Today's Top Stories Editor's Corner: An end-of-year note Also Noted: Knowledge Tree News From the Fierce Network:
Today's Top News1. Bank of America issues default notice on MBIA bonds
The nasty battle between Bank of America and bond insurer MBIA has escalated again. Bank of America, which purchased $136 million worth of the 5.70 percent senior notes due 2034 as part of a strategy to prevent MBIA from making critical covenant changes, has issued a notice of default to the company and the trustee for the notes. Bank of America also filed suit against MBIA in a New York state court, alleging MBIA interfered with Bank of America's tender offer to buy the bonds. MBIA was seeking to change covenants to help ensure that unmet obligations by its insurance unit would force the parent company into bankruptcy court. It announced last month that it was successful in its consent solicitation to make such a change, a move that some analysts felt reduced Bank of America's leverage in the overall legal war. Bank of America's move to issue the notice of default would appear to be a tactical step toward blocking the covenant change. The bank apparently thinks doing so will make increase the chances that the insurance unit will be placed into a liquidation proceeding, making it less likely that millions of dollars in claims held by Merrill Lynch will be paid off. Is the ultimate goal to push the MBIA parent into bankruptcy? If so, it would make it less likely that Bank of America will be forced to pay billions to settle claims that it fraudulently misrepresented the quality of mortgages that MBIA insured, the main bone of contention in the larger suit. The two companies are now preparing for that trial. For more: Related articles: Read more about: Bank of America, MBIA
2. New liquidity stress test underway
The Federal Reserve Board has initiated a new kind of stress test for major financial institutions, including many of the 19 banks subject to annual Dodd-Frank mandated capital-oriented stress tests. The model focuses on system-wide liquidity. Known internally at the Fed as "C-Lar" -- the liquidity version of the Fed's annual "comprehensive capital analysis and review" -- the new tests are "a sign that the Fed is stepping up its scrutiny of liquidity – one of the biggest issues revealed by the 2008 financial crisis – and testing not just access to cash at individual banks but how they would fare under system-wide financial stress," notes the Financial Times. The tests reflect the view of some regulators that short-term liquidity issues present massive risks that so far have not been addressed. The market for commercial paper, relevant Repos and short-term securitized products of all types loom large in this discussion. While there isn't a pass-fail grade to be rendered, unlike the capital stress tests, there may be some specific remedies handed down to banks. The article noted that, "If a bank's liquidity is called into question, Fed examiners could use the results to push them to adjust their funding or increase their stock of easy-to-sell assets. For example, a bank reliant on short-term funding could be pressured to issue more long-term debt if bank supervisors judge that a lender would not be sufficiently liquid in times of stress. Longer-dated debt typically is more expensive for banks and would raise their funding costs, hurting earnings." For more: Related articles: Read more about: Liquidity Stress Test 3. Bank of America donates vacant homes in settlement
A sad consequence of the mortgage meltdown has been the rise of blighted properties that are now owned by banks. As the number of these vacant properties has exploded, banks in some areas were accused of being slumlords. Deutsche Bank, for example, has been vexed by this issue in the Los Angeles area. One solution is to simply give away more vacant homes, effectively transferring the liability, and Bank of America has done just that. it plans to give 2,000 homes to Habitat for Humanity, which is the largest grant the organization has ever received. The giveaway was previously announced by the bank, but Habitat for Humanity only recently began taking delivery of the homes. "All donations are provided from Bank of America's portfolio of vacant real estate owned properties, whether through foreclosure, deed-in-lieu or other events…By turning vacant properties over to Habitat for reuse, we can help protect residents and communities from the dangers and economic damage posed by resulting blight and help stabilize and revitalize these neighborhoods," the bank said in a statement. This certainly makes for good public relations. At the same time, there's a less-discussed benefit: It fulfills a component of the historic $25 billion settlement between mortgage banks and government officials inked in February. Under the terms of the deal, banks can satisfy more than $2 billion of their obligation by donating or demolishing abandoned homes. So this would appear to be win for all parties, expect the original homeowner. For more: Related articles: Read more about: mortgages, Foreclosures 4. Husbands trading on wives' information
When husbands betray wives who have shared corporate secrets, the results can be disastrous. This is a whole new form of "cheating," but one with even more serious consequences, as it often brings prosecutors into the marital picture. Bloomberg has dug up a series of incidents in which husbands have secretly traded on insider information revealed to them in confidence by their spouses. The most interesting example involves Christie Hefner, former CEO of Playboy. She repeatedly warned her husband, after he mentioned casually on several occasions that he should perhaps buy and sell the stock, that it would be a terrible idea. In SEC testimony, Hefner said that in 1998, she went a step further, "assigning Playboy's general counsel, Howard Shapiro, to spell out the consequences Marovitz and his wife would face if he began trading Playboy shares. Shapiro prepared a memo for Marovitz, himself a lawyer, outlining the 'serious implications' of his trading in Playboy stock, according to the SEC. He warned him that 'all SEC rules regarding Christie's sale or purchase of stock are equally applicable to you, particularly the rules governing insider trading' and 'your purchase is imputed to Christie.' " Marovitz traded anyway, and was nabbed. It was more than awkward when he had to tell his wife that he was under investigation. They subsequently separated. For more: Read more about: insider trading 5. Hedge fund tough times in perspective
A recent Financial News article notes the spate of closures that have rippled through the industry. "At least six hedge-fund firms announced plans to close in November and two more joined the list this week, underscoring the shakeout hitting the industry from uncertain markets, tighter regulation and what some fund managers say are investors with ever-shorter time horizons. Some funds were hit by large requests from investors for cash, but others were just struggling to make money, fund managers and industry consultants say." Eight or 10 closures do not make for a definitive trend, but it does appear that we're running ahead of last year's pace. "Globally, 424 funds were liquidated in the first six months of 2012, 14% more than in the same period in 2011, according to data provider Hedge Fund Research. It hasn't yet published figures for the third quarter, but if the six-month pace holds, it would top the number of closures in both 2010 and 2011." This isn't great news. The real story, however, may be a much more striking lack of hedge fund launches. The number of launches rose steadily from about 650 in 2008 to more than 1,000 (roughly) in 2011. So far this year, we're running about even with last year's pace; 549 were launched in the first half of the year. That number may have plunged in the second half. We'll wait and see. The barriers to entry seem to be as high as ever. As of now, the prognosis for 2013 remains subdued. For more: Read more about: insider trading Also Noted
SPOTLIGHT ON... UBS Libor settlement hits $1.6B We'll have to wait until the settlement is actually announced to confirm the specifics, but it looks now as if the UBS settlement will top $1.6 billion. The settlement also includes a payment for alleged manipulation of the Tibor. The amount will be paid to the Justice Department, the Commodity Futures Trading Commission, the U.K. Financial Services Authority and the Swiss Financial Market Supervisory Authority. The announcement is expected early this week. Article Company News:
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | ||||||||||||||||||||||||||||||||||||||||||||||
Monday, December 17, 2012
| 12.17.12 | New liquidity stress test underway
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment