December 15, 2011: Fitch Downgrades Banks, Including Bank of America and Goldman

December 15, 2011

JLN Interest Rates - http://www.jlninterestrates.com


Conversation Starter

Celent Says Long-Term Investors Have Derisked Portfolios Due To Regulatory, Accounting Changes

According to a new report from financial research firm Celent, the financial crisis and regulatory changes - coupled with falling returns in traditional equities - have changed the long-term dynamics for buy-side firms. Of more immediate importance to the financial markets is that many long-term investors have derisked their portfolios in response to regulatory and accounting changes, including a move toward mark-to-market accounting and stricter capital requirements, as well as a lower institutional tolerance for risk. This shift has led many institutions to increase their buffers of liquid investments - with some institutions shunning illiquid investments altogether - and reduce the capital allocated to risky and volatile assets.

See the full report here:Celent: Derivatives and Investment Risk Solutions for the Buy Side: Optimizing the Risk-Return Equation



Six in Ten Americans Still Likely to Cut Back on Dining and Entertainment

NEW YORK , N.Y. - For the last several years the economy has been one of the hottest topics, and everyone - including politicians, economists, retailers, business owners, employees and consumers - has been following closely. Much has been said about Americans' cutting back, budgeting, and possibly, a "new normal". The Harris Poll has been tracking Americans' spending and savings plans for over three years and on the whole has not seen a tremendous amount of change. This month, similar to the last time, the questions were asked in May 2011, six in 10 U.S. adults say they are likely to decrease spending on eating out at restaurants (61 percent) and on entertainment (58 percent) within the next six months. Despite reducing their spending in these non-essential areas, Americans do not seem to indicate overwhelmingly  that they will be saving or investing more in the coming six months as 51 percent say they are likely to, and 49 percent say they are unlikely to do so. These numbers have remained generally constant since November of 2008, when 49 percent said they would save or invest more money.

See the full release here.

--Christine Nielsen



Lead Stories

Fitch Downgrades Banks, Including Bank of America and Goldman
Fitch Ratings has today taken rating actions on nine global trading and universal banks (GTUBs). The actions complete its assessment of the GTUBs, carried out in conjunction with a broad review of the ratings for the largest banking institutions in the world. Fitch has downgraded eight issuers’ Viability Ratings (VRs) and affirmed one, removing them from Rating Watch Negative where they were placed on Oct. 13, 2011.
http://jlne.ws/uqRggO

Investors Still Reluctant to Buy Euro Zone Bank Debt
CNBC
Warnings from rating agencies that they might broadly downgrade euro zone sovereign debt , in which the region's banks have a significant stake, have added to investors' reluctance to lend their dollars.
http://jlne.ws/vHz3D8

Bernanke worried Europe could hurt U.S.
CNN Money
Federal Reserve Board Chairman Ben Bernanke told Republican senators on Capitol Hill on Wednesday that he's concerned about European sovereign debt problems spilling over to the U.S. economy, according to senators.
http://jlne.ws/tid8RG

Bernanke Tells Senators Federal Reserve Has No Plan to Aid European Banks
Bloomberg
Federal Reserve Chairman Ben S. Bernanke told Republican senators the Fed has no plan to provide aid to European banks amid the region's sovereign debt crisis, according to two lawmakers who attended the meeting.
http://jlne.ws/usnweT

FOMC: Global Financial Markets Pose Downside Risk to U.S. Economic Outlook
Wall Street Cheat Sheet via Yahoo! Finance
To fulfill its dual mandate to foster maximum employment and price stability, the Federal Open Market Committee has decided to continue Operation Twist and keep interest rates at record lows.
http://jlne.ws/vC3Y5C

Text of Statement by Federal Reserve
New York Times
The full text of the statement released on Tuesday by the Federal Open Market Committee of the Federal Reserve.
http://jlne.ws/s8WZyF

FOMC Statement:: Economy Expanding "Moderately," Global Growth Slowing
Calculated Risk
Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth . While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated.
http://jlne.ws/trBFrl

Federal Reserve keeps monetary policy on ice
CNN Money
The Federal Reserve acknowledged the job market has improved slightly, but said the economy's immediate future remains on pins and needles.
http://jlne.ws/tBnCXR

How Federal Reserve policymakers affect the economy
The Post-Standard
The Federal Reserve's chief policymaking group, the Federal Open Market Committee, has vast power over the economy through its ability to set monetary policy.
http://jlne.ws/vhBqyj

What to Look for from the Fed in 2012
U.S.News & World Report LP via Yahoo! News
The Fed is treading water for now, but how long will it last?
http://jlne.ws/uR214f

Senate panel OKs bank critic Hoenig to FDIC
Market Watch
WASHINGTON (MarketWatch) - The Senate Banking Committee on Tuesday approved White House nominee Thomas Hoenig -- who recently retired as Kansas City Fed president - to be Federal Deposit Insurance Corp. vice chairman. Hoenig must still be approved by the full Senate before he can begin work at the agency.
http://jlne.ws/sDE8yd

Mortgage Rates Sink to New Low
PR Newswire via Yahoo! Finance
NEW YORK , Dec. 15, 2011 /PRNewswire/ -- The 30-year fixed mortgage rate fell to a new record low of 4.19 percent, according to Bankrate.com's weekly national survey.
http://jlne.ws/tIqEQc

Ben Bernanke Is an Ordinary American Homeowner
New York Magazine
Fed chairman Ben Bernanke, like lots of people, still owes the bulk of money on the $850,000 Washington, D.C. home he purchased in 2004. Like lots of people, he had to send proof of employment and pay stubs in order to get a loan. Also, like lots of people, he's refinanced a couple of times in the past couple of years at key junctures, reports.
http://jlne.ws/vfaBmu

**CN: He's just Benny From The Block.


Ben's birthday a bust for marts
New York Post
Ben Bernanke marked his 58th birthday by being Wall Street's party pooper.
http://jlne.ws/sc7yaU

Regulators know where MF Global funds went
Reuters via Yahoo! News
WASHINGTON (Reuters) - Regulators now have a more complete picture of money transfers in the final days of bankrupt brokerage MF Global, but must sort out which transactions were legitimate before more money can be released to customers, a top official told Reuters on Wednesday.
http://jlne.ws/udsXRU

MF Global puts harsh light on self-regulation
Reuters via Yahoo! News
WASHINGTON (Reuters) - Two weeks after MF Global's collapse, officials from the Commodity Futures Trading Commission briefed Senate staff on the brokerage firm's final days. When asked about reports that the brokerage firm had written checks that bounced when customers tried to cash them, the regulators had an admission that surprised the room: they didn't know about the bad checks."
http://jlne.ws/rq5NZi

MF Global Probe Said to Investigate Use of Funds to Post Margin
BusinessWeek
U.S. authorities are investigating whether MF Global Holdings Ltd. intentionally tapped customer funds to cover the bankrupt firm's margin payments on European government bond trades while lawmakers press top company officials on the possible misuse of as much as $1.2 billion.
http://jlne.ws/vWp56h

MF's Corzine said to know of customer-backed loan
Reuters via Yahoo! News
WASHINGTON (Reuters) - An MF Global employee told regulators that former chief Jon Corzine knew that the now-bankrupt brokerage firm used customer money to lend to a European affiliate, a CME Group executive said on Tuesday.
http://jlne.ws/vigGO3

Corzine Says He Didn't Order Misuse of Funds at MF Global
BusinessWeek
Jon S. Corzine, the former chairman and chief executive officer of MF Global Holdings Ltd., told lawmakers he "never gave any instructions to misuse customer funds" and didn't give orders that could be misconstrued.
http://jlne.ws/tCDVwo

Corzine Visited NY Fed as MF Global Sought Primary Dealer Status
BusinessWeek
Jon S. Corzine, former chairman and chief executive officer of MF Global Holdings Ltd., met with New York Federal Reserve officials in 2010 as the broker sought to become a primary dealer of government securities, Thomas C. Baxter Jr., general counsel of the New York Fed, said.
http://jlne.ws/u66EdP

Fire Bernanke? Not So Fast, Mr. Gingrich
Wall Street Journal Blogs
Newt Gingrichs promise to fire Fed chairman Bernanke isn't as easily executed as the Republican presidential nominee has often made it sound on the stump.
http://jlne.ws/ufJ3QH

Banks face E350bn Basel III shortfall
By Brooke Masters in London - Financial Times
European banks will have to raise nearly E200bn ($260bn) in new capital or cut their balance sheets by nearly 20 per cent, to achieve the tougher new Basel III banking reform rules that start taking effect in 2013, a new study has found.
http://jlne.ws/uBVBsA

Fitch cuts ratings on 5 European banks
AP via Yahoo! News
Fitch Ratings on Wednesday downgraded the debt ratings for five major European commercial banks and cooperative banking groups, citing the eurozone crisis and stronger headwinds facing the banking sector.
http://jlne.ws/sKLaSX

U.S. runs $137 billion deficit in November
Market Watch
WASHINGTON (MarketWatch) -- The federal government ran a budget deficit of $137 billion in November, the Treasury Department reported Monday, keeping its finances in the red in the second month of the fiscal year. The government spent $290 billion in the month and took in $152 billion, pushing the fiscal year-to-date deficit to $236 billion. For the first two months of the year, the U.S. is ...
http://jlne.ws/vk4Zyr

U.S. Growth Decouples From Debt as JPMorgan Sees Lower Yield
BusinessWeek
The strengthening U.S. economy is proving no deterrent to the biggest rally in Treasuries since 2008, and America's largest bank says it may get even better for bond investors.
http://jlne.ws/sa5igb

Forecasters Miss by Most in 9 Months on Improving Data: Economy
BusinessWeek
U.S. economic data are outperforming expectations by the most in nine months, a trend Federal Reserve officials may incorporate into their policy statement tomorrow.
http://jlne.ws/vYHvTw

Pimco Leads 'Go-Anywhere' Funds Veering Off-Course as Rates Fall
BusinessWeek
Pimco Unconstrained Bond Fund and other "go-anywhere" bond funds created during the 2008 credit crisis went mostly to the wrong places in 2011 after missing a rally in Treasuries and buying riskier assets that lost ground.
http://jlne.ws/vY8j8I

Berkshire's Bond Holdings May Give Buffett Role in ResCap Plan
BusinessWeek
Warren Buffett's Berkshire Hathaway Inc., one of the largest creditors of government-owned Ally Financial Inc., may wind up playing a central role in the restructuring of its Residential Capital LLC mortgage unit.
http://jlne.ws/tdc5WD

Wall Street seeks dismissal of record bankruptcy
AP via Yahoo! Finance
Wall Street creditors are asking a judge to throw out the record bankruptcy filed by Alabama's largest county over more than $4 billion in debt.
http://jlne.ws/viQePz




Events

Fixed Income Markets 2012
January 24, 2012
Tabb Forum Looks At Changes Ahead And Staying Ahead In Fixed Incomes
http://jlne.ws/snQ3VO

Treasury Futures: Using International Fixed-Income and Money Market Spreads
January 31, 2012
The IFM Instructs On Using Fixed Income And Money Market Spreads
http://jlne.ws/u7MgUK

National Association of Home Builders' Show
February 10, 2012
Special Session With Fed's Bernanke Open To All Registered Attendees
http://jlne.ws/tEcqjW





Economic News

Jobless Claims in U.S. Decrease Last Week to Three-Year Low
BusinessWeek
The number of applications for unemployment benefits unexpectedly dropped last week to the lowest level in three years, showing the U.S. labor market is healing.
http://jlne.ws/tgqmJT

Skills 'Mismatch' Hurts Unemployed in U.S. as Job Openings Grow: Economy
Bloomberg
Federal Reserve policy makers yesterday said that while the American job market shows signs of improving, they are still concerned with the "elevated" level of unemployment. One reason may be because employers can't find qualified help, according to economists like Dean Maki.
http://jlne.ws/vMwla1

US pre-open: Manpower sees best hiring outlook since 2008
LONDON (SHARECAST) - The major US equity benchmarks are now pointing to average gains of 0.5% at the start of today's trading. That despite worse than expected economic numbers out in the pre-open and ahead of tonight's meeting of the Federal Reserve's Open Market Committee.
http://jlne.ws/v7kXpO

Industrial Production in U.S. Unexpectedly Fell in November
BusinessWeek
U.S. industrial production unexpectedly dropped in November for the first time in seven months, an indication of a pause in manufacturing as 2011 comes to a close.
http://jlne.ws/tzP3BT

U.S. Retail Sales Rose at Slower Pace in November: Economy
BusinessWeek
Retail sales rose in November at the slowest pace in five months, indicating American consumers were trying to live within their means heading into the holiday shopping season as wages dropped.
http://jlne.ws/rIYemC



Exchanges, Clearing Houses & MTFs

Javelin and CME Execute and Clear $4.1 Billion of Interest Rate Swaps in Real Time
PR Newswire
NEW YORK, Dec. 14, 2011 /PRNewswire/ -- Javelin Capital Markets, a swaps trading platform, and the CME, a swaps clearing house, today announced that they had executed and cleared over $4.1 Billion of interest rates swap trades in an average time of under 2 seconds-a market...
http://jlne.ws/v8rFBS

CME Group, Javelin clear first rate swaps in real time
Chicago Tribune
Javelin Capital Markets, an electronic trading platform for privately traded derivatives, said on Wednesday that it has executed and cleared over $4 billion in interest rate swaps through CME Group, the first time the trades have been cleared in real time.
http://jlne.ws/w1SRHR



Firms & Banks

BGC Partners Launches Hybrid Trading Platform for Treasury Inflation-Protected Securities (TIPS)
CNW Group via Yahoo! Finance
http://jlne.ws/rRAg9L

Software developer Broadway Technology gets investment from Goldman Sachs, others
Austin American-Statesman
http://jlne.ws/uofruY

Invesco Mortgage Capital and CYS Investments to See Uptick in Net Interest Income
Marketwire via Yahoo! Finance
NEW YORK, NY- For roughly three years, the central bank has kept overnight interest rates near zero as unemployment remains relatively high and housing issues persist.
http://jlne.ws/vmJFrn

First Asset Licenses Morningstar Equity, Fixed Income, and Managed Futures Indexes for ETFs
CNW Group Finance Press Releases via Yahoo! Finance
http://jlne.ws/sTLToD

Morgan Stanley spent $750K on lobbying in 3Q
AP via Yahoo! News
Morgan Stanley & Co. spent $750,000 in the third quarter to lobby the federal government on new financial regulations, complex trading investments and mortgage industry reforms, among other issues, according to a recent disclosure filing.
http://jlne.ws/t20ukF

JPMorgan Chase spent $2.45M on 3Q lobbying
AP via Yahoo! News
JPMorgan Chase & Co. spent $2.45 million to lobby the federal government in the third quarter on rules governing home mortgages, Wall Street reform and other issues, according to a disclosure report.
http://jlne.ws/ueYzId

Credit Agricole to cut jobs as loss looms
Reuters via Yahoo! News
PARIS (Reuters) - Credit Agricole will make a 2011 loss, write off 2.5 billion euros ($3.2 billion) worth of assets and cut 2,350 jobs in a cull of its investment banking operations, the French bank said on Wednesday in its second profit warning of the year.
http://jlne.ws/uwHLTr

Credit Suisse to Merge Private, Investment Bank Operations
http://jlne.ws/vjWgb0

State Street leaves UK and German bond markets
By Michael Mackenzie in New York and David Oakley in London - Financial Times
State Street, the large US custodian bank, has cited new regulations including the “Volcker rule” for its decision to quit the UK and German government bond markets just three months after becoming an official dealer.
http://jlne.ws/ucxkxk

Commerzbank boosts capital by 700 mn euros
AFP via Yahoo! News
Commerzbank, Germany's second-biggest bank needing 5.3 billion euros in fresh funds, said Wednesday a repurchase of securities will beef up its core capital by more than 700 million euros ($910 million).
http://jlne.ws/rJ6jzf

Goldman losing at least 37 partners
Boston Globe
Goldman Sachs has lost at least 37 partners in 2011 as the firm heads toward the end of its worst year for profit and share performance since 2008. The number is an estimate based on internal memos, company filings and news reports as the New York-based bank doesn't publicize departures.
http://jlne.ws/sYV8cx

Lloyds takes a gamble on chief’s health
By Sharlene Goff, Kate Burgess and Patrick Jenkins - Financial Times
Bushy-tailed and smiling was how the chairman of Lloyds Banking Group described António Horta-Osório as he confirmed the bank’s chief executive would return from a period of sick leave on January 9.
http://jlne.ws/svQSxa

Old Mutual to Sell Its Nordic Business for $3.2 Billion
By MARK SCOTT - NY Times
LONDON — British insurer Old Mutual agreed on Thursday to sell the Skandia Insurance Company, its Nordic savings and banking business, to the Swedish insurance company Skandia Liv for £2.1 billion, or $3.2 billion.
http://jlne.ws/uOrI9s





Regulators

IMF boosts emergency response powers
Washington Post
The International Monetary Fund could pour more than $100 billion in short-term loans into Italy under a program recently expanded as part of an effort to ramp up the fund's crisis fighting. But a broader bailout of the country remains problematic as European, IMF and other international officials debate how extensively the burden of Europe's rescue should be spread around the globe.
http://jlne.ws/tY0McD

EU Asks Deutsche Boerse-NYSE Clients, Rivals for Remedy Response
BusinessWeek
European Union regulators asked clients and rivals of Deutsche Boerse AG and NYSE Euronext whether the revised concessions offered this week are sufficient to eliminate antitrust concerns over their planned merger.
http://jlne.ws/w4jBnF

NY Fed Didn't Give Corzine Preferential Treatment, Baxter Says
BusinessWeek
MF Global Holdings Ltd. and Jon S. Corzine, the broker's former chairman and chief executive officer, didn't receive preferential treatment in a bid to become a primary dealer of government securities, said Thomas C. Baxter Jr., general counsel of the New York Federal Reserve.
http://jlne.ws/rTSG5L








Global News

European Central Bank monthly Bulletin
International Business Times
The European Central Bank responded to mounting market pressure and speculation of a rate cut this meeting, where the Governing Council voted to cut key interest rates by quarter basis point to 1.00%, the fourth move this year, while the Bank also cut the marginal lending facility by 25 bp to 1.75% .
http://jlne.ws/vGvivH

Europe's Central Bank Maneuvers Crisis Intervention
NPR
The European Central Bank has ruled out large scale bond purchases to save struggling countries from their mounting debts. But the ECB has said it will extend unlimited credit to European banks. Some observers say these low-interest bank loans could be a back door way to address the debt crisis. National banks would have a new source of cash to buy their home country's sovereign debt.
http://jlne.ws/vN1XXA

Brazil Rate Futures Yields Rise on European Debt Optimism as Real Advances
Bloomberg
Yields on most Brazilian interest- rate futures contracts rose after Spain sold more bonds than expected, spurring bets that stability in Europe may prompt the central bank to slow its pace of interest-rate cuts.
http://jlne.ws/vCEIao

Brazil Says Done With Stimulus to Reignite Growth, Lending
BusinessWeek
Brazil has taken the bulk of stimulus measures needed to reignite economic growth next year and sees no need to rely on state banks to help boost credit, Deputy Finance Minister Nelson Barbosa said.
http://jlne.ws/vXStlT

Italy government calls confidence vote on austerity
Reuters via Yahoo! News
ROME (Reuters) - Italy's government has called a confidence vote in parliament on Friday to speed up approval of a 33-billion euro ($43 billion)austerity package intended to restore market confidence in the euro zone's third largest economy. Minister for Parliamentary Relations Piero Giarda announced the confidence vote, expected early on Friday afternoon.
http://jlne.ws/vwagaf

Singh Says No Surrender as Markets Query India's Ambition
BusinessWeek
India's Prime Minister Manmohan Singh pledged to overcome opposition to opening the country's retail industry to companies like Wal-Mart Stores Inc., saying his two-decade reform agenda is the best way of reviving the slowest economic growth in two years.
http://jlne.ws/um6yPx

Czech Lawmakers Approve 2012 State Budget That Trims the Shortfall by 22%
Bloomberg
Czech lawmakers approved the 2012 state budget, endorsing a 22 percent deficit cut, as the government prepares crisis measures to mitigate the effects of the euro area's debt crisis.
http://jlne.ws/tMGjjm

China To Continue Prudent Monetary Policy Next Year - Xinhua
http://jlne.ws/tq8X31

Finnish central bank forecasts growth will drop from current 2.8 pct to 0.4 pct in 2012
Washington Post
HELSINKI - The Finnish central bank says economic growth in the Nordic country will fall from a predicted 2.8 percent this year to 0.4 percent in 2012, unless the euro debt crisis worsens. The governor of the Bank of Finland warns that economic growth will "at best be sluggish" in the next few years. In 2013, gross domestic product is expected to increase 1.8 percent.
http://jlne.ws/sqptH2

Libya Central Bank expected to have sanctions lifted
Reuters via Yahoo! News
UNITED NATIONS (Reuters) - Libya's central bank and a subsidiary are expected to have U.N. sanctions against them lifted on Friday in a move to ease a cash crunch since the country's civil war ended, diplomats said on Wednesday.
http://jlne.ws/rP9C5C

Japan central bank says business confidence falls
AP via Yahoo! News
A key central bank survey showed Thursday that confidence at major Japanese manufacturers fell over the last quarter, as the export-reliant country battled a strong yen and an increasingly precarious global economy.
http://jlne.ws/s63b18

French central bank chief mocks British economy
AFP via Yahoo! News
The head of the French central bank criticised the British economy on Thursday, arguing that ratings agencies are targeting the wrong country for a debt downgrade.
http://jlne.ws/sfrABG

Kenya central bank seeks to mop up $45 mln
Reuters via Yahoo! News
NAIROBI (Reuters) - Kenya's central bank said on Wednesday it was seeking to mop up 4 billion shillings from the market through repurchase agreements. The Central Bank of Kenya hoovered up 2 billion shillings on Tuesday at a weighted average of 14.156 percent.
http://jlne.ws/udrHw7















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