Morning Scan

Thursday, August 5, 2010

Receiving Wide Coverage ...

Earnings Cheer: Lloyds Banking Group reported a profit in the first half of the year, its first in nearly two years, paving the way for the U.K. government to sell its stake; HSBC and Standard Chartered also reported that profits increased in the first half. The Journal said the banks have benefited from falling impairment charges against bad loans as the economy improves, though Lloyds also saw a modest increase in revenue. Across the Channel, Societe Générale said its net profit more than tripled in the second quarter, but also sounded a cautious note about the economy. The Times carried an AP article saying homebuilder PulteGroup reported a quarterly profit for the first time in more than three years.

Consumer Gloom: The Journal reported that Americans filed for bankruptcy protection in July, reversing a trend of declining filings over the previous three months and highlighting the continuing financial struggles of many consumers. A Post editorial said the national homeownership rate fell from the first to the second quarter after years of government policy aiming at the reverse. "To put it another way, the recession and its accompanying wave of foreclosures have wiped out the past decade's worth of increases in homeownership. And there's more trouble ahead." In the Times, "Breakingviews" panned a recent proposal by a top Morgan Stanley economist that the government loosen the rules on mortgage refinancing. "One problem is that the government has struggled to streamline the refinancing process. Another is figuring out who would pay any associated fees. But most important, the whole idea seems like a deliberate re-creation of the supercheap credit and lax lending standards that led to the financial crisis in the first place." Wall Street Journal, New York Times, Washington Post

GSE Despair: In the Journal's "Capital" column, David Wessel said one of the underappreciated conclusions to be drawn from the financial crisis is that it will cost far more to bailout Fannie Mae and Freddie Mac than Wall Street. "The government didn't nationalize the banks. Someday, it will sell its stake in GM. But it nationalized the mortgage market and hasn't found a way out. So taxpayers keep pumping money into Fannie and Freddie at a rate of greater than $1 billion a week." In the Times' "Market Place" column, David Gillen said "Fannie Mae has become the nation's hottest penny stock — and, perhaps, its most dangerous. Even though the shares are almost worthless, they are changing hands at a furious pace." Wall Street Journal, New York Times

Wall Street Journal

Morgan Stanley is nearing a deal to relinquish control of in-house hedge-fund firm FrontPoint Partners, in what the Journal said would be one of its first high-profile overhauls amid new management and financial regulation. It said Goldman Sachs is also trying to decide what to do with its two large proprietary-trading desks.

UBS was ordered to pay $80.8 million to Kajeet Inc., or 10 times the amount the Maryland marketer of cellphones originally invested in auction-rate securities, in what the paper called "another sign of the reckoning still dogging Wall Street for its role in investor losses during the meltdown."

The Small Business Administration's sweetened lending is proving a hit, but is now in limbo, drawing complaints from both borrowers and lenders.

The U.S. unit of HSBC is being investigated for possible violations of anti-money laundering rules and other federal laws, according to an SEC filing.

New York Times

The IRS said Wednesday it plans to overhaul a unit devoted to monitoring large corporations and wealthy individuals as it bolsters its focus on international tax evasion. The new unit will examine whether financial institutions are complying with the Foreign Account Tax Compliance Act, a new law that requires them to disclose the details about American clients with undeclared offshore accounts.

Washington Post

A column broke down at least seven studies required in the financial reform. "If the federal agencies charged with investor protection had been more watchful and had aggressively enforced existing laws before the financial crisis struck, we might not be in this mess. But there's no use grousing about money already lost," the paper said.


, with contributions from Sara Lepro and Rachel Witkowski.