Bank of America – Page 8 – Infinite Unknown

Wall Street crisis deepens and Banks rush to do deals

September 17, 2008 by Infinite

NEW YORK (Reuters) – Manic and increasingly desperate dealmaking gripped Wall Street on Wednesday as U.S. stocks plummeted to three-year lows amid new signs of distress in the global financial industry.

Morgan Stanley was discussing a merger with regional banking powerhouse Wachovia, the New York Times reported. CEO John Mack got a phone call from Wachovia on Wednesday but is also pursuing other options, the paper said.

“In this market, anything’s possible. It seems like the market wants the investment banking model to disappear,” said Danielle Schembri, bond analyst covering brokers at BNP Paribas in New York.

Washington Mutual , the country’s largest savings bank, put itself up for sale, sources said, confirming a New York Times report. Potential suitors include Citigroup, JPMorgan, Wells Fargo and HSBC, they added.

Goldman profit plunges 70 pct amid market slump

September 16, 2008 by Infinite

Goldman Sachs Group CEO Lloyd Blankfein

NEW YORK (Reuters) – Goldman Sachs Group Inc (GS.N) said quarterly profit plunged 70 percent as the worst market slump in decades led to weaker-than-expected revenues, knocking the stock to its lowest level in nearly three years.

Still, the larger of the two major U.S. investment banks still standing, beat profit expectations on Tuesday, even as it recorded $1.1 billion in write-downs and losses from its principal investments. It was the biggest earnings decline since Goldman went public in 1999.

Wilbur Ross: Possibly a Thousand Banks Will Close

September 15, 2008 by Infinite

In an exclusive interview with CNBC.com, Wilbur Ross, chairman and CEO of WL Ross & Co., says he sees possibly as many as a thousand bank closures in the coming months. And this will create opportunities for investors.

(Watch the full CNBC.com exclusive interview with Wilbur Ross )

“I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s,” Ross said.

WaMu shares hit hard

September 15, 2008 by Infinite

Already battered, Washington Mutual shares fall as potential capital sources’ attention is diverted.

NEW YORK (CNNMoney.com) — Don’t forget about Washington Mutual.

Concerned that Wall Street has done just that, the nation’s largest savings-and-loan plummeted 22% in mid-day trading. Investors are concerned that potential sources of capital have disappeared in the upheaval this weekend on Wall Street that saw Lehman Brothers (LEH, Fortune 500) file the nation’s largest bankruptcy and Bank of America (BAC, Fortune 500) scoop up Merrill Lynch (MER, Fortune 500).

Washington Mutual (WM, Fortune 500) shares were battered last week, losing 36% of their value as investors grew increasingly nervous that the bank didn’t have enough capital to see it through the tsunami sweeping Wall Street.

Bank of America Said to Reach $44 Billion Deal to Buy Merrill

September 14, 2008 by Infinite

Sept. 14 (Bloomberg) — Bank of America Corp. reached a deal to acquire Merrill Lynch & Co. for about $44 billion, the Wall Street Journal reported, after shares of the third-biggest U.S. securities firm fell by more than 35 percent last week and smaller rival Lehman Brothers Holdings Inc. neared bankruptcy.

Lehman Brothers teeters on verge of collapse as Barclays pulls out

September 14, 2008 by Infinite

Lehman Brothers HQ in New York

Global investment bank Lehman Brothers is teetering on the verge of collapse after Barclays pulled out of an 11th-hour rescue.

The departure of Barclays left US Treasury Secretary Hank Paulson and Tim Geithner, the head of the Federal Reserve Bank of New York, spearheading desperate last-ditch attempts to put in place some form of a workable rescue package.

Traders fear that the collapse of Lehman would send shockwaves around the world and spark a global sell-off of shares.

Lehman which employs 4,000 staff in London and 24,00 around the world, could be placed into liquidation as soon as Monday. The bank would be the single largest casualty of the current credit crisis and its collapse one of the biggest failures in Wall Street history.

In one of the most traumatic days in the history of Wall Street, Bank of America is reported to be on the verge of buying Merrill Lynch for $38bn.

U.S. Stocks at 25.8 Times Earnings Means Rally Can’t Continue

September 2, 2008 by Infinite

Sept. 2 (Bloomberg) — The best already may be over for the U.S. stock market this year.

The Standard & Poor’s 500 Index, which had the worst first half since 2002, added 0.2 percent this quarter, the only gain among the world’s 10 biggest markets in dollar terms. Shares in the benchmark index for American equity climbed to an average 25.8 times reported profits, the highest valuation in five years. The last time that happened, the S&P 500 fell 38 percent.

Merrill, Wachovia Hit With Record Refinancing Bill

August 26, 2008 by Infinite

Aug. 26 (Bloomberg) — Merrill Lynch & Co., Wachovia Corp., Lehman Brothers Holdings Inc. and the rest of the U.S. finance industry are about to find out how expensive credit has become.

Banks, securities firms and lenders have a record $871 billion of bonds maturing through 2009, according to JPMorgan Chase & Co., just as yields are at their most punitive compared with Treasuries. The increase in yields may cost them as much as $23 billion more in annual interest versus a year ago based on Merrill Lynch index data.

Morgan Stanley Said to Freeze Home-Equity Credit Withdrawals

August 6, 2008 by Infinite

Aug. 6 (Bloomberg) — Morgan Stanley, the second-biggest U.S. securities firm, told thousands of clients this week that they won’t be allowed to withdraw money on their home-equity credit lines, said a person familiar with the situation.

Citigroup’s $1.1 Trillion in Mysterious Shadow Assets

July 14, 2008 by Infinite

July 14 (Bloomberg) — At an investor presentation in May, Citigroup Inc. Chief Executive Officer Vikram Pandit said shrinking the bank’s $2.2 trillion balance sheet, the biggest in the U.S., was a cornerstone of his turnaround plan.

Nowhere mentioned in the accompanying 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books: trusts to sell mortgage-backed securities, financing vehicles to issue short-term debt and collateralized debt obligations, or CDOs, to repackage bonds.

Now, as Citigroup prepares to announce second-quarter results July 18, those off-balance-sheet assets, used by U.S. banks to expand lending without tying up capital, are casting a shadow over earnings. Since last September, at least $100 billion of assets have flooded back onto Citigroup’s balance sheet, accompanied by more than $7 billion of losses.

“If you start adding up all the potential exposures, it’s a huge number,” said Sam Golden, a former ombudsman for the U.S. Office of the Comptroller of the Currency who now heads the financial-industry practice for restructuring adviser Alvarez & Marsal in Houston. “The banks will say that it was disclosed. Investors are saying, `Yeah, but it was cryptic. We really didn’t know what you were telling us.”’

U.S. banks already are reeling from more than $165 billion of writedowns and credit losses, so shareholders are wary of unknown obligations that might force them to take responsibility for additional troubled assets. The risks have become so obvious that accounting officials are proposing new rules — some of which Citigroup opposes — that would force many assets back onto balance sheets.

S&P 500 plunges into a bear market

July 10, 2008 by Infinite

NEW YORK (Reuters) – Stocks tumbled on Wednesday, dragging the S&P 500 into a bear market, as worries about more credit losses hurt financial companies and Cisco Systems led technology shares lower after its CEO raised fears of an extended economic downturn.

The S&P closed 20 percent below its all-time high set in October, making it the last of the three major U.S. stock indexes to fall into a bear market. Stocks have been roiled for months by the credit crisis and a severe U.S. economic slowdown.

In the latest news to scare the market, Cisco’s (CSCO.O: Quote, Profile, Research, Stock Buzz) John Chambers told Reuters that customers of the company, which makes Internet infrastructure, see the economy picking up early in 2009 rather than later this year. At least two brokerages also cut their price targets on the stock.

Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) dropped sharply as some investors worried that the two pillars of the U.S. housing market will need to raise billions of dollars in additional capital through stock sales, diluting the holdings of current investors.

Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) shares fell more than 9 percent, after Fitch Ratings said it may cut the U.S. investment bank’s debt rating, given expected ongoing write-downs and diminished prospects for earnings.

ECB raises key rate to 4.25%

July 3, 2008 by Infinite

FRANKFURT: The European Central Bank, spooked by soaring prices for food and fuel, raised interest rates Thursday, joining several other central banks in battling a global eruption of inflation.

The quarter-point hike, which the bank had signaled last month, had little initial effect on markets, with the euro treading water against the dollar and stocks staying relatively steady. Central banks in Sweden and Norway also raised rates this week, citing inflation. On Thursday, Indonesia raised its key interest rate for the third time this year, while India raised its key lending rate twice last month.

The Federal Reserve in the United States, where short-term interest rates are only half of those in Europe, has so far declined to join them.

The European Central Bank’s decision deepens a recent divergence in monetary policy across the Atlantic, ending a long period when it tended to follow the course set by the Fed.

But the sharp rise in inflation has put Europe’s bank into a policy bind because it has been accompanied, in recent days, by evidence that the economy here is deteriorating much like that of the United States.

Manufacturing activity in the 15 countries that use the euro shrank in June for the first time in three years, according to a survey of European purchasing managers. In Spain and Ireland, where a collapse in housing prices has magnified the problems, there is a real risk of recession.

Still, the European Central Bank, hewing to its inflation-fighting mandate, pressed on with the expected increase, moving the benchmark rate to 4.25 percent from 4 percent. Among other things, it is intended as a warning to unions not to use higher inflation as a lever to demand hefty wage increases.
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Say goodbye to the Dollar and to Wall Street.
Got Gold and Silver? – The Infinite Unknown

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It was not clear, before an afternoon news conference chaired by the bank’s president, Jean-Claude Trichet, whether the rate increase would be a one-time gesture or the start of a cycle of tighter monetary policy.

Several economists said they doubted the bank could tighten much further, given the parlous economic situation.

“The ECB is hiking at a time when confidence is plummeting,” said Thomas Mayer, the chief European economist at Deutsche Bank. “The question is, ‘what do you do when asset prices fall at the same time that consumer prices rise?’ The central bankers seem to have reached the end of the line.”

McCain Would Give America’s 200 Largest Corporations $45 Billion In Tax Breaks

June 28, 2008June 28, 2008 by Infinite

If you’re a CEO of one of America’s largest corporations and have enjoyed the Presidency of George W. Bush, a contribution to the McCain campaign is looking like a pretty good investment.

A new report from the Center For American Progress Action Fund finds that a key piece of John McCain’s tax plan — cutting the corporate tax rate from 35% to 25% — would cut taxes by almost $45 billion every year for America’s 200 largest corporations as identified by Fortune Magazine.

Eight companies — Wal-Mart Stores Inc., Exxon Mobil Corp., ConocoPhillips Co., Bank ??of America Corp., AT&T, Berkshire Hathaway Inc., JPMorgan Chase & Co., and Microsoft Corp. — would each receive over $1 billion a year.

The following table shows the tax savings to America’s five largest firms. See a full list of all 200 companies and their savings under McCain here:

These giveaways are just one part of McCain’s doubling of the Bush tax cuts for corporations and the wealthy which would create the largest deficits in 25 years and drive the United States into the deepest deficits since World War II.

A recent analysis by the Public Campaign Action Fund found that John McCain’s campaign has received $5.6 million from the PACs and executives of the Fortune 200.

Over the past eight years, under George W. Bush, American workers have seen their wages stagnate as corporate profits have skyrocketed. John McCain’s misguided priorities show he’s more of the same: the same $45 billion in tax cuts for America’s 200 largest companies could be used to lift over 9 million Americans out of poverty.

American Express: The Economy is Worsening

June 26, 2008June 26, 2008 by Infinite

June 25 (Bloomberg) — American Express Co., the biggest U.S. credit-card company by purchases and cash advances, said customers are falling further behind on their debt, signaling the economy is worsening.

“Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,” Chief Executive Officer Kenneth Chenault said in a statement today announcing the company would receive as much as $1.8 billion in a settlement with competitor MasterCard Inc.

American Express and rivals Capital One Financial Corp. and Discover Financial Services have fallen by more than a third in the past 12 months in New York trading as consumers absorb the housing slump, rising unemployment and higher food and fuel bills. New York-based American Express adopted a “cautious view” for the year in January after cardholder spending slowed and overdue payments rose in December.

“If you look at the employment situation, clearly that’s deteriorated, and consumer confidence is down as well,” said Sanjay Sakhrani, an analyst with KBW Inc. in New York who has a “market perform” rating on the stock. “Both play a key role in the credit-card industry.”

The Federal Reserve today left its benchmark interest rate at 2 percent, saying “uncertainty about the inflation outlook remains high.” Consumer prices rose 4.2 percent in the 12 months ended in May, the fastest pace since January, while the unemployment rate rose by the most in more than two decades.

Consumer Confidence

Confidence among Americans dropped to the lowest level in 16 years, the Conference Board said yesterday.

After years of increases, some fear a tipping point has finally been reached

June 2, 2008 by Infinite

Relentless rise in oil prices tests economy’s resilience

WASHINGTON — Only a few weeks ago, prominent policymakers and economists were cheerfully asserting that the U.S. economy would dodge recession and keep chugging forward despite a housing bust, a credit crunch and continuing job losses.

“The data are pretty clear that we are not in recession,” said President Bush’s chief economist, Edward Lazear. Treasury Secretary Henry M. Paulson Jr. declared “the worst is likely to be behind us” and confidently predicted that more than $100 billion in tax rebates would help create half a million new jobs by the end of the year.

But instead of clearing, the skies over the economy have ominously darkened in recent days. The chief reason is oil. And there are signs the nation may have reached an economic tipping point after years of shrugging off the petroleum problem.

“We may finally have crossed the line where the price of crude actually matters for most companies,” said Peter Boockvar, equity strategist at New York financial firm Miller Tabak & Co. “The stock market has been in la-la land when it comes to oil, but they got a pretty good dose of reality the last few days.”

The ill effects of the latest price hikes would not be so surprising if it were not for the fact that the nation’s economy and financial markets remained blissfully unruffled by oil’s upward march during most of the last five years. Until this week.

“The economic outlook has been taken hostage by the relentless surge in oil prices,” said Robert V. DiClemente, chief U.S. economist at Citigroup in New York.

“We’re seeing an inexorable increase, and it doesn’t seem like anybody’s in charge or can do anything about it,” added Bank of America senior economist Peter E. Kretzmer.

Big, small firms take hits

Among the signs that the economy may finally be feeling the effect of rising oil prices was Ford Motor Co.’s announcement Thursday that it was abandoning any hope of making a profit this year or next now that sales of its gas-guzzling pickup trucks and Explorer sport utility vehicles have plunged.

And experts said that the other two U.S. automakers, General Motors Corp. and Chrysler, may be in even greater trouble.

Ford Chief Executive Alan Mulally said the industry had “reached a tipping point” where energy costs were fundamentally changing what kind of vehicles Americans buy.

Meantime, to cope with higher energy prices, American Airlines and United Airlines both raised ticket prices, and American announced plans to impose a new baggage-handling fee. But experts say the price hikes barely begin to make up for recent losses.

“The airline industry is devastated. It can’t survive $130-a-barrel oil,” said industry analyst Ray Neidl at Calyon Securities in New York.

Fed’s Direct Loans to Banks Climb to Record Level

June 9, 2008May 16, 2008 by Infinite

“The Fed no longer publishes figures for M3.”

Excursion:

Mr. Bernanke has pledged to bring increased transparency to Federal Reserve policymaking, but the recent Fed decision to discontinue compiling and releasing the M3 monetary aggregate figure casts doubt on this promise. M3 is widely used by economists, policy makers, and investors as the most accurate and reliable true measure of the money supply.

Ron Paul, known as a congressional expert on monetary policy, reminded Mr. Bernanke that inflation is always a monetary phenomenon, resulting from an increase in the money supply as ordered by the Fed itself. M3 has risen more than twice as fast as M2 and GDP in recent years, illustrating that real inflation is much higher than the government admits through its CPI statistics. The troubling possibility is that the Fed discontinued M3 for the simple reason that it wants to conceal the extent to which the money supply- and hence price inflation- really grows.

Paul is preparing legislation that will compel the Fed to continue publishing M3, and plans to introduce the bill in the Financial Services committee later this month.

Source: Ron Paul

(PS: Core inflation excludes costs of food and energy goods, the very items that are the most visible prices for most consumers! – The Infinite Unknown)

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The Federal Reserve’s direct loans of cash to commercial banks climbed to the highest level on record in the past week as money-losing lenders increasingly turn to the central bank for funds.

Funds provided through the so-called discount window for banks rose by $2.8 billion to a daily average of $14.4 billion in the week to May 14, the central bank said today in Washington. Separately, the Fed’s loans to Wall Street bond dealers rose by $75 million to $16.6 billion.

Policy makers have increased the attractiveness of direct loans as they seek to alleviate the impact of the credit crunch. Fed Chairman Ben S. Bernanke said two days ago that while markets have improved, they remain “far from normal,” adding that the central bank is prepared to increase its twice monthly auctions of funds to banks.

Not-So-Safe-Deposit Boxes: States Seize Citizens’ Property to Balance Their Budgets

May 13, 2008May 13, 2008 by Infinite

The 50 U.S. states are holding more than $32 billion worth of unclaimed property that they’re supposed to safeguard for their citizens. But a “Good Morning America” investigation found some states aggressively seize property that isn’t really unclaimed and then use the money — your money — to balance their budgets.

Unclaimed property consists of things like forgotten apartment security deposits, uncashed dividend checks and safe-deposit boxes abandoned when an elderly relative dies.

Banks and other businesses are required to turn that property over to the state for safekeeping. The problem is that the states return less than a quarter of unclaimed property to the rightful owners.

Not-So-Safe-Deposit Boxes

San Francisco resident Carla Ruff’s safe-deposit box was drilled, seized, and turned over to the state of California, marked “owner unknown.”

“I was appalled,” Ruff said. “I felt violated.”

Unknown? Carla’s name was right on documents in the box at the Noe Valley Bank of America location. So was her address — a house about six blocks from the bank. Carla had a checking account at the bank, too — still does — and receives regular statements. Plus, she has receipts showing she’s the kind of person who paid her box rental fee. And yet, she says nobody ever notified her.

“They are zealously uncovering accounts that are not unclaimed,” Ruff said.

To make matters worse, Ruff discovered the loss when she went to her box to retrieve important paperwork she needed because her husband was dying. Those papers had been shredded.

And that’s not all. Her great-grandmother’s precious natural pearls and other jewelry had been auctioned off. They were sold for just $1,800, even though they were appraised for $82,500.

“These things were things that she gave to me,” Ruff said. “I valued them because I loved her.”

Bank of America told ABC News it deeply regrets the situation and appreciates the difficulty of what Mrs. Ruff was going through. The bank has reached a settlement with Ruff and continues to update its unclaimed property procedures as laws change.

California’s Class Action Lawsuit

Ruff is not alone. Attorney Bill Palmer represents her and countless other citizens in a class action lawsuit against the state of California.

Bank of America Net Income Falls 77% on Writedowns

June 25, 2008April 21, 2008 by Infinite

April 21 (Bloomberg) — Bank of America Corp., the second- largest U.S. bank, said profit dropped for a third straight quarter as the company set aside $6.01 billion for bad loans.

First-quarter net income declined 77 percent to $1.21 billion from $5.26 billion a year earlier, the Charlotte, North Carolina-based bank said today in a statement. The results fell short of analysts’ estimates and sent the bank’s stock down 2.5 percent in New York trading.

Chief Executive Officer Kenneth Lewis scaled back a January forecast of 20 percent earnings growth this year after reporting the two worst quarters since he took over in 2001. Lewis said he now expects “sequential profit improvement” for the rest of 2008. The bank’s consumer unit, which contributed more than 60 percent of operating income in 2007, faces a nationwide jump in unpaid debt and the highest unemployment rate since 2005.

“The first quarter was much worse than our expectations three months ago,” Lewis said on a conference call. “It’s too early to strike up the band and say that happy days are here again.”

Banks face “new world order,” consolidation: report

October 22, 2008March 19, 2008 by Infinite

NEW YORK (Reuters) – Financial firms face a “new world order” after a weekend fire sale of Bear Stearns and the Federal Reserve’s first emergency weekend meeting since 1979, research firm CreditSights said in a report on Monday.

More industry consolidation and acquisitions may follow after JPMorgan Chase & Co on Sunday said it was buying Bear Stearns for $236 million, or $2 a share, a deep discount from the $30 price on Friday and record share price of about $172 last year.

“Last evening the Bear Stearns situation reached a crescendo, as JPMorgan agreed to acquire the wounded broker for a token amount of $2 per share,” CreditSights said. “The reality check is that there are many challenged major banks, brokers, thrifts, finance/mortgage companies, and only a handful of bona fide strong U.S. banks.”

A ‘Moral Hazard’ for a Housing Bailout: Sorting the Victims From Those Who Volunteered

March 17, 2008March 15, 2008 by Infinite

WASHINGTON – Over the last two decades, few industries have lobbied more ferociously or effectively than banks to get the government out of its business and to obtain freer rein for “financial innovation.”

But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives for an epic government rescue plan is suddenly coming into fashion.

A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government – now that it is in trouble.

The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes.

Bear Stearns gets emergency funds

March 17, 2008March 14, 2008 by Infinite

Bear Stearns is one of the best-known US Wall Street firms

US bank Bear Stearns has got emergency funding, in a move that raises fears that one of Wall Street’s biggest names is on the verge of collapsing.

JP Morgan Chase will provide the money to Bear Stearns for 28 days with the Federal Reserve of New York’s backing.