WASHINGTON (AP) -- The Bush administration is trying to confront the credit crisis that has rattled nerves from Wall Street to Main Street by proposing wholesale changes in how Washington oversees the financial system.
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A plan set for release Monday would give new powers to the Federal Reserve so that the central bank serves as the system's overarching protector of stability.
The proposal would abolish agencies such as the Office of Thrift Supervision and the Commodity Futures Trading Commission, shifting their responsibilities to other federal institutions.
When Treasury Secretary Henry Paulson outlines the ideas in a speech, the changes will represent the most sweeping overhaul of financial regulation since the Great Depression of the 1930s.
The Associated Press obtained a 22-page executive summary of the proposal. It seeks to make sense of the mishmash of overlapping oversight in which an alphabet-soup roster of agencies regulates banks, thrifts and credit unions.
Under the current hodgepodge, institutions that take deposits and are federally insured face multiple regulatory bodies. By contrast, hedge funds, private equity firms and investment banks endure substantially less regulation.
The credit crisis that has rocked Wall Street and made credit hard to get on Main Street has highlighted that discrepancy in regulation.
Many financial institutions have declared billions of dollars in losses stemming from soaring mortgage defaults caused by prolonged housing troubles.
In an unprecedented move designed to get credit flowing again, the Fed is allowing investment banks to borrow directly from the Fed, something only commercial banks had the power to do before.
That decision came as part of a rescue effort for Bear Stearns Cos., the nation's fifth largest investment bank. It nearly failed earlier this month before the Fed rushed in with a $30 billion line of credit to facilitate the sale of Bear Stearns to JP Morgan Chase & Co.
The Fed's moves have put public money potentially at risk and increased calls for greater regulation of investment banks and other institutions.
The Paulson plan is expected to generate intense debate in Congress, which would have to approve the changes.
Some top Democrats, including Rep. Barney Frank, the chairman of the House Financial Services Committee, are pushing competing ideas that would streamline oversight but also impose new controls beyond those in Paulson's plan.
Sen. Charles Schumer, a leading voice in the debate, said he did not think Paulson had gone far enough in dealing with some of the new complex types of investments heavily featured in the current financial crisis.
"Very complex financial instruments have evolved in recent years," said Schumer, D-N.Y. "The Treasury Department should address these issues as well."
David Nason, Treasury's assistant secretary for domestic finance, said the administration's primary goal is to get through the current credit crisis with officials understanding that the debate over an overhaul plan this far-reaching could last for years.
"These are very complex issues that require a serious amount of debate," he said in an AP interview Saturday. "It is going to take time to play out."
Business groups on Saturday generally voiced support for Paulson's approach and said there would be significant debate over the details.
"The current crisis just shows in a very stark way that ... you need a regulatory structure that is simple, nimble and modern and ours does not meet that test," said David Hirschmann, president of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness.
Tim Ryan, president of the Securities Industry and Financial Markets Association, a big lobbying group for Wall Street, said there was "universal agreement that it is time to modernize and revitalize the current system."
The Paulson plan would:
--designate the Fed as the primary regulator for market stability, greatly expanding its ability to examine any financial institution deemed to pose a risk to the stability of the system.
--shift the functions of the Office of Thrift Supervision to the Office of the Comptroller of the Currency, although ultimately the plan envisions just one banking regulator.
--merge the Securities and Exchange Commission with the Commodity Futures Trading Commission.
--create a national regulator for insurance companies, which now are largely regulated by the states.
--establish a commission to address the abuses exposed in the current tidal wave of mortgage defaults.
29/03/08
21/02/08
Stocks Climb on Techs, Ahead of Data
Thursday February 21, 9:47 am ET
By Joe Bel Bruno,
AP Business Writer.
Wall Street Moves Higher on Strong Tech Gains, Ahead of Economic Data
NEW YORK (AP) -- Wall Street extended its rally in early trading Thursday as traders placed bets that further economic data will allow the Federal Reserve to cut interest rates at its March meeting.
Investors, who shrugged off inflation concerns to send stocks broadly higher Wednesday, are awaiting two key reports due out at 10 a.m. EST. The hope is that both are upbeat enough to reassure investors that the U.S. economy isn't falling into a recession, yet show enough weakness to motivate central bankers to implement further rate cuts when they meet March 18.
The Conference Board's gauge of leading economic indicators is expected to show a slight dip last month. The report is designed to predict where the U.S. economy is headed in the next three to six months.
Meanwhile, the Philadelphia Federal Reserve's February manufacturing index is expected to rebound from January's six-year low while still showing declining business activity.
Traders are already pricing in another interest rate cut -- perhaps by up to 50 basis points -- after minutes from the Fed's last policy-setting meeting indicated central bankers will remain vigilant. The Fed forecast slower growth and continued risks to the economy from housing and credit markets.
In the first hour of trading, the Dow Jones industrial average rose 50.88, or 0.41 percent, to 12,478.14.
Broader indexes also moved higher. The Standard & Poor's 500 index added 5.13, or 0.38 percent, to 1,365.16, while the Nasdaq composite rose 19.40, or 0.83 percent, 2,346.50.
By Joe Bel Bruno,
AP Business Writer.
Wall Street Moves Higher on Strong Tech Gains, Ahead of Economic Data
NEW YORK (AP) -- Wall Street extended its rally in early trading Thursday as traders placed bets that further economic data will allow the Federal Reserve to cut interest rates at its March meeting.
Investors, who shrugged off inflation concerns to send stocks broadly higher Wednesday, are awaiting two key reports due out at 10 a.m. EST. The hope is that both are upbeat enough to reassure investors that the U.S. economy isn't falling into a recession, yet show enough weakness to motivate central bankers to implement further rate cuts when they meet March 18.
The Conference Board's gauge of leading economic indicators is expected to show a slight dip last month. The report is designed to predict where the U.S. economy is headed in the next three to six months.
Meanwhile, the Philadelphia Federal Reserve's February manufacturing index is expected to rebound from January's six-year low while still showing declining business activity.
Traders are already pricing in another interest rate cut -- perhaps by up to 50 basis points -- after minutes from the Fed's last policy-setting meeting indicated central bankers will remain vigilant. The Fed forecast slower growth and continued risks to the economy from housing and credit markets.
In the first hour of trading, the Dow Jones industrial average rose 50.88, or 0.41 percent, to 12,478.14.
Broader indexes also moved higher. The Standard & Poor's 500 index added 5.13, or 0.38 percent, to 1,365.16, while the Nasdaq composite rose 19.40, or 0.83 percent, 2,346.50.
15/02/08
US FEDERAL RESERVE SIGNALS NEW INTEREST RATE CUT TO PROTECT AGAINST RECESSION
Tom Bawden, New York
Ben Bernanke, the Chairman of the US Federal Reserve, pledged today to tackle the credit crunch that is threatening America’s growth by acting "as needed" to bolster its flagging economy.
In remarks that appeared to reinforce the case for a further interest rate cut, Mr Bernanke said that the central bank "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks".
Mr Bernanke told a Senate Banking Committee hearing: "More-expensive and less-available credit seems likely to continue to be a source of restraint on economic growth.
"The outlook for the economy has worsened in recent months, and the downside risks to growth have increased."
The Fed controls the economy chiefly by determining the key "federal funds" interest rate.
Although he did not go into details, analysts interpreted Mr Bernanke's comments as a further indication that the Fed would cut interest rates again at its next meeting, on March 18.
The Fed imposed an emergency cut of 0.75 percentage points in the cost of borrowing to 3.5 per cent on January 22, then reduced the rate by a further half-point at its scheduled meeting eight days later.
Mr Bernanke added: "My baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt."
"The softer labour market, together with factors including higher energy prices, lower equity prices, and declining home values, seem likely to weigh on consumer spending in the near term."
The Dow Jones industrial average fell 43.80 points to 12,508.40 as Mr Bernanke's comments emerged
Ben Bernanke, the Chairman of the US Federal Reserve, pledged today to tackle the credit crunch that is threatening America’s growth by acting "as needed" to bolster its flagging economy.
In remarks that appeared to reinforce the case for a further interest rate cut, Mr Bernanke said that the central bank "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks".
Mr Bernanke told a Senate Banking Committee hearing: "More-expensive and less-available credit seems likely to continue to be a source of restraint on economic growth.
"The outlook for the economy has worsened in recent months, and the downside risks to growth have increased."
The Fed controls the economy chiefly by determining the key "federal funds" interest rate.
Although he did not go into details, analysts interpreted Mr Bernanke's comments as a further indication that the Fed would cut interest rates again at its next meeting, on March 18.
The Fed imposed an emergency cut of 0.75 percentage points in the cost of borrowing to 3.5 per cent on January 22, then reduced the rate by a further half-point at its scheduled meeting eight days later.
Mr Bernanke added: "My baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt."
"The softer labour market, together with factors including higher energy prices, lower equity prices, and declining home values, seem likely to weigh on consumer spending in the near term."
The Dow Jones industrial average fell 43.80 points to 12,508.40 as Mr Bernanke's comments emerged
11/02/08
COUNTRYWIDE DEBUTS SUBPRIME "WORKOUT" PLAN
By Riley McDermid & Amy Hoak, MarketWatch
Last update: 4:00 p.m. EST Feb. 11, 2008
NEW YORK (MarketWatch) -- Help could be on the way for some subprime-mortgage borrowers caught up in the twin sagas of the plummeting housing market and besieged Countrywide Financial Corp., after the nation's largest home-loan lender said Monday that it's broadening efforts to help prevent foreclosures.
The Calabasas, Calif.-based company CFC (6.65, +0.07, +1.1%) is teaming up with the Association of Community Organizations for Reform Now, the advocacy group also known as Acorn, to expand an existing $16 billion program to help subprime borrowers avoid foreclosure and work out more manageable rates on their mortgages.
The new plan will be open to borrowers whether they are current on their payments or not, and they need not have adjustable-rate mortgages to apply, the company said.
It will allow all Countrywide borrowers with subprime loans to seek "workout" options, not just those with ARMs whose rates are due to "reset" at higher levels.
Many borrowers have struggled to stay current on payments that have reset to vastly higher rates -- a function of the many "hybrid" loan products popularized earlier this decade as a way stimulate the lending environment.
"All homeowners with a Countrywide subprime loan will get some kind of relief," said Maude Hurd, national president of Acorn, during a conference call with reporters. In a news release, she called the agreement "historic," and said the practices set out in it would "fill gaps by providing assistance to borrowers who don't fit the financial situations covered in the previously announced initiatives, placing Countrywide and ACORN at the forefront of assisting more homeowners across the nation to stay in their homes."
"We hope that other servicers will follow suit," Hurd said during the teleconference.
Shares of Countrywide (CFC 6.65, +0.07, +1.1%) traded 1.5% higher Monday afternoon, changing hands at $6.68, up 10 cents.
Countrywide has struggled to come up with a publicity-friendly plan for dealing with the skyrocketing number of defaults on its books, even as federal regulators have scrambled to put together a plan to help avoid foreclosures.
The Bush administration debuted its own subprime plan in December, under which the government and banks like Countrywide, Citigroup Inc. (CIT 25.01, +0.51, +2.1%) , Washington Mutual Inc. (WM 16.80, -1.28, -7.1%) and Wells Fargo & Co.(WFC 29.54, +0.06, +0.2%) would work together to help keep borrowers in their homes.
Industry research firm RealtyTrac said Jan. 30 that foreclosure filings were up 75% in 2007, with some particularly hard-hit states seeing a 79% rise. The data showed that more than 2 million properties went into foreclosure in that 12-month period, with December seeing an 86% increase in foreclosure activity from the same month a year earlier.
At the end of last year, Countrywide said that nearly 7% percent of loans in its servicing portfolio were delinquent -- a jump of nearly two percentage points from the same period the year before. Of those, more than 1% faced immediate foreclosure, with that number expected to rise in the next few months.
Countrywide reported on Monday that it had completed more than 12,000 workout programs during December, which included 10,000 loan modifications for its customers. The company said it is currently working with more than 100,000 additional borrowers to find affordable workout solutions. About 3,200 employees are working with these customers, company representatives said on Monday's call.
Workout solutions can include modifications to a loan, which often involves lowering the rate for a period of time if a borrower is unable to make payments after the loan resets. They also include repayment plans, which can work for borrowers with temporary interruptions in their ability to pay.
Countrywide had been expected to announce Monday's agreement last month, but that plan was put on hold after news broke that the lender would be acquired by Bank of America Corp. (BAC 42.14, -0.02, 0.0%) in a $4.1 billion, all-stock deal.
How effective government and industry programs have been is debatable. The Mortgage Bankers Association reported last month that subprime ARM borrowers who already had a repayment plan or loan modification in place but were unable to avoid default anyway accounted for 40% of the subprime ARM foreclosures.
But Wade Rathke, chief organizer of Acorn, said Monday's announcement was significant. There are many firms that are still trailing in providing sufficient foreclosure relief efforts, he said, and Countrywide could lead by example on this front.
"As events have proven, this was a more serious situation than anyone anticipated," he said during the teleconference. "There are companies that really need to step up," Rathke said, adding that Countrywide's initiative could set the stage for "a more uniform level of progress across the field."
While Monday's announcement focused on struggling subprime borrowers, in coming months, Countrywide will also evaluate the best way to help another group of borrowers who may need it -- prime borrowers with pay-option loans, said Mary Jane Seebach, managing director of public affairs for Countrywide.
Countrywide customers seeking more information about workout programs or counseling can call the company's home retention division at 800-669-6650, or Acorn's housing call center at 866-67-ACORN.
Amy Hoak is a MarketWatch reporter based in Chicago
Last update: 4:00 p.m. EST Feb. 11, 2008
NEW YORK (MarketWatch) -- Help could be on the way for some subprime-mortgage borrowers caught up in the twin sagas of the plummeting housing market and besieged Countrywide Financial Corp., after the nation's largest home-loan lender said Monday that it's broadening efforts to help prevent foreclosures.
The Calabasas, Calif.-based company CFC (6.65, +0.07, +1.1%) is teaming up with the Association of Community Organizations for Reform Now, the advocacy group also known as Acorn, to expand an existing $16 billion program to help subprime borrowers avoid foreclosure and work out more manageable rates on their mortgages.
The new plan will be open to borrowers whether they are current on their payments or not, and they need not have adjustable-rate mortgages to apply, the company said.
It will allow all Countrywide borrowers with subprime loans to seek "workout" options, not just those with ARMs whose rates are due to "reset" at higher levels.
Many borrowers have struggled to stay current on payments that have reset to vastly higher rates -- a function of the many "hybrid" loan products popularized earlier this decade as a way stimulate the lending environment.
"All homeowners with a Countrywide subprime loan will get some kind of relief," said Maude Hurd, national president of Acorn, during a conference call with reporters. In a news release, she called the agreement "historic," and said the practices set out in it would "fill gaps by providing assistance to borrowers who don't fit the financial situations covered in the previously announced initiatives, placing Countrywide and ACORN at the forefront of assisting more homeowners across the nation to stay in their homes."
"We hope that other servicers will follow suit," Hurd said during the teleconference.
Shares of Countrywide (CFC 6.65, +0.07, +1.1%) traded 1.5% higher Monday afternoon, changing hands at $6.68, up 10 cents.
Countrywide has struggled to come up with a publicity-friendly plan for dealing with the skyrocketing number of defaults on its books, even as federal regulators have scrambled to put together a plan to help avoid foreclosures.
The Bush administration debuted its own subprime plan in December, under which the government and banks like Countrywide, Citigroup Inc. (CIT 25.01, +0.51, +2.1%) , Washington Mutual Inc. (WM 16.80, -1.28, -7.1%) and Wells Fargo & Co.(WFC 29.54, +0.06, +0.2%) would work together to help keep borrowers in their homes.
Industry research firm RealtyTrac said Jan. 30 that foreclosure filings were up 75% in 2007, with some particularly hard-hit states seeing a 79% rise. The data showed that more than 2 million properties went into foreclosure in that 12-month period, with December seeing an 86% increase in foreclosure activity from the same month a year earlier.
At the end of last year, Countrywide said that nearly 7% percent of loans in its servicing portfolio were delinquent -- a jump of nearly two percentage points from the same period the year before. Of those, more than 1% faced immediate foreclosure, with that number expected to rise in the next few months.
Countrywide reported on Monday that it had completed more than 12,000 workout programs during December, which included 10,000 loan modifications for its customers. The company said it is currently working with more than 100,000 additional borrowers to find affordable workout solutions. About 3,200 employees are working with these customers, company representatives said on Monday's call.
Workout solutions can include modifications to a loan, which often involves lowering the rate for a period of time if a borrower is unable to make payments after the loan resets. They also include repayment plans, which can work for borrowers with temporary interruptions in their ability to pay.
Countrywide had been expected to announce Monday's agreement last month, but that plan was put on hold after news broke that the lender would be acquired by Bank of America Corp. (BAC 42.14, -0.02, 0.0%) in a $4.1 billion, all-stock deal.
How effective government and industry programs have been is debatable. The Mortgage Bankers Association reported last month that subprime ARM borrowers who already had a repayment plan or loan modification in place but were unable to avoid default anyway accounted for 40% of the subprime ARM foreclosures.
But Wade Rathke, chief organizer of Acorn, said Monday's announcement was significant. There are many firms that are still trailing in providing sufficient foreclosure relief efforts, he said, and Countrywide could lead by example on this front.
"As events have proven, this was a more serious situation than anyone anticipated," he said during the teleconference. "There are companies that really need to step up," Rathke said, adding that Countrywide's initiative could set the stage for "a more uniform level of progress across the field."
While Monday's announcement focused on struggling subprime borrowers, in coming months, Countrywide will also evaluate the best way to help another group of borrowers who may need it -- prime borrowers with pay-option loans, said Mary Jane Seebach, managing director of public affairs for Countrywide.
Countrywide customers seeking more information about workout programs or counseling can call the company's home retention division at 800-669-6650, or Acorn's housing call center at 866-67-ACORN.
Amy Hoak is a MarketWatch reporter based in Chicago
04/02/08
FED AUCTIONS TO CONTINUE
The Federal Reserve said Friday it will pump $60 billion in cash to commercial banks in two auctions to be held this month as part of its ongoing efforts to stem a persistent credit crunch that has stalled the nation's financial system.
The new auctions will be held Feb. 11 and Feb. 25 through the Fed's term auction facility, continuing a new auction process it announced in December to bolster bank reserves and raise confidence levels.
The central bank said it will keep holding such auctions "for as long as necessary to address elevated pressures in short-term funding markets."
The announcement comes after the Fed slashed its key interest rate target by 125 basis points this month -- its largest monthly move in over two decades.
The new auctions will be held Feb. 11 and Feb. 25 through the Fed's term auction facility, continuing a new auction process it announced in December to bolster bank reserves and raise confidence levels.
The central bank said it will keep holding such auctions "for as long as necessary to address elevated pressures in short-term funding markets."
The announcement comes after the Fed slashed its key interest rate target by 125 basis points this month -- its largest monthly move in over two decades.
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