2010 bank failures increase to 22 - Two banks were closed on Friday bringing the year-to-date total to 22. Rainier Pacific Bank, Tacoma, Washington - $718 million in assets - was closed by the Washington Department of Financial Institutions, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Umpqua Bank, Roseburg, Oregon, to assume all of the deposits of Rainier Pacific Bank. Carson River Community Bank, Carson City, Nevada - $51 million in assets - was closed by the Nevada Department of Business and Industry, which appointed the FDIC as receiver. The FDIC entered into a purchase and assumption agreement with Heritage Bank of Nevada, Reno, Nevada, to assume all of the deposits of Carson River Community Bank.
FDIC bracing for a wave of failures - The FDIC is bracing for a new wave of bank failures that could cost the agency many billions of dollars and further strain its finances. Last Tuesday the agency announced that it had placed 702 financial institutions on its list of "problem" banks, the highest number since 1993. Of course, not all of those banks are destined to fail, and FDIC officials said that they expected failures to peak this year. But they also warned that the Depository Insurance Fund might have to cover $20 billion in additional losses by 2013. To protect the fund, FDIC Chair, Sheila Bair said that the agency would soon issue bonds backed by the assets of failed banks and guaranteed by the government. The program aims to attract non-traditional buyers of bank assets, like insurance companies, pension funds and mutual funds.
Senate Banking Committee requests update on CRE efforts - Senate Banking Committee Chairman, Christopher Dodd, has asked financial regulators for an update on efforts to stabilize the commercial real estate market. He wrote that the weakness of this market "requires prompt and robust responses from the regulators to guard against harmful effects on financial institutions and the economy." Dodd noted that delinquency rates on commercial mortgages rose from 4% in September, 2009 to 6% last month.
Banking regulation gains traction - The prospect of financial regulatory overhaul passing Congress improved last week as representatives left a meeting with Treasury Secretary, Timothy Geithner, saying that they had agreed on the need to get a bill through Congress this year. Members of the Senate Banking Committee, which has wrestled for months over the legislation, said they believed an accord might be possible, though significant differences remained over the extent of new consumer protections.
FCPA proposal signals compromise - The Senate Banking Committee on Friday proposed creating a Bureau of Financial Protection inside the Treasury Department to regulate mortgages, credit cards, payday loans and other consumer products. The proposal represents an attempt at compromise by the chairman, Senator Christopher J. Dodd, on the issue that has been the greatest source of discord over financial regulatory overhaul. According to the proposal, Mr. Dodd has agreed to house the new bureau within the Treasury - as opposed to creating a standalone agency, as the Obama administration had sought - but insisted that the bureau have a director appointed by the President, a dedicated budget comprised of assessments on large banks and nonbank lenders, and authority to adopt regulations.
Citigroup board shakeup - Citigroup shook up its board on Friday and is preparing a marketing campaign to revamp its image with Washington and Wall Street. The bank said that three former members of its audit committee - C. Michael Armstrong (former AT&T chairman), Anne Mulcahy (Xerox's chairwoman), and John Deutch (former director of the CIA) - will not stand for re-election. The former President of Mexico, Ernesto Zedillo, would join the board ahead of its annual shareholder meeting on April 20.
Bank of America combines brokerages - Bank of America is combining its online brokerage, formerly known as Quick & Reilly, with Merrill Lynch's web offerings as part of a broader push to attract more "emerging affluent" investors. These online brokerage services, together with Merrill's call center, will be brought together as the focus for investors with less than $250,000 of assets. The new services will be called "Merrill Edge".
AIG posts $11 billion loss - AIG announced on Friday that it lost about $11 billion last year, surprising analysts. To increase its reserves to pay future claims, the company set aside $2.7 billion on a pretax basis indicating that AIG is experiencing significantly larger claims on policies sold long before its government rescue in late 2008.
Fannie Mae loses $16.3B in 4th quarter; $74.4B for 2009 - Fannie Mae, the nation's largest provider of residential mortgage funds, reported a loss of $16.3 billion for the fourth quarter on Friday and said it had requested $15.3 billion from the Treasury to maintain a positive net worth. The government-controlled company said it would need additional taxpayer funds in the future to continue operations. Fannie Mae said rising defaults kept credit-related expenses elevated at $11.9 billion, though expenses were almost half the third-quarter level of $22.0 billion. Fannie Mae's quarterly loss was $15.2 billion before a $1.2 billion dividend payment on senior preferred stock owned by the Treasury, putting total 2009 losses at $74.4 billion, compared with $59.8 billion in 2008.
SEC restricts short-selling; looks to switch accounting standards - The Securities and Exchange Commission (SEC) voted on Wednesday to restrict selling stocks short when they are falling rapidly, with the hope the action would improve investor confidence. The SEC also said it hoped to approve the switch of American companies to international accounting standards by the end of 2011, but it set a series of conditions that made eventual adoption of the standards appear less than certain.
Economic News
US economy sees upward revision - The US economy grew at an annualized rate of 5.9% in the last three months of 2009, revised official figures have shown. The rate is higher than the first estimate of 5.7%. The figures confirm the United States economy is emerging rapidly from recession. The rise was due to an increase in manufacturing output rather than stronger consumer spending. In fact, growth in consumer spending was revised down from 2% to 1.7% in the quarter.
Consumer confidence drops 11 pts - The Conference Board said Tuesday that its Consumer Confidence Index fell almost 11 points, to 46, in February, down from a revised 56.5 in January. Analysts were expecting only a slight decrease, to 55. One gauge, measuring consumers' assessment of current conditions, dropped to 19.4 from 25.2, the lowest level since 1983. The other barometer, which measures their outlook over the next six months and had been rising since October 2009, fell to 63.8 from 77.3.
New home sales plunge to record low - The Commerce Department reported last week that new home sales fell in January to the lowest level since record-keeping began in 1963. January's 11.2% drop in new-home sales - to a seasonally adjusted annual rate of 309,000 - came as a surprise to analysts, who had forecast an increase of 3.5%. It was the third consecutive month that sales fell. In parallel, the Mortgage Bankers Association said applications for loans to buy homes dropped last week to the lowest level in 13 years
Home prices in modest rise - The Standard & Poor's/Case-Shiller index of home prices in 20 metropolitan areas rose 0.3% in December on a seasonally adjusted basis, with most of the cities improving from November. It was the seventh consecutive month that the index showed rising prices. But another 600,000 households slipped underwater during the fourth quarter, according to data firm First American CoreLogic, a real estate research company. The total number of households with negative equity is now 11.3 million, or 24% of all residential properties.
Bernanke expects extended period of low interest rates - Federal Reserve Chairman, Ben Bernanke, told Congress on Wednesday that the Fed did not intend to start raising short-term interest rates anytime soon. He said the economic recovery would remain halting for many more months
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