principal economist at the Wellington-based organization, said in a report today. “Any increases in interest rates should be contingent on convincing evidence of a sustained economic recovery.” New Zealand’s economy will grow 1.5 percent this year, Eaqub said, reiterating a December forecast. The pace may quicken to 2.4 percent in 2013 as the reconstruction of earthquake-damaged Christchurch and the surrounding province of Canterbury accelerates. “We are less optimistic than most on the timing of the rebuild, as we think persistent aftershocks, tougher building codes and insurance issues will slow Canterbury’s recovery,” Eaqub said. To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net |
2024-08-02 | Bloomberg | HSBC-Libor Probe, Dutch Deposit Guarantee, Basel: Compliance | HSBC Holdings Plc (HSBA) received requests for information from regulators and prosecutors in the U.K., U.S. and European Union as part of an investigation into whether the London Interbank Offered Rate, or Libor, was manipulated. HSBC, Europe’s largest bank, is cooperating with the probe, the company said in a regulatory filing yesterday. The bank also said it is the subject of separate investigations involving U.S. anti-money laundering laws and mortgage foreclosure practices. The U.S. Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission, the Department of Justice and the U.K. Financial Services Authority are investigating submissions made by banks regarding Libor rates and whether there were attempts to manipulate them. Libor is the rate of interest at which banks borrow funds from other banks in the London market. “These ongoing matters are at an early stage,” HSBC said. “Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these regulatory investigations or putative class actions lawsuits, including the timing and potential impact, if any, on HSBC.” The bank also received grand jury subpoenas and other requests for documents from the U.S. Attorney’s Office, the Department of Justice and the New York District Attorney’s Office over its units’ bank note and dollar clearing services, compliance with the U.S. Bank Secrecy Act, anti-money laundering controls and the Office of Foreign Asset Control requirements. “It is likely that there could be some form of formal enforcement action in respect of some or all of the ongoing investigations,” HSBC said. Separately, Barclays Plc (BARC) , Britain’s second-largest bank by assets, said that the European Commission is among the regulators investigating the process for setting Libor. In its half-yearly report published today, the bank added the EU’s Brussels-based antitrust authority to a list of regulators examining Libor setting which it disclosed in April. “Barclays is co-operating in the relevant investigations and is keeping regulators informed,” the bank said in today’s filing. Compliance Policy Dutch Banks to Pay 4 Billion Euros Into Deposit Guarantee Fund Dutch banks will have to pay a quarterly premium of 0.025 percent of deposits in ten years starting from July 2012 to create a guarantee fund to reimburse depositors when a bank fails, according to a legislative proposal published by the Finance Ministry yesterday. Based on current deposits the fund would have a target size of 4 billion euros ($5.8 billion). In addition, banks will pay a risk-premium of as much as 100 percent of that contribution according to their level of risk, the ministry said. IMF Backs U.K. Bid to Exceed Basel Bank Rules in Clash With EU The International Monetary Fund said the U.K. is right to seek the power to exceed minimum capital standards on banks endorsed by global regulators, siding with Britain in a clash with the European Union. IMF made the statement in a report on the U.K. published in Washington yesterday. Michel Barnier, the EU’s financial-services commissioner, has clashed with some governments in the 27-nation EU over how to interpret and implement last year’s deal by the Basel Committee on Banking Supervision. Finance ministers including U.K. Chancellor of the Exchequer George Osborne, Spain ’s Elena Salgado and Sweden’s Anders Borg have criticized plans to make it harder for national regulators to set tougher capital rules than the accord, known as Basel III. Barnier last month proposed common rules to put in place Basel III in the EU, arguing in favor of harmonizing core requirements. Chantal Hughes, a spokeswoman for the commission, didn’t immediately respond to a phone call seeking comment. U.K. Watchdog Tells Retail Financial Advisers to Disclose Fees The U.K.’s Financial Services Authority published rules requiring independent financial advisers to disclose fees they receive for directing clients into certain funds. Advisers must give customers details of fees or commissions they get for arranging the sale of retail investment products, the watchdog said in a statement on its website yesterday. The rules, which take effect at the end of next year, are part of an overhaul of the U.K. retail investment industry. Large-Scale Bank M&A Unlikely as Rules Crimp Deals, KPMG Says Banks are unlikely to pursue large-scale mergers and acquisitions for at least two years as rules aimed at preventing another financial crisis crimp dealmaking, according to a study by KPMG LLP. The average size of a banking takeover has been falling by 64 percent annually during the past three years, dropping to $87 million in 2010 from $243 million in 2007, the accounting firm said in a report yesterday. Regulators in Europe and the U.S. are forcing banks to bolster capital, leaving them with less cash to finance acquisitions. They’re also forcing the biggest lenders, those deemed too-big-to-fail, to hold additional capital to prevent a repeat of the crisis that followed the collapse of Lehman Brothers Holdings Inc. in September 2008. KPMG said its report was based on 23 interviews with banking executives from the world’s largest banks and banking association members. Compliance Action Ex-Ernst & Young Executives Barred by PCAOB Over Fake Papers The U.S. audit industry watchdog barred two former Ernst & Young LP executives over claims they drafted fake working papers to mislead regulators who were planning to inspect their work. Peter O’Toole , who was a partner at Ernst & Young, agreed to pay a $50,000 fine and will be banned from the industry for at least three years, the Public Company Accounting Oversight Board said in a statement yesterday. Darrin Estella, a former manager at the New York-based firm, was barred for at least two years for his role in creating the documents, the PCAOB said. After learning that the PCAOB planned to inspect a 2009 audit, O’Toole told Estella to create and backdate a document related to a review of how their client valued an investment, the PCAOB said. Estella drafted the document on another employee’s laptop using a flash drive, which he later threw away in an effort to hide the misconduct. O’Toole and Estella resolved the claims without admitting or denying the allegations, the PCAOB said. “The PCAOB has not alleged any deficiencies in the carrying out of the audit, or that any of the alleged conduct was designed to hide an audit failure, or that the alleged backdated document did not portray audit work that did not take place,” Eugene Goldman, O’Toole’s attorney at McDermott Will & Emery, said in a telephone interview. William Lovett, Estella’s lawyer at Collora LLP , declined to comment. German, Swiss Tax Talks ‘Not Finished Yet’, Spokeswoman Says Negotiations between Germany and Switzerland to settle a dispute over tax evasion by wealthy German clients aren’t finished yet though they’re “far advanced,” German Finance Ministry spokeswoman Silke Bruns told reporters at a regular government press conference in Berlin yesterday. Bruns said she “wouldn’t be surprised” if a treaty was signed this month. Indiana Bank Closure Brings Failed Bank Cost to $5.06 Billion The closure of Integra Bank of Evansville brings the cost of failed banks to the Federal Deposit Insurance Fund in 2011 to $5.06 billion, according to data provided by the FDIC. Integra, which had 52 branches, was closed July 29 by regulators and the FDIC was appointed as receiver. Evansville’s Old National Bank will assume all of Integra’s deposits. For a table listing banks that have failed since 1934 and their cost since 1986 in millions of dollars to the Deposit Insurance Fund, click here. Courts SEC Complaint Against Gabelli Reinstated by Appeals Court Marc J. Gabelli, a former portfolio manager of Gabelli Global Growth Fund, must face a lawsuit against him brought by the U.S. Securities and Exchange Commission, a federal appeals court said, reversing a lower-court ruling. The SEC alleged in a 2008 complaint that Gabelli, a son of founder Mario Gabelli, had authorized the fund to be market timed by Folkes Asset Management, now known as Headstart Advisers Ltd., and that former Gabelli Funds LLC Chief Operating Officer Bruce Alpert had allowed it to continue. The U.S. Court of Appeals in New York yesterday reversed a decision by U.S. District Judge Deborah A. Batts dismissing the complaint on the grounds that the SEC waited too long to seek civil fines against them. Batts ruling last year also threw out securities fraud claims against Alpert. The appeals court ruled the claim for civil penalties isn’t subject to time limitations. A lawyer representing Marc Gabelli, Lewis J. Liman, didn’t return a telephone message. SEC spokesman Kevin Callahan declined to comment on the ruling. “We’re disappointed with the decision,” said Kathleen Massey, a lawyer for Alpert. “We disagree with the court’s analysis.” Massey said she is confident Alpert will prevail when the facts are considered once the case is returned to the trial court. Market timing is the practice of short-term buying, selling and exchanging of mutual funds to exploit pricing inefficiencies. The case is SEC v. Marc Gabelli, 08-cv-3868, U.S. District Court, Southern District of New York ( Manhattan ). Ex-General Re Officers Win Retrial After Convictions Tossed Four former executives at General Reinsurance Corp. and one at American International Group Inc. (AIG) won reversal of their 2008 convictions on charges that they defrauded AIG investors of as much as $597 million. The U.S. Court of Appeals in New York yesterday ordered a new trial for General Re’s ex-Chief Executive Officer Ronald Ferguson, ex-Chief Financial Officer Elizabeth Monrad, ex-Senior Vice President Christopher Garand and ex-Assistant General Counsel Robert Graham. Former AIG Vice President Christian Milton also won reversal and a new trial. Federal jurors convicted them in Hartford, Connecticut , after a six-week trial. The fraud centered on what prosecutors called a sham transaction to inflate AIG’s loss reserves by $500 million. It preceded by several years the financial crisis of New York-based AIG, which got a bailout of $182.3 billion from U.S. taxpayers. The appeals court said the judge erroneously let prosecutors display to jurors three charts with AIG stock-price data. The charts suggested, without foundation, that the transaction caused the stock to plummet “and (given the role of AIG in the financial panic) prejudicially cast the defendants as causing an economic downturn that has affected every family in America,” a three-judge appeals panel ruled. The case is U.S. v. Ferguson, 08-6211, U.S. Court of Appeals for the Second Circuit (New York). For more, click here. SEC Sues for Assets of Money Manager Who Killed Himself The U.S. Securities and Exchange Commission sued the estate of J. David Salinas, an investment manager who committed suicide last month, claiming his companies ran a Ponzi scheme, selling investors bonds that didn’t exist. Salinas, through his companies Select Asset Management and J. David Group, defrauded investors of more than $50 million from 2004 to the present, the SEC said in a complaint filed yesterday in federal court in Houston. The agency also sued Brian A. Bjork, chief investment officer of Select Asset. While Bjork and Salinas promised investors safe corporate and other bonds, “the J. David Group corporate bond offering was bogus,” the SEC said. The investors included numerous college basketball coaches. Salinas was a founder of an elite high school summer basketball program in Houston and a donor to college sports programs. J. Randle Henderson, an attorney for Select Asset Management, said he couldn’t immediately comment on the lawsuit because he just received the complaint. Salinas, 60, was found dead of a gunshot wound on July 17 at his home in the Houston suburb of Friendswood, Texas. The death was ruled a suicide, according to published reports. Kathleen Galloway, an SEC attorney, said in today’s filing that a Galveston County prosecutor told her July 17 that the death was “apparently a suicide.” “David Salinas conducted all the bond transactions for the J. David Financial Group of companies,” Matt Hennessy, Bjork’s attorney, said. “Brian had no indication that David was deceiving his investors. Brian was shocked to learn of the degree of David’s deception.” The case is SEC v. Bjork, 11-cv-02830, U.S. District Court, Southern District of Texas (Houston). For more, click here. Interviews/Speeches BOE’s Haldane Says Policy Makers Could Use Haircuts as Tool Andrew Haldane , the Bank of England ’s Executive Director for Financial Stability, said policy makers could regulate collateral requirements to strengthen financial markets and prevent another credit crisis. “A hands-off haircuts policy runs a significant risk of systemic collapse if haircuts are pro-cyclically trimmed during the upswing,” Haldane said in a speech in Edinburgh yesterday. A model measuring the impact of intervention shows that “even the weak policy shrinks the probability of collapse by more than half, whatever the initial level of haircuts. And under the tough policy, the financial system is effectively inoculated against haircut-induced pro-cyclicality.” Haldane’s comments come amid the U.K. government’s shake-up of bank rules, which will invest the Bank of England with control of financial regulation. The central bank’s interim Financial Policy Committee recommended in June that banks take the opportunity of periods of “strong earnings” to build up capital. The interim panel will have power only to recommend action until its status is approved by Parliament. Comings and Goings OCC Names Benhart Deputy Comptroller for Credit, Market Risk The Office of the Comptroller of the Currency named Darrin Benhart deputy comptroller for credit and market risk, according to a statement released by the agency in Washington yesterday. Benhart will be one of two deputy comptrollers for credit and market risk at the agency. He will be a principal adviser on emerging systemic risks in the banking system, the OCC said in the statement. Benhart joined the agency in 1992. 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 . |
2024-04-27 | Bloomberg | China to Expand Insurers’ Investment Scope, Regulator Says | China will broaden the investment scope of insurers and simplify approval procedures to boost the industry’s support to the nation’s economic growth, the insurance regulator said. The China Insurance Regulatory Commission will gradually increase the types of unsecured corporate bonds that insurers can buy, Chairman Xiang Junbo said during a trip to Wenzhou in eastern Zhejiang province, according to a statement posted on the watchdog’s website today. The regulator will also “appropriately” adjust the percentage ceilings on different asset classes in insurance companies’ portfolios, Xiang said without being specific. The agency will tighten supervision on the companies’ ability to settle claims as it loosens restrictions on their investment behavior, he added. The new measures may be tested in Wenzhou, Xiang said, adding that his agency will support qualified private investors in the city to set up regional insurance companies. --Zhang Dingmin. Editors: Andreea Papuc To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net |
2024-06-28 | Bloomberg | U.S. First Quarter Third Gross Domestic Product (Text) | Following is the text of the Gross Domestic Product from the Commerce Department. GROSS DOMESTIC PRODUCT: FIRST QUARTER 2012 (THIRD ESTIMATE) CORPORATE PROFITS: FIRST QUARTER 2012 (REVISED ESTIMATE) Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.0 percent. The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was also 1.9 percent. The increase in real GDP in the first quarter reflected positive contributions from personal consumption expenditures (PCE), exports, residential fixed investment, nonresidential fixed investment, and private inventory investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased. The deceleration in real GDP in the first quarter primarily reflected decelerations in private inventory investment and in nonresidential fixed investment that were partly offset by accelerations in PCE, in exports, and in residential fixed investment and a deceleration in imports. Annual Revision of the National Income and Product Accounts The annual revision of the national income and product accounts (NIPAs), covering the first quarter of 2009 through the first quarter of 2012, will be released along with the “advance” estimate of GDP for the second quarter of 2012 on July 27, 2012. The August Survey of Current Business will contain an article that describes the annual revision in detail. ______________ FOOTNOTE. Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Quarter-to- quarter dollar changes are differences between these published estimates. Percent changes are calculated from unrounded data and are annualized. “Real” estimates are in chained (2005) dollars. Price indexes are chain-type measures. This news release is available on BEA’s Web site along with the Technical Note and Highlights related to this release. For information on revisions, see “Revisions to GDP, GDI, and Their Major Components.” ______________ Motor vehicle output added 1.16 percentage points to the first-quarter change in real GDP after adding 0.47 percentage point to the fourth-quarter change. Final sales of computers subtracted 0.05 percentage point from the first-quarter change in real GDP after adding 0.12 percentage point to the fourth- quarter change. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 2.6 percent in the first quarter; this index increased 1.1 percent in the fourth quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 2.4 percent in the first quarter, compared with an increase of 1.2 percent in the fourth. Real personal consumption expenditures increased 2.5 percent in the first quarter, compared with an increase of 2.1 percent in the fourth. Durable goods increased 13.7 percent, compared with an increase of 16.1 percent. Nondurable goods increased 2.1 percent, compared with an increase of 0.8 percent. Services increased 0.8 percent, compared with an increase of 0.4 percent. Real nonresidential fixed investment increased 3.1 percent, compared with an increase of 5.2 percent in the fourth. Nonresidential structures increased 1.9 percent, in contrast to a decrease of 0.9 percent. Equipment and software increased 3.5 percent, compared with an increase of 7.5 percent. Real residential fixed investment increased 20.0 percent, compared with an increase of 11.6 percent. Real exports of goods and services increased 4.2 percent in the first quarter, compared with an increase of 2.7 percent in the fourth. Real imports of goods and services increased 2.7 percent, compared with an increase of 3.7 percent. Real federal government consumption expenditures and gross investment decreased 5.9 percent in the first quarter, compared with a decrease of 6.9 percent in the fourth. National defense decreased 8.3 percent, compared with a decrease of 12.1 percent. Nondefense decreased 0.8 percent, in contrast to an increase of 4.5 percent. Real state and local government consumption expenditures and gross investment decreased 2.7 percent, compared with a decrease of 2.2 percent. The change in real private inventories added 0.10 percentage point to the first-quarter change in real GDP, after adding 1.81 percentage points to the fourth-quarter change. Private businesses increased inventories $54.4 billion in the first quarter, following an increase of $52.2 billion in the fourth quarter and a decrease of $2.0 billion in the third. Real final sales of domestic product -- GDP less change in private inventories -- increased 1.8 percent in the first quarter, compared with an increase of 1.1 percent in the fourth. Gross domestic purchases Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 1.7 percent in the first quarter, compared with an increase of 3.1 percent in the fourth. Gross national product Real gross national product -- the goods and services produced by the labor and property supplied by U.S. residents -- increased 0.5 percent in the first quarter, compared with an increase of 1.8 percent in the fourth. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which decreased $44.3 billion in the first quarter after decreasing $36.7 billion in the fourth; in the first quarter, receipts decreased $19.6 billion, and payments increased $24.6 billion. Current-dollar GDP Current-dollar GDP -- the market value of the nation’s output of goods and services -- increased 3.9 percent, or $148.4 billion, in the first quarter to a level of $15,467.8 billion. In the fourth quarter, current-dollar GDP increased 3.8 percent, or $143.3 billion. Gross domestic income Real gross domestic income (GDI), which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 3.1 percent in the first quarter, compared with an increase of 2.6 percent in the fourth. For a given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the incorporation of largely independent source data. However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of change. Revisions The “third” estimate of the first-quarter increase in real GDP is the same as in the “second” estimate issued last month, reflecting a downward revision to imports and an upward revision to nonresidential fixed investment that were offset by downward revisions to exports, to personal consumption expenditures, and to private inventory investment. Corporate Profits Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $6.4 billion in the first quarter, in contrast to an increase of $16.8 billion in the fourth quarter. Current- production cash flow (net cash flow with inventory valuation adjustment) -- the internal funds available to corporations for investment -- decreased $123.9 billion in the first quarter, in contrast to an increase of $44.8 billion in the fourth. Taxes on corporate income increased $83.3 billion in the first quarter, in contrast to a decrease of $0.7 billion in the fourth. Profits after tax with inventory valuation and capital consumption adjustments decreased $89.7 billion in the first quarter, in contrast to an increase of $17.5 billion in the fourth. Dividends increased $10.1 billion compared with an increase of $10.3 billion; current-production undistributed profits decreased $99.8 billion in contrast to an increase of $7.2 billion. Domestic profits of financial corporations increased $26.3 billion in the first quarter, compared with an increase of $29.9 billion in the fourth. Domestic profits of nonfinancial corporations increased $15.4 billion in the first quarter, compared with an increase of $28.4 billion in the fourth. In the first quarter, real gross value added of nonfinancial corporations increased 3.8 percent. Profits per unit of real product increased, reflecting an increase in unit prices and a decrease in unit labor costs; unit nonlabor costs were unchanged. The rest-of-the-world component of profits decreased $48.1 billion in the first quarter, compared with a decrease of $41.5 billion in the fourth. This measure is calculated as (1) receipts by U.S. residents of earnings from their foreign affiliates plus dividends received by U.S. residents from unaffiliated foreign corporations minus (2) payments by U.S. affiliates of earnings to their foreign parents plus dividends paid by U.S. corporations to unaffiliated foreign residents. The first-quarter decrease was accounted for by an increase in payments and a decrease in receipts. Profits before tax with inventory valuation adjustment is the best available measure of industry profits because estimates of the capital consumption adjustment by industry do not exist. This measure reflects depreciation-accounting practices used for federal income tax returns. According to this measure, domestic profits of both financial and nonfinancial corporations increased. The increase in nonfinancial industry profits reflected increases in all major industries; the largest increases were in manufacturing and in “other” nonfinancial. Within manufacturing the increase was widespread; the largest increases were in petroleum and coal products and in “other” durable goods. Profits before tax increased $234.3 billion in the first quarter, in contrast to a decrease of $8.3 billion in the fourth. The before-tax measure of profits does not reflect, as does profits from current production, the capital consumption and inventory valuation adjustments. These adjustments convert depreciation of fixed assets and inventory withdrawals reported on a tax-return, historical-cost basis to the current-cost measures used in the national income and product accounts. The capital consumption adjustment decreased $230.4 billion in the first quarter (from $100.9 billion to -$129.5 billion), compared with a decrease of $1.8 billion in the fourth. The inventory valuation adjustment decreased $10.4 billion (from -$18.6 billion to -$29.0 billion), in contrast to an increase of $26.9 billion. The large increase in first-quarter taxes on corporate income and the large decrease in the first-quarter capital consumption adjustment mainly reflected the expiration of bonus depreciation claimed under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. For detailed data, see the table “Net Effects of the Tax Acts of 2002, 2003, 2008, 2009, and 2010 on Selected Measures of Corporate Profits” at www.bea.gov/national/xls/technote_tax_acts.xls. Profits from current production are not affected because they do not depend on the depreciation-accounting practices used for federal income tax returns; rather they are based on depreciation of fixed assets valued at current cost and using consistent depreciation profiles based on used-asset prices. For more detail on the effect of the changes in the tax act provisions on the capital consumption adjustment, see FAQ #999 on the BEA Web site, “Why does the capital consumption adjustment for domestic business decline so much in the first quarters of 2011 and 2012?” Next release -- July 27, 2012, at 8:30 A.M. EDT for: Gross Domestic Product: Second Quarter 2012 (Advance Estimate) Annual Revision of the National Income and Product Accounts (First Quarter 2009 through First Quarter 2012) SOURCE: U.S. Commerce Department, http://www.bea.gov. To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-06-27 | Bloomberg | SEC Nominees Say Agency Must Finish Dodd-Frank, Jobs Act Rules | Two U.S. Senate staff members nominated to join the Securities and Exchange Commission said today the agency should focus on finishing rules mandated by Congress. Kara M. Stein, a Democrat, and Michael Piwowar, a Republican, told the Senate Banking Committee the SEC must complete the required rulemaking, much of it a response to the financial crisis, even as it studies how to address an evolving and complex electronic market for equities trading. “We need to pursue all of those things at one time,” said Stein, who has worked as a top policy aide to Senator Jack Reed of Rhode Island. Stein and Piwowar would join the SEC as it adapts to a new agenda under Chairman Mary Jo White, who says the agency’s rulemaking priorities are prescribed by the Dodd-Frank Act of 2010 and the Jumpstart Our Business Startups Act of 2012. The SEC is preparing to vote on rules that would allow equity crowdfunding and advertising for investors by hedge funds. Both rules are required by the Jobs Act. “I will definitely work with Chair White who sets the rulemaking agenda for the SEC to make sure that priorities are placed on rulemaking that is mandated under the Jobs Act and the Dodd-Frank Act,” Piwowar told the committee. Piwowar said the SEC also could move forward on a pilot program to test widening the minimum price increment at which some small stocks are quoted. Advocates of the change say it would boost trading interest in less liquid stocks by providing more incentives for market makers who facilitate orderly trading. SEC Seats Stein would replace Elisse B. Walter as a Democratic commissioner and Piwowar would succeed Troy A. Paredes as a Republican appointee on the five-member commission that oversees U.S. capital markets. Stein has served as a top aide to Reed, a Democrat, and Piwowar has been chief Republican economist on the Senate Banking Committee. The nominations of Stein and Piwowar are uncontroversial, and both are expected to win Senate confirmation, possibly as soon as July. The committee will vote on their nominations at a future hearing. “Kara and Mike are familiar faces on this side of the dais, and I wish them all the best,” said Senator Tim Johnson, the South Dakota Democrat who leads the banking committee. Senators reserved most of their questions at the hearing for Representative Mel Watt, a North Carolina Democrat who has been nominated to head the Federal Housing Finance Agency. Watt faces opposition from Republicans who say they prefer a technocrat, rather than a politician, to run FHFA. Senate Jobs Stein, 49, served as staff director of a Senate securities and insurance subcommittee that Reed led from 2009 to 2013. After Reed left the post, Stein moved to his personal office as a senior policy adviser and legal counsel. She holds undergraduate and law degrees from Yale University, according to Reed’s office. “She has the expertise and importantly the temperament to be an extraordinarily effective commissioner of the Securities and Exchange Commission,” Reed said at today’s hearing. Piwowar, 45, would become one of the few economists to serve as a commissioner. He earned a Ph.D in finance from Pennsylvania State University and previously worked as an economist at the SEC and at the White House under George W. Bush and President Barack Obama. He would join the commission as it seeks to improve its integration of economic analysis into rulemaking. Legislation ‘Rigors’ “Both he and Kara Stein have faced the rigors of legislating the Dodd-Frank Act, the Jobs Act, and a number of other securities-related matters during their time on the banking committee,” Senator Mike Crapo, an Idaho Republican, said. “This battle-scarred expertise will serve them both well at the SEC.” Neither Stein nor Piwowar appear to have significant conflicts of interest that would force them to recuse themselves from SEC rulemaking or enforcement cases, according to their federal financial disclosure reports. Stein’s financial assets include investments in mutual funds and shares of Orbital Sciences Corp. (ORB) Her disclosure report states her assets are worth between $211,015 and $565,000. She earned $139,998 as a Senate staff member between April 2012 and March 2013, according to data from Legistorm. Piwowar reported his financial assets are worth between $155,029 and $750,000. He earned $171,038 as a Senate aide between April 2012 and March 2013, according to Legistorm, which compiles congressional data. To contact the reporter on this story: Dave Michaels in Washington at dmichaels5@bloomberg.net To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net |
2024-09-25 | Bloomberg | Scotiabank Seeks to Boost Wealth Earnings to 30% of Profit | Bank of Nova Scotia , Canada ’s third-largest lender by assets, seeks to generate 20 percent to 30 percent of total profit from its global wealth and insurance unit in three to five years. The goal was among four Scotiabank disclosed today during an investor conference in Toronto, where the company is based. The business accounted for 19 percent of the lender’s earnings in the first three fiscal quarters, with 25 percent of that from outside Canada. The unit is also targeting “organic” earnings growth, which excludes acquisitions, of more than 10 percent, and a return on economic equity of at least 16 percent to 20 percent. Scotiabank seeks to boost contributions from wealth operations outside of Canada to at least 30 percent of the division’s earnings. “We’re expecting to achieve these through good markets or bad markets,” Chris Hodgson, group head of global wealth and insurance, said in a telephone interview. “But they’re not a slam dunk by any stretch.” Scotiabank joins Canadian lenders including Toronto-Dominion Bank and Canadian Imperial Bank of Commerce in attempting to expand the share of profit from wealth management as domestic consumer lending slows and investment demands from an aging, affluent population increase. ‘Growth Strategy’ “Wealth and insurance is a very significant growth strategy for the bank,” Hodgson said. The division can increase earnings in the short term by 10 percent to 15 percent, and more in the medium term, Hodgson said. Additional growth could come through “opportunistic” acquisitions, he said, though the priority is internal growth. Scotiabank has spent more than C$6 billion ($5.8 billion) on wealth acquisitions in the past five years. Scotiabank seeks to expand in the institutional asset-management business in Canada, Hodgson said, building on its purchase of a 37 percent stake in CI Financial Corp. (CIX) in 2008 and the takeover of DundeeWealth Inc. in 2011. Outside Canada, Scotiabank is interested in buying more pension assets, such as last year’s purchase of a stake of Colfondos AFP, Colombia ’s fourth-largest pension-fund company, and its April agreement to buy a stake in Banco Bilbao Vizcaya Argentaria SA (BBVA) ’s pension-fund management business, AFP Horizonte, in Peru , he said. ‘Eye Open’ “We’ll be keeping an eye open for other assets that may come available, but we’d only do them in markets where we already have a strong banking presence,” Hodgson said. “We’re not going to do it in markets where we have no other presence. It just doesn’t make sense from our perspective.” Scotia’s global wealth business has C$139 billion of assets under management, C$315 billion of assets under administration and operates in 24 countries, the lender said. The business had C$3.3 billion of revenue for the 12 months ended July 31. Insurance accounted for about C$600 million of revenue for the period, and operates in 30 countries. Scotiabank President Brian Porter said during today’s conference that he has an “appetite” for acquisitions to build on the lender’s existing businesses. “There are some markets where we’d like to have additional scale and some product categories where we’re looking to be bigger,” said Porter, 55, who becomes chief executive officer on Nov. 1. To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; David Scanlan at dscanlan@bloomberg.net ; Christine Harper at charper@bloomberg.net |
2024-09-24 | Bloomberg | ProAssurance to Buy Eastern for $205 Million in Workers Comp Bet | ProAssurance Corp. (PRA) , the seller of medical liability protection, agreed to buy Eastern Insurance Holdings for about $205 million to expand in workers’ compensation coverage. The deal values Eastern at $24.50 a share, compared with yesterday’s closing price of $21.16, and is expected to be completed by Jan. 1, Birmingham, Alabama-based ProAssurance said today in a statement distributed by PR Newswire. To contact the reporter on this story: Marci Jacobs in New York at Mjacobs63@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-07-09 | Bloomberg | U.S. June Conference Board Employment Trends Index (Text) | Following is the text of U.S. employment trends index from the Conference Board. The Conference Board Employment Trends Index dipped to 107.47 in June, down from the revised figure of 108.23 in May. The June figure is 5.6 percent higher than a year ago. “The Employment Trends Index has been flat since February, suggesting that slow employment growth is likely to continue through the summer,” said Gad Levanon , Director of Macroeconomic Research at The Conference Board. “Since there is little hope of acceleration in the pace of economic activity any time soon, these weak labor market conditions are likely to persist for the coming months.” June’s drop in the ETI was driven by negative contributions from four of the eight components. The declining indicators -- beginning with the largest negative contributor -- were Percentage of Firms with Positions Not Able to Fill Right Now, Ratio of Involuntarily Part-time to All Part-time Workers, Initial Claims for Unemployment Insurance and Percentage of Respondents Who Say They Find “Jobs Hard to Get.” The Employment Trends Index aggregates eight labor-market indicators, each of which has proven accurate in its own area. Aggregating individual indicators into a composite index filters out “noise” to show underlying trends more clearly. The eight labor-market indicators aggregated into the Employment Trends Index include: Percentage of Respondents Who Say They Find “Jobs Hard to Get” (The Conference Board Consumer Confidence Survey) Initial Claims for Unemployment Insurance (U.S. Department of Labor) Percentage of Firms With Positions Not Able to Fill Right Now (National Federation of Independent Business Research Foundation) Number of Employees Hired by the Temporary-Help Industry ( U.S. Bureau of Labor Statistics ) Ratio of Involuntarily Part-time to All Part-time Workers (BLS) Job Openings (BLS)** Industrial Production (Federal Reserve Board)* Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)** *Statistical imputation for the recent month **Statistical imputation for two most recent months The Conference Board publishes the Employment Trends Index monthly, at 10 a.m. ET on the Monday that follows each Friday release of the Bureau of Labor Statistics Employment Situation report. The technical notes to this series are available on The Conference Board website: http://www.conferenceboard. org/data/eti.cfm. (ETI) 2012 Publication Schedule Index Release Date (10 AM ET) Data for the Month Monday, August 6 July Monday, September 10 August Tuesday, October 9 * September Monday, November 5 October Monday, December 10 November * Tuesday release due to holiday SOURCE: The Conference Board http://www.conference-board.org |
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