Reuters blog archive

from Financial Regulatory Forum:

Lehman: Barclays got $8.2 bln “windfall” from sale

Signs are displayed on the former Lehman Brothers, now Barclays Capital building in Times Square in New York September 23, 2008. REUTERS/Eric Thayer (UNITED STATES)   By Phil Wahba and Emily Chasan
   NEW YORK, Sept 15 (Reuters) - Lehman Brothers Holdings Inc <LEHMQ.PK> said on Tuesday that Barclays Capital Inc <BARC.L> got a $8.2 billion "windfall profit" from excess assets it took control of in the fire sale of Lehman's U.S. brokerage business a year ago.
   In court papers filed in federal bankruptcy court in Manhattan on Tuesday, Lehman claimed that "critical changes" were made to the sale in between the time the sale order was signed and the deal was closed, resulting in Barclays gaining control of assets that Lehman contends were not supposed to be part of the sale.
   Lehman filed for bankruptcy on Sept. 15, 2008, in the largest U.S. bankruptcy in history. Its flagship U.S. brokerage business was sold to Barclays less than a week later in a hurriedly-assembled deal.
    "Certain Lehman executives agreed to give Barclays an undisclosed $5 billion discount off the book value of securities transferred to Barclays, and later agreed to give billions more in so-called "additional value" that Barclays demanded, but the court never approved," Lehman said in the court filing.
    The charges come after Lehman received approval in June to probe whether Barclays got "too good of a deal" when it bought Lehman's brokerage business, as the British bank was able to quickly book a $4.2 billion gain on its $1.75 billion purchase. Barclays said at the time that it did not expect the probe to result in any additional claims.
  Lehman was allowed to probe Barclays because of the speed with which the deal with Lehman's was reached. "It's conceivable that mistakes were made," said Judge James Peck of U.S. Bankruptcy Court for the Southern District of New York at a hearing in June.
   Lehman alleged in the filing that Barclays had committed to pay former Lehman employees $2 billion in bonuses but never did and "never intended to do so" despite factoring them in to the terms of the sale.
   The difficulties with the valuations of assets and liabilities were "exacerbated the fact that many of the Lehman decision makers who 'negotiated' the transaction with Barclays had at the same time been offered lucrative" jobs at Barclays on condition the sale be closed, Lehman said.
    "This is an opportunistic claim," Barclays said in a statement on Tuesday. "Now that the economy has begun to stabilize the Lehman Estate is trying to re-trade the deal on the basis of a meritless argument."
   Lehman is asking the court to amend the deal and a hearing is scheduled for Oct. 15.
   The Trustee overseeing the liquidation of Lehman's North American brokerage business and return of assets to customers also said in a statement on Tuesday that "billions of dollars in additional assets" that Barclays claims it owns are "customer property" and were not authorized by the sale.
   "The transfer of these assets to Barclays would create an unfair windfall for Barclays at the expense of public customers," James Giddens, the trustee for the Liquidation of Lehman Brothers Inc. under the Securities Investor Protection Act said in the statement.
   The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.
 (Reporting by Emily Chasan and Phil Wahba, additional reporting by Chelsea Emery; Editing Bernard Orr) ((; +1 646 223 6114; Reuters Messaging: Keywords: LEHMAN/BARCLAYS 
Tuesday, 15 September 2009 23:26:12RTRS [nN1576688 ] {C}ENDS

from Financial Regulatory Forum:

A year after Lehman, Bernanke says recession likely over

U.S. Chairman of the Federal Reserve Ben Bernanke speaks about a year of economic turmoil at the Brookings Institution in Washington September 15, 2009. REUTERS/Jim Young    (UNITED STATES POLITICS BUSINESS)   By Caroline Valetkevitch
   NEW YORK, Sept 15 (Reuters) - A year after the Lehman Brothers collapse, Federal Reserve chief Ben Bernanke said on Tuesday the recession was likely over, while data supported hopes that recovery from the worst downturn in decades was advancing.
   But Bernanke said the recovery would be slow and it would take time to create jobs. Similar warnings came from the Bank of Canada and Bank of England, whose governor also said the bank could cut the interest rate it pays on commercial banks' deposits. For more see [ID:nN1523355].
   The comments came exactly one year after the collapse of Lehman Brothers investment bank, an event that set off the U.S. economy's worst recession since the 1930s and helped spark a global financial crisis.
   "Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time," Bernanke said after addressing a Brookings Institution conference. Fed officials meet next week to review their policy options.
   The U.S. Commerce Department said retail sales climbed 2.7 percent in August after declining 0.2 percent in July. It was the biggest monthly advance since January 2006 and well above expectations on Wall Street for a 2 percent increase.
   "Retail sales show the recovery is here. This wasn't just autos, it wasn't just gasoline. This was the U.S. consumer getting out of their foxhole," said T.J. Marta, market strategist at Marta on the Markets in Scotch Plains, New Jersey. "This is indisputably a good number."
   Readings on manufacturing in the New York region and on national producer prices also came in stronger than expected.
   Stocks in Europe and the United States rose after the retail data, with the benchmark Standard & Poor's 500 index <.SPX> gaining 0.3 percent to end at 1,052.63, while U.S. Treasuries prices <US10YT=RR> fell, pulling benchmark yields back from two-month lows.
   The S&P is up about 55 percent since hitting 12-year lows in early March, but investors have been eager to see more definitive signs that the economy is getting better.
   In its monthly report, the Organization of Petroleum Exporting Countries, which left its world oil demand forecast for 2010 unchanged, also said a recovery will be slow and gradual, even though evidence shows the world economy should be improving.
   Crude oil prices in New York <CLV9> rose $2.07 to $70.93 a barrel.
   In Germany, the ZEW survey showed a smaller-than-expected improvement in the country's investor morale.
   The ZEW's expectations index for Germany rose to 57.7 from 56.1 in August, reaching its highest since April 2006, although economists had expected a bigger rise.
    Adding to the mostly upbeat comments on the economy in the United States, President Barack Obama told autoworkers the U.S. economy was on the mend. [ID:nN1549500]
   Even with signs of economic improvement, the rising U.S. unemployment rate has remained a top worry and autoworkers have been among the hardest hit by layoffs.
   The Bank of Canada's deputy governor, meanwhile, said a smooth economic recovery in Canada is not yet assured and that the strength of the Canadian dollar is one factor that could derail a comeback. (Reporting by Reuters reporters worldwide; Editing by Dan Grebler) ((; Tel: +1 646 223 6393; Reuters Messaging: Keywords: FINANCIAL/ 
Tuesday, 15 September 2009 22:46:09RTRS [nN1576055 ] {C}ENDS

from Financial Regulatory Forum:

U.S. says banks getting help cut lending in July

REUTERS/Cheryl Ravelo WASHINGTON, Sept 15 (Reuters) - The U.S. Treasury Department said on Tuesday that banks receiving government bailout funds cut their new lending by 10 percent in July.
A monthly survey of lending activities at the top 22 banks that have received capital injections showed their overall outstanding loan balance was down 1 percent from June to July because of less demand from borrowers and charge-offs by banks, the Treasury said.
"Total origination of new loans at the 22 surveyed institutions decreased 10 percent from June to July," the Treasury report said, adding that the value of new loans by all the banks was about $282 billion in July.
The decision to pump taxpayers' money into banks was motivated largely by lawmakers' wish for banks to keep lending, but a sluggish economy and more cautious consumers appear to be leading to more cautious use of credit.
Treasury said banks again reported that demand in the commercial real estate and the commercial and industrial loans markets "is well below normal levels," adding that "none of the respondents predicted change in demand in the near term."
Banks said real estate developers were reluctant to begin new projects "under current poor economic conditions, which include a rising supply of office space as firms downsize and vacancies rise."
In addition, total credit card outstanding balances fell by 1 percent from June to July, indicating that consumers were spending conservatively and paying down balances.
"Job losses, generally low levels of consumer spending and higher savings rates contributed to the decline in credit card balances," Treasury said. (Reporting by Glenn Somerville; Editing by Leslie Adler)
((; +1-202-898-8377; Reuters Messaging: Keywords: USA TREASURY/LENDING

Tuesday, 15 September 2009 22:52:52RTRS [nN1579620 ] {C}ENDS

from Financial Regulatory Forum:

U.S. Treasury to wind down financing program -WSJ

FINANCIAL/BAILOUT-GEITHNER    Sept 16 (Reuters) - The U.S. Treasury Department is expected to begin winding down the Supplementary Financing Program, which provides cash for Federal Reserve initiatives, to avoid hitting the $12.1 trillion debt ceiling, the Wall Street Journal reported, citing people familiar with the matter.
   The Treasury is expected to wind down the program to as little as $15 billion but government officials want to keep it in place in case it is needed in the future, the paper said.
   The Treasury Department could not be reached for comment.
   The Supplementary Financing Program was announced in September last year in which the Treasury issued bills apart from its regular borrowing program. Last fall, the Treasury had raised almost $560 billion by issuing bills under the program. (Reporting by Santosh Nadgir in Bangalore; Editing by Dan Lalor) ((; within U.S +1 646 223 8780; Outside U.S +91 080 4135 5800; Reuters messaging:
Wednesday, 16 September 2009 06:40:26RTRS [nLG711102 ] {C}ENDS

from FaithWorld:

U.S. religious conservatives and progressives profiled

The first ever comparative surveys of U.S. conservative and progressive (or liberal) religious activists has just been published by the Bliss Institute of Applied Politics at the University of Akron and Public Religion ResearchClick here for a link to the survey.

Many findings of the study -- based on a detailed survey answered by 1,866 progressive religious activists and 1,123 conservative ones -- will come as no surprise to followers of the U.S. political scene. But they will no doubt be closely scrutinized by both Republican and Democratic strategists.

from Financial Regulatory Forum:

US’ Geithner – less need for government in markets

FINANCIALS-GEITHNER/   By Glenn Somerville and David Lawder
   WASHINGTON, Sept 10 (Reuters) - U.S. Treasury Secretary Timothy Geithner said Thursday a strengthening economy means the government can end some of the extraordinary support it put in place for markets and prepare for a slow recovery.
   Appearing before the Congressional Oversight Panel for the $700 billion Troubled Asset Relief Program, Geithner said the economy was in far better shape now than a year ago when it was "on the verge of collapse," though it still had problems.
   "As we enter this new phase, we must begin winding down some of the extraordinary support we put in place for the financial system," he said. "We are now in a position to evolve our strategy as we move from crisis response to recovery."
   Geithner faced a grilling from the TARP panel members, who wanted to know why taxpayer-provided aid was so available for financial firms but not to other types of businesses. He suggested the decision to aid banks was paying off.
   At a later town hall meeting carried by CNBC television, Geithner told questioners that he was confident China will remain a big buyer of U.S. debt securities because it also wants to see the global economy regain its balance.
   But he said there must be tighter controls over risk-taking by banks, calling that "a critical part of creating a more effective financial system." He also said they will include tying executives' pay more tightly to performance in future.
   Geithner said banks that received capital injections have repaid more than $70 billion, reducing the government's total investment to $180 billion. and estimated another $50 billion will be repaid over the next 12 to 18 months.
   "We still have a long way to go before true recovery takes hold," he told the panel, adding it will be necessary to keep applying stimulus measures as necessary to get growth firmly back on track.
   Another senior Treasury official told reporters earlier that Treasury will allow its money market mutual fund guarantee program to expire on Sept. 18.
   The backstop program was created a year ago to prevent panic withdrawals of $3.4 trillion in savings after a key fund "broke the buck" when its net asset value per share fell below $1. The program took in $1.2 billion in fees from funds, but has not had any payouts.
   Geithner boasted that the economy now was "back from the brink" of the free fall that it was in when the Obama administration took office in January even though recovery likely will be gradual at best.
   Treasury intends to press ahead with so-called public-private investment funds to buy toxic assets. The senior Treasury official predicted that the first purchases should occur by early October.
   The official said there was a "great deal of interest" in purchasing toxic assets among investors and money managers running the funds, but the appetite among banks to sell their toxic assets has been less than anticipated.
   "We thought it would be necessary for banks to sell some of these assets in order to attract private capital. It turned out that they were able to raise the capital without selling the assets," the official said.
   Geithner said that by providing support for U.S. automakers, the government avoided substantial job losses and that a specially assembled Auto Task Force had avoided intervening in day-to-day decisions by management of General Motors Corp and Chrysler Corp.
   "Such intervention could seriously undermine the companies' long-term viability and, consequently, their ability to repay the taxpayer for its investment," Geithner said.
   He cited a litany of problems still facing the economy, including "unacceptably high" unemployment, a shaky mortgage market outside those covered by mortgage finance sources Fannie Mae <FNM.N> and Freddie Mac <FRE.N>, strained financing for commercial real estate enterprises and tight credit for small business.
   Given those conditions, "it is realistic to assume recovery will be gradual, with more than the usual ups and downs," Geithner warned.
 (Editing by Kenneth Barry) ((; Tel: +1-202-898-8377; Reuters Messaging:
Friday, 11 September 2009 01:03:18RTRS [nN10401052] {C}ENDS

from Financial Regulatory Forum:

US Treasury bans lobbying on pending TARP requests

no_talking    WASHINGTON, Sept 10 (Reuters) - The U.S. Treasury on Thursday posted new lobbying restrictions to curb political influence on investments from the government's $700 billion bailout program, prohibiting most communications once a funding application has been filed.
   The new rules, under development since January, allow Treasury officials to speak with registered lobbyists and other outside persons concerning general questions about the logistics and implementation of funding requests from the Troubled Asset Relief Program.
   But Treasury officials contacted about specific applications that are not logistical in nature must "immediately end the conversation," according to guidance published on the Treasury's website.
    The Treasury employees must report the incident immediately and the name of the lobbyist and other participants, along with a brief description of the conversation, will be posted on the Treasury website within three days, according to the guidance.
   In a set of frequently asked questions, the Treasury said once a company applies for funding, "its representatives cannot initiate communications with you (Treasury employees) orally about the merits of the application or proposal."
   Communications from an outside party at a "widely attended" industry gathering are exempted from the ban but not private conversations that may occur at such a gathering.
   The Treasury has similar rules in place to curb political influence on tax matters.
   Since the bailout program was launched in October 2008, the Treasury has invested over $200 billion into more than 600 banks in its Capital Purchase Program, of which more than $70 billion has been repaid.
   It has put up over $80 billion in support for the auto industry and invested another $115 billion to prop up American International Group <AIG.N>, Citigroup <C.N> and Bank of America <BAC.N>.
   The special inspector general for the TARP program, Neil Barofsky, recently conducted a study that found no evidence that the Treasury's TARP investments were unduly influenced by lobbyists or politicians, but he recommended that the controls over these decisions be improved. (Reporting by David Lawder; Editing by Kenneth Barry) ((; +1 202 898 8411)) Keywords: FINANCIAL/BAILOUT LOBBYING
Friday, 11 September 2009 01:11:53RTRS [nN10420373] {C}ENDS

from DealZone:

Road to fortune or highway to hell?

GM-OPEL/That will ultimately be the question asked about what kind of a future the German carmaker Opel faces.

Parent General Motors said on Thursday that it indeed wanted
to sell a majority stake in the unit to Canadian auto parts
group Magna and Russia's Sberbank, a decision long favoured by the German government under Chancellor Angela Merkel.

from Financial Regulatory Forum:

U.S. lobbying rules for bailout firms seen soon

USA/   WASHINGTON, Sept 4 (Reuters) - The U.S. Treasury Department is expected to soon issue final lobbying restrictions for companies receiving taxpayer funds from the government's $700 billion bailout program, two sources familiar with Treasury's thinking told Reuters on Friday.
   The rules to curb outside influence in allocation of bailout funds are expected to severely restrict contacts with lobbyists in applications for investments in banks and other firms under the Troubled Asset Relief Program (TARP).
   The new rules have been under development since January and could be published as early as next week, one source said.
   The Treasury has indicated the rules will be modeled on the approach taken in the Obama administration's $787 billion economic stimulus program to shield disbursements from lobbyist influence.
   Under those rules, once government employees establish they are speaking to a federally registered lobbyist regarding stimulus expenditures, they must decline or immediately end the conversation and report the incident. Similar restrictions would apply to the Treasury and financial regulators that evaluate TARP investment requests.
   The Treasury has similar rules in place to curb political influence on tax matters.
   A Treasury spokeswoman declined to comment on the timing of the new lobbying restrictions for TARP bailouts.
   When the Treasury announced the rule-making effort in January, it said it would be required to certify to Congress that "each investment decision is based only on the investment criteria and the facts of the case."
   Since the bailout program was launched in October 2008, the Treasury has invested $204.5 billion into over 600 banks in its Capital Purchase Program, of which more than $70 billion has been repaid.
   It has put up over $80 billion in support to the the auto industry and invested another $115 billion to prop up American International Group, Citigroup <C.N> and Bank of America <BAC.N>.
   The special inspector general for the TARP program, Neil Barofsky, recently conducted a study that found no evidence that the Treasury's TARP investments were unduly influenced by lobbyists or politicians, but he recommended that the controls over these decisions be improved.
   (Reporting by David Lawder and Rachelle Younglai; Editing by Andrew Hay)
   ((; +1 202 898 8411))
Friday, 04 September 2009 22:35:04RTRS [nN04189459] {C}ENDS

from Financial Regulatory Forum:

Europe split over U.S. bank capital plans

BRITAIN/   By Anna Willard and Huw Jones
   LONDON, Sept 4 (Reuters) - Continental European officials defended the globally-agreed Basel II capital rules for banks on Friday despite a U.S. call for its effective replacement with a tougher new regime within three years.
   Britain and Canada offered broad support for U.S. Treasury Secretary Timothy Geithner's plan for a radical reform so that banks set aside enough capital to avoid a rerun of the government bailouts during the credit crunch.
   But France and Germany were cool as they pushed for more countries to adopt the Basel II rules in full, something which the United States has resisted.
   Geithner wants the new framework to be broader and tougher, requiring banks to hold more capital and be in place by the end of 2012 -- an ambitious target as Basel II took a decade to thrash out. [ID:nN03126032]
   He was due to present his proposal to a meeting of G20 finance ministers in London on Friday and Saturday but was already meeting some opposition.
   French Economy Minister, Christine Lagarde, said revisions to Basel II would ensure banks have sufficient capital, and suggested that simply a "good and sound" explanation of what Basel II was needed to persuade G20 ministers it was enough.
   "It has been significantly improved, amended over time to take into account the... liquidity principle that was not part of the Basel II solution," Lagarde told reporters on the sidelines of the G20 meeting.
   "I think we need to see clearly what is the problem, where is the issue, and what is the position of Basel II as amended before we jump to any new rules."
   A G7 source said Germany was also wary and a board member of its biggest bank, Hugo Banziger of Deutsche Bank, said Basel II did not need replacing.
   "There is absolutely no reason why that should be replaced... Basel II is a very good platform. Minor things need to be adjusted and other things need to be developed," Banziger told a Bank of France panel discussion.
   European Central Bank Governing Council Members Christian Noyer and Nout Wellink said in a Bank of France report on regulation that planned refinements to Basel II would lead to improvements.
   "Blaming Basel II is certainly short-sighted. If we should blame something, we should blame Basel I," Noyer said.
   "I am not taking from what (Geithner) said that it is against Basel II. I think the problems he raises are to a large extent addressed now by the Basel Committee."
   British Finance Minister, Alistair Darling told Reuters in an interview he agreed with the United States that, across the world, banks needed to strengthen their capital position.
   "Inevitably, different countries have different emphases. It's very important that people recognise that the capital positions of banks have to be strengthened. It's important that we see all of these proposals as a whole."
   Canada's Finance Minister, Jim Flaherty, also offered broad support for Geithner's proposal.
   "Certainly we have common cause with the U.S. With respect to capitalization requirements. Without being immodest, these kinds of recommendations have the world converging toward the Canadian position," Flaherty told reporters.
   But Nout Wellink, who is also chairman of the Basel Committee on Banking Supervision which drafted the Basel II rules, said in the Bank of France report that changes to Basel II would make markets safer.
   "Taken together, the recent and planned initiatives of the Basel Committee will promote a more robust banking sector and limit the risk that weaknesses in banks amplify shocks between the financial and real sectors," Wellink said.
    Noyer said more changes were needed to address the root causes of risks to financial stability, such as monitoring of system wide risks from banks. But there was still no widely accepted method to measure such risk "if this risk is able to be captured", he said.
   Click on [G20] for more from the meeting.
   (Additional reporting by Louise Egan, Sumeet Desai and Matt Faloon, editing by Patrick Graham)
   ((Reuters messaging:; + 44 207 542 3326;
 Keywords: ECB BASEL/ 
Friday, 04 September 2009 21:37:25RTRS [nL4728085 ] {C}ENDS