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August 1, 2008

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News on the capital markets, securities and financial industry

Morning Bell

SIFMA recommends moves to restore confidence in ratings
SIFMA's 37-person task force, made up of investors, issuers and underwriters, has released a 12-point recommendation for addressing issues with credit-rating agencies. Among other measures, the recommendations advise against proposals that would require the agencies to differentiate between different types of debt by assigning different symbols. "This is dynamic, impactful guidance. The 12 recommendations integrate the best thinking of senior, expert SIFMA members worldwide on how to restore trust in credit ratings," said Tim Ryan, president and CEO of SIFMA. Read SIFMA's news release regarding the task force and its recommendations. Reuters (7/31) , Bloomberg (7/31) , CFO.com (7/31) , InvestmentNews (7/31) , Financial Times (free content) (7/31)

Video View

Paulson: Stimulus helped, but housing worries linger

Treasury Secretary Henry Paulson said Thursday that an economic-stimulus package passed earlier this year will continue to prop up second-half economic activity. Paulson noted, however, that the housing slump remained a top concern. "Housing continues to be at the heart of our economic challenges and remains our most significant downside risk," he said during a speech in Washington. ClipSyndicate/Bloomberg (7/31) , Chicago Tribune/Associated Press (7/31)

Industry News

Greenspan's housing comments chill stock markets
Former Federal Reserve Chairman Alan Greenspan said Thursday that the housing slump had pushed the U.S. into a "once-in-a-century" crisis. Greenspan's comments, in turn, pushed the stock market into a slump during the last 30 minutes of trading Thursday. Greenspan said housing prices were "nowhere near the bottom" during a CNBC interview. Los Angeles Times (7/31)

Bain executive: More corporate bankruptcies in 2009
Sam Rovit, head of Bain & Company's corporate-renewal group, expects bankruptcies to increase next year. The financial-consulting firm is predicting 75 corporate bankruptcies this year and said the figure would jump to 105 in 2009. "The big question is going to be whether the economy goes into recession," Rovit said. "Our forecast is low growth as opposed to recession." The New York Times/Dealbook (7/31)

Freddie policies aimed at curbing foreclosures
Freddie Mac will help borrowers with Freddie-owned loans avoid foreclosure by doubling incentives from $250 to $500 for mortgage servicers. The troubled mortgage giant also plans to extend the time for foreclosures in Washington, D.C., and 20 states with relatively fast foreclosure processes. The Wall Street Journal (7/31)

Fitch downgrades FGIC's ratings
Fitch Ratings downgraded the financial-strength rating and long-term-issuer rating for FGIC and said further downgrades might be necessary. "Today's rating action is based on Fitch's expectation that FGIC will experience further credit deterioration on its book of business backed by residential mortgage-backed securities," according to a statement from Fitch. "This deterioration could lead to further additions in loss reserves, which will increase the possibility that FGIC could become subjected to some form of regulatory intervention." Bloomberg (7/31)

Government data increasingly showing signs of a recession
Government data released Thursday made it appear more likely that the country's economy has slid into a recession. The economy expanded more slowly than expected in the second quarter, while fourth-quarter numbers were revised to show a contraction. The fourth-quarter revision marked the first economic contraction since the recession of 2001. The New York Times (8/1)

Profit surge leading up to crunch heightens sense of gloom
A surge in corporate profits between 2005 and 2007 made drop-offs in the past year seem even more detrimental, according to commentators' analysis of government data. The drop-off has created an increased sense of gloom in the U.S. economy, which has only been partially offset by increased overseas profits for U.S. firms. The New York Times (8/1)

Other News

Former Bear Stearns CEO will depart JPMorgan Chase
The Wall Street Journal (8/1)

Regulatory Roundup

SEC advisory panel urges caution on fair-value proposal
A Securities and Exchange Commission advisory panel approved a series of recommendations Thursday that included a proposal to ease requirements for restating financial reports. The panel also cautioned the SEC on its approach to an investor-backed valuation scheme. "It's not rejecting the move toward fair value, but a recommendation of a balanced approach," said Edward Nusbaum, chief executive officer of accounting firm Grant Thornton and a member of the SEC's Advisory Committee on Improvements to Financial Reporting. Reuters (7/31)

Banks, dealers join N.Y. Fed to cut risks in derivatives
The Federal Reserve Bank of New York is leading efforts to reduce trading and settlement risks in over-the-counter credit-derivative markets. Dealers delivered a progress report to the New York Fed that includes a commitment to expand automated trade matching and electronic processing in other OTC markets. Additionally, dealers and large banks should soon have a central clearinghouse for the market. Financial Times (free content) (7/31)

SIFMA's group works with industry on expanded derivatives improvement processing plan

Investor Trends

Wind-energy ETFs draw investor interest
Exchange-traded funds focusing on wind energy have been drawing cash from investors as oil prices remain high. The ETFs, however, are hard to form, and some of the included companies draw minimal revenue from wind energy. That could make it difficult to measure how the wind-power ETFs are performing. The Wall Street Journal/Dow Jones Newswires (8/1)

Credit crisis marks first anniversary
The credit crisis is entering its second year, Prashant Gopal writes in a BusinessWeek news analysis. "Now as another August heaves into view, the credit crisis is a year bigger and -- like many 1-year-olds -- indiscriminate about where it makes its messes," Gopal writes. Observers have differing views on how much bigger the crisis will get. BusinessWeek (7/31)

Owners of major exchanges taking big share-price hits
NYSE Euronext and other owners of major stock exchanges are feeling the effects of the bear market in their own share prices even though trading volumes are largely up. Nasdaq Chief Financial Officer David Warren contends that the exchanges are being "unjustly tarred with the same brush that the Street has been using with the financial stocks." International Herald Tribune/Reuters (7/31)

SIFMA News

Research Management Conference, Sept. 26, New York

Five years have passed since the Global Research Settlement, and the business world is still evolving from the historic agreement. SIFMA's intense one-day Research Management Conference will discuss the future of research regulation as well as evaluate the ongoing and new unintended consequences of rules and regulations. The keynote speaker this year is Erik R. Sirri, director for division of training and markets for the U.S. Securities and Exchange Commission. Register or learn more about the event.

Fixed Income & Derivatives Operations Conference, Oct. 1 to 3, Miami

Sign up now to hear senior buy- and sell-side industry participants discuss new innovative technologies, regulatory initiatives, market trends and practices and ways to advance the industry's operations goals for the fixed-income and derivatives markets. Don't miss featured speakers Frederic Hannequart, executive director and chairman of Euroclear Bank SA/NV, and Anthony W. Ryan, assistant secretary of the Treasury for financial markets at the U.S. Department of the Treasury. Register or learn more about the event.

SmartQuote

You know you're getting old when you stoop to tie your shoelaces and wonder what else you could do while you're down there."

--George Burns,
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