Archive for December, 2009

Government probes banks on sale of risky securities: report (Reuters)

Thursday, December 24th, 2009 | Finance News

BANGALORE (Reuters) –
U.S. regulators and legislators are investigating whether Wall Street investment banks deliberately sold risky structured securities to clients, and then bet on the securities failing, The New York Times reported on Wednesday.

Investigators in Congress, the Securities and Exchange Commission, and the Financial Industry Regulatory Authority are looking at banks' sales of complicated instruments known as collateralized debt obligations, according to the paper.

It said banks that created these securities, and then bet on their failing, or similar securities failing, include Goldman Sachs (GS.N), Morgan Stanley (MS.N), and Deutsche Bank (DBKGn.DE).

The paper said any probes are in early stages, but investigators seem to be focusing on whether banks violated fair dealing laws, or securities laws, in selling CDOs to investors and then betting against their clients using credit derivatives.

In some cases, the securities appear to have been deliberately stuffed with particularly risky mortgages, in order to perform poorly if the housing market tanked, according to the paper.

FINRA, the SEC, and Deutsche Bank declined to comment.

A spokesman for Morgan Stanley was not immediately available for comment.

Goldman Sachs said in a statement: "It is fully disclosed and well known to investors that banks that arranged synthetic CDOs took the initial short position and that these positions could either have been applied as hedges against other risk positions or covered via trades with other investors."

To read the statement, click on: http://r.reuters.com/pet48g

(Reporting by Dan Wilchins in New York and Ajay Kamalakaran in Bangalore; Editing by Anshuman Daga and Tim Dobbyn)

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Durable orders up, jobless claims at 15-month low (Reuters)

Thursday, December 24th, 2009 | Finance News

WASHINGTON (Reuters) –
New orders for long-lasting U.S. manufactured goods excluding transportation items surged in November and new applications for jobless aid hit the lowest level in 15 months last week, pointing to a firmly entrenched economic recovery.

The U.S. Commerce Department said on Thursday that durable goods orders excluding transportation rose 2 percent last month, more than reversing October's 0.7 percent drop and beating market expectations for a 1 percent rise.

However, a plunge in orders for civilian aircraft tempered overall orders, which rose only 0.2 percent, below expectations for a 0.5 percent increase.

A separate report from the Labor Department showed initial claims for state unemployment benefits fell 28,000 to 452,000 last week. That was the lowest level since early September 2008. Economists had expected a drop of only 10,000.

"Both of these series point to ongoing healing in the economy," said Robert Dye, senior economist at PNC Financial Services in Pittsburgh. He said the figures suggested economic growth in the fourth quarter would be stronger than had been expected "with a moderate recovery through 2010."

Analysts now see U.S. GDP growing at an annual pace of between 4 percent and 5 percent in the fourth quarter, up from a 2.2 percent rate in the July-September period. Waning government support, however, is expected to weigh on growth in 2010.

U.S. stocks opened higher on the data, which eased concerns from Wednesday after a surprise drop in new home sales. U.S. government debt prices fell slightly on Thursday.

LABOR MARKET MENDING

The labor market is slowly mending after the worst U.S. recession since the 1930s. Employers last month cut the fewest number of jobs in more than a year and the unemployment rate dipped to 10 percent from a 26-1/2 year high of 10.2 percent in October.

The improving labor market tone was underscored by a decline in the four-week moving average of new claims, which reached the lowest level in nearly 15 months last week.

The average, which is considered a better measure of underlying labor market trends than initial claims figure, dropped to 465,250, closing in on the 450,000 mark that some analysts say will indicate labor market stabilization.

"We might even see some job growth when we get that December jobs number," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco, referring to data the government will release in early January.

The durable goods report showed strength in orders in nearly every sector last month. Durable goods orders are a leading indicator of manufacturing activity and tend to give good indication of overall business health.

In a sign that businesses are starting to spend again, non-defense capital goods orders excluding aircraft jumped 2.9 percent last month after dropping 2 percent in October.

"This suggests that the fourth-quarter recovery in business investment was a bit stronger than we previously feared. This report supports our view that GDP will expand by about 5 percent annualized in the fourth quarter," said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto.

Durable goods inventories fell 0.2 percent in November after being flat the prior month. Shipments increased 0.3 percent, adding to October's 0.7 percent gain.

"The factory recovery is broadening and may be accelerating, although it remains a question as to how much a leveling in inventory liquidation as well as fiscal stimulus is powering the improved performance," said Cliff Waldman, an economist for the Manufacturers Alliance/MAPI.

(Additional reporting by Emily Kaiser in Washington, Chuck Mikolajczak and Richard Leong in New York; Editing by Neil Stempleman)

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Fannie, Freddie CEO pay gets regulator nod: report (Reuters)

Wednesday, December 23rd, 2009 | Finance News

(Reuters) –
The U.S. housing regulator has approved pay packages for the chief executives of mortgage finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N) in the range of $4 million to $6 million, the Wall Street Journal said, citing people familiar with the matter.

The Federal Housing Finance Agency has approved the pay details for Fannie's Michael Williams and Freddie's Charles Haldeman, which the housing companies are expected to spell out in a securities filing on Thursday, the paper said.

Fannie Mae and Freddie Mac, which together own or guarantee half of all U.S. mortgages, were seized by the U.S. government and put into conservatorship in September 2008 at the peak of the credit crises.

The Federal Housing Finance Agency did not immediately respond to a Reuters email seeking comment that was sent outside of regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Valerie Lee)

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