plus 3, NY Fed chief worries about recovery's strength - Tacoma News Tribune

NY Fed chief worries about recovery's strength - Tacoma News Tribune

Posted: 04 Feb 2010 08:20 AM PST

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Bernanke says Federal Reserve can take on supercop role

WASHINGTON â€" Federal Reserve Chairman Ben Bernanke ran into skepticism Tuesday from lawmakers wary of expanding the Fedâ€™s duties to police big financial companies. They argued that the Fed failed to spot problems that led to the financial crisis in the first place.
â€œThe Fed has made some big mistakes,â€ said Rep. Spencer Bachus, R-Ala., ranking member of the House Financial Services Committee.
An Obama administration proposal to make the Fed the supercop of globally interconnected financial companies would be â€œjust inviting a false sense of security that inevitably will be shattered at the expense of the taxpayer,â€ Bachus warned.

As recovery spreads, jobs continue to lag

WASHINGTON â€" The economic recovery is spreading to more parts of the country even as a growing number of people canâ€™t find full-time jobs.
The duality of the recovery is underscored in a Federal Reserve survey released Wednesday: The economy is growing, and the recovery is extending its reach geographically. Yet 27 million people are either unemployed, forced into part-time jobs or so discouraged that theyâ€™ve stopped looking for work.
The Fed said that while the economy is still sluggish, conditions have improved modestly. But it also said the job market in most of the Fedâ€™s 12 regions remained â€œsoftâ€ as the new year began.

FedEx quarterly earnings off 30% from last year

FedEx, the worldâ€™s second-largest package delivery company issued a tepid outlook for the quarter that ends in February, saying itâ€™s not sure if strong holiday season shipping volume will hold up. But in the long run, it sees strong demand in Asia and Latin America leading the way to global economic recovery.
FedEx said Thursday its earnings for the quarter that ended in November fell 30 percent from a year ago, and its forecast for the fiscal third quarter fell well below what Wall Street was expecting. FedEx predicts earnings of 50 to 70 cents per share this quarter.

Fed says recession waning; Dow up

WASHINGTON â€" The Federal Reserve delivered a vote of confidence in the economy Wednesday, saying it would slow the pace of an emergency rescue program and indicating the recession appears to be ending.
The central bank also held interest rates steady at record lows, with a closely watched bank lending rate near zero, and again pledged to keep them there for â€œan extended periodâ€ to nurture an anticipated recovery.
Fed Chairman Ben Bernanke and his colleagues said the economy appeared to be â€œleveling outâ€ â€" a considerable upgrade from their last meeting in June, when the Fed observed only that the economyâ€™s contraction was slowing.

Fed holds rates at record low to aid recovery

The Federal Reserve pledged Wednesday to hold rates at record lows to nurture the economic recovery and lower unemployment. But its decision drew a dissent from one member, signaling the Fed's challenge in deciding when to pull back stimulus money it pumped into the economy.
The Fed's statement sketched a mixed picture of the economy. Pointing to weakness, it noted that bank lending is contracting. And it dropped a reference in its previous statement to an improving housing market.
But on the positive side, the Fed said business spending on equipment and software seems to be rising. And it said economic activity "continues to strengthen."

NEW YORK –

A top Federal Reserve official says he's worried about the weakness of the economic recovery but doesn't think it will slip into another recession.
William Dudley, president of the Federal Reserve Bank of New York, says in an interview with The Associated Press: "I think we do have a sustainable economic recovery."
But he adds: "I'm less confident how strong that recovery will be." The odds that the economy will fall back into recession "are low, but not zero," he says.
To energize the recovery, the Fed has pledged to hold interest rates at record lows for an "extended period."
Dudley says that with unemployment high and factories operating well below capacity, the Fed can be "quite patient" before reversing course and raising rates.

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Loan Repurchases Are a $10 Billion Problem for Big Banks - Yahoo Finance

Posted: 04 Feb 2010 08:49 AM PST

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Just when they thought the worst of the mortgage crisis was behind them, billions of dollars in bad loans from the debacle may be rising from the dead and creeping back on the balance sheets of the largest U.S. banks.
Big lenders including Bank of America (BAC), J.P. Morgan Chase (JPM) and Wells Fargo (WFC) may be forced to repurchase troubled home loans from insurers and mortgage-finance giants like Freddie Mac (FRE) that had agreed to take on risks associated with those assets during the real estate boom.
The banks are setting aside more reserves to cover the potential costs of such repurchases, cutting into earnings.
The trend is also pitting big lenders, insurers and mortgage-finance institutions against each other. That's a big change from the previous decade, when they worked together to fuel the housing boom by originating, insuring and securitizing mortgages in record amounts.
Christopher Whalen, managing director of research firm Institutional Risk Analytics, offered up a colorful metaphor for the unfolding situation.
"The wave of loan repurchase demands on securitization sponsors is the next area of fun in the zombie dance party, namely the part where different zombies start to eat each other," Whalen wrote in a note to clients Tuesday.
Mortgage insurers such as MGIC Investment (MTG) have rescinded, or refused to pay, roughly $6 billion in claims from delinquent home loans since January 2008, rating agency Moody's Investors Service estimated in a December report. That could leave banks that originated the loans on the hook for losses.
Bond insurers are expecting to recover more than $4 billion from banks for breaches of representations and warranties on residential mortgage-backed securities they guaranteed, Moody's also noted.
"Depending on how things go it certainly could go much higher than $10 billion," said James Eck, a senior analyst in Moody's Specialty Insurance team.
Meanwhile, government-controlled mortgage-finance giants Fannie Mae (FNM) and Freddie Mac are also getting in on the act, potentially forcing banks to repurchase billions of dollars more in bad loans.
In the first nine months of 2009, firms that collect payments on mortgages guaranteed by Freddie Mac repurchased home loans with a total unpaid balance of $2.7 billion. That was up from $1.2 billion in the same period of 2008, Moody's noted.
Vulnerable to Potential Exposures
Bank of America and Wells Fargo may be particularly exposed on this front, according to Institutional Risk's Whalen.
Fannie and Freddie "are going to tear 50-100 basis points easy out of the flesh of the banking industry in the form of loan returns," he wrote.
Wells Fargo said last month that $1.2 billion in fourth-quarter income from mortgage loan originations and sales included a $316 million increase in reserves to cover loan repurchases. The bank disclosed no such reserves in its third-quarter earnings release.
It's a similar situation at Bank of America. Joe Price, the company's head of consumer banking, told analysts last month that the company has billions of dollars in reserves lined up to cover loan repurchases and related disputes with Fannie, Freddie and insurers.
"I would be disingenuous if I didn't say people were throwing everything over the wall then can, because they are," Price said during a January conference call with analysts.
Bank of America books "hundreds of millions of dollars" in reserves for these risks each quarter, he added.
At J.P. Morgan Chase, the company's retail division reported its first quarterly loss in nearly two years in January, partly because it had to set aside more reserves for loan repurchases.
"Obviously it's picked up," Michael Cavanagh, J.P. Morgan Chase's chief financial officer, said recently.
"All parties in the mortgage chain are taking a look at their rights and looking to bring claims," he said during a conference call with analysts. Cavanagh didn't disclose details of the company's reserves covering these risks.
The process takes a long time because each disputed loan has to be scrutinized to see if the originator should buy it back or whether the risk should stay with the insurer or Fannie and Freddie.
Legacy of Countrywide
Bank of America's Price said the company is still resolving similar disputes from a business that it exited in 2001.
A lot of Bank of America's more-recent exposure comes from its 2007 acquisition of mortgage lender Countrywide Financial.
In September, MBIA (MBI) sued Countrywide, alleging that the lender "fraudulently induced" the bond insurer to guarantee securities backed by home-equity lines of credit and second-liens.
MBIA claims Countrywide didn't underwrite the home loans properly because it was trying to gain more market share during the real estate boom. The bond insurer said that it already paid out $1.5 billion on these guarantees and that it remains exposed to "several hundred million dollars more," according to the suit.
Bank of America is fighting back on some of these claims. Countrywide sued MGIC Investment in December, on the grounds that the mortgage insurer is improperly denying millions of dollars in valid claims on defaulted home loans.
Countrywide said that MGIC knew much about the lender's underwriting policies and that it only questioned them after the real estate market collapsed and claims spiked.
"As long as the real estate market remained relatively strong, and claims levels remained moderate, MGIC was happy to collect premiums on loans that were made based on existing underwriting practices, about which it was fully aware," Countrywide said in the suit.
From Allies to Adversaries
Disputes such as these are sparking increased tensions between companies that previously worked closely together during the real estate boom.
For mortgage insurers, this means that customer relationships may be damaged and that the perceived value of their coverage may fall, Moody's warned back in December.
"This remains a source of tension in the industry," said Michael Fraizer, chief executive of Genworth Financial (GNW), which owns one of the largest mortgage insurers. "No one can be happy, but you have to approach the issue professionally. We wanted to make sure we were paying all appropriate claims, not inappropriate claims."
Genworth saved $847 million in 2009 from loss-mitigation efforts, including mortgage insurance policy recissions and loan modifications. Recissions accounted for roughly two-thirds of these savings, the insurer noted.
In 2010, Genworth expects loss mitigation to generate the same level of savings, or more. Recissions will make up less of the total, while mortgage modifications are set to pick up.
Battles like these may be more important for bond insurers and their mortgage counterparts than the big banks, according to Moody's.
"For a large bank, it could be an earnings event for a quarter, rather than something that really depletes capital," said David Fanger, a senior vice president on Moody's banking team.

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Commerce secy to detail push to double exports - San Francisco Chronicle

Posted: 04 Feb 2010 08:13 AM PST

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The president's National Export Initiative will target three key areas — expanding trade advocacy, improving access to credit especially for small and medium-sized businesses and rigorously enforcing international trade laws. The government-wide strategy will be coordinated at the cabinet level, Locke is set to tell a National Press Club audience.
"Increasing the export of American products and services to global markets can help revive the fortunes of U.S. companies, spur future economic growth and support jobs here at home," Locke said in remarks prepared for delivery to a National Press Club audience. "This initiative will correct an economic blind spot that has allowed other countries to slowly chip away at the United States' international competitiveness."
In his State of the Union message, President Barack Obama announced the five-year push to double exports, saying the initiative would support 2 million jobs. Republicans applauded the effort.
Although experts say Obama's goal is achievable, the creation of jobs — an issue that some analysts believe contributed to the Democrats' Senate election loss in Massachusetts — is not as certain. The U.S. Chamber of Commerce estimates that a free trade agreement with South Korea alone would lead to 200,000 American jobs, and the National Association of Manufacturers concludes that increased exports from modernizing export control law could boost the GDP by $64 billion by 2019, creating 160,000 manufacturing jobs.
But Public Citizen's Global Trade Watch said potential jobs from more exports are negated by job losses that come from increased reliance on products purchased from abroad.
"While the U.S. is a major exporter, we are underperforming," Locke said. "U.S. exports as a percentage of GDP are still well below nearly all of our major economic competitors."
Still, the president's initiative would focus on small- and medium-businesses, increasing credit available from the Export-Import Bank from $4 billion to $6 billion. An additional $80 million in next year's budget proposal would go to the Commerce Department's International Trade Administration, which helps American companies export their products and services around the world, to assist more than 23,000 firms to begin or grow exports. The Agriculture Department's export promotions stand to receive $54 million, mostly to help farmers sell specialty crops.
The plan also calls for the government to continue its push for access to foreign markets through free-trade agreements.
"The United States is committed to a rules-based trading system where the American people — and the Congress — can feel confident that when we sign an agreement that gives foreign countries the privilege of free and fair access to our domestic market, we are treated the same."

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Successful 2009 Leads California Bank of Commerce to New Hire -- Rick ... - Stockhouse

Posted: 04 Feb 2010 08:56 AM PST

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LAFAYETTE, CA, Feb 04, 2010 (MARKETWIRE via COMTEX News Network) --
California Bank of Commerce (OTCBB: CABC), a unique commercial bank in the San Francisco Bay Area targeting closely held businesses and professionals, today announced the hiring of Rick Harbaugh as a Senior Vice President in commercial banking.
"California Bank of Commerce had a noteworthy 2009 with Total Assets increasing by 41% to $194 million. We fully expect to continue attracting new quality clients and grow our loan and deposit base in 2010. Hiring experienced bankers like Rick is integral to our growth strategy and augments our strength in the middle market. He brings a wealth of commercial banking experience and long-standing relationships with businesses throughout the Bay Area," said John Rossell III, President and CEO of the bank.
Prior to joining California Bank of Commerce, Mr. Harbaugh was Vice President, Corporate Banking for U.S. Bank in San Francisco where he provided relationship banking to middle market businesses located throughout the Bay Area. During his fifteen years in commercial banking, Mr. Harbaugh held similar positions at City National Bank and Union Bank of California.
"California Bank of Commerce will enable me to continue developing long-term relationships with clients, in a responsive, entrepreneurial environment. The Bank has a remarkable reputation for its commercial lending expertise, exceptional personal service and state of the art operations technology. California Bank of Commerce provides its business clients with access to senior management empowered to make the decisions. This allows me to serve my clients quickly and effectively," said Harbaugh.
Image Available: http://www2.marketwire.com/mw/frame_mw?attachid=1169489
Contact: Mark DeVincenzi 925-444-2916
SOURCE: California Bank of Commerce
Copyright 2010 Marketwire, Inc., All rights reserved.

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