Opening Bell: 08.18.11

Author:
Updated:
Original:

Morgan Stanley Cuts Outlook, Cites Threat Of Recession (Reuters)
Morgan Stanley slashed its global growth forecast for 2011 and 2012, saying the U.S. and the euro zone were "dangerously close to a recession", and criticized policymakers in Washington and Europe for not acting more decisively to contain the sovereign debt crisis. The bank cut its global gross domestic product growth forecast to 3.9 percent from 4.2 percent for 2011, and to 3.8 percent from 4.5 percent for 2012.

Fed Eyes European Banks (WSJ)
The New York Fed recently has been holding extensive meetings with the lenders to gauge their vulnerability to escalating financial pressures. The Fed is demanding more information from the banks about whether they have reliable access to the funds needed to operate on a day-to-day basis in the U.S. and, in some cases, pushing the banks to overhaul their U.S. structures, the people familiar with the matter say. Officials at the New York Fed "are very concerned" about European banks facing funding difficulties in the U.S., said a senior executive at a major European bank who has participated in the talks.

S&P Backs French Triple-A Rating (WSJ)
"We're confident in the triple-A rating, stable. We have confirmed it, we confirm it today," said Carol Sirou, the head of S&P in France, in an interview on French radio. "There are several rumors, but we never comment on them."

Lawyer: SEC Files Were Illegally Destroyed (NYT)
An enforcement lawyer at the Securities and Exchange Commission says that the agency illegally destroyed files and documents related to thousands of early-stage investigations over the last 20 years, according to information released Wednesday by Congressional investigators. The destroyed files comprise records of at least 9,000 preliminary inquiries into matters involving notorious individuals like Bernard L. Madoff, as well as several major Wall Street firms that later were the subject of scrutiny after the 2008 financial crisis, including Goldman, Lehman, Citi and Bank of America...The agency’s records were routinely destroyed under an S.E.C. policy, since changed, that called for the disposal of records of a preliminary inquiry that was closed if it did not get upgraded to a formal investigation, according to Congressional records and people involved in inquiries into the matter.

Grassley Questions SEC Over Records Claims (Bloomberg)
U.S. Senator Charles Grassley asked the Securities and Exchange Commission to answer allegations that the agency destroyed files from initial investigations of firms including Goldman Sachs Group, SAC Capital and Bernard Madoff Investment Securities LLC. Grassley, the top Republican on the Senate Judiciary Committee, made the request in a letter to SEC Chairman Mary Schapiro dated yesterday, citing claims by an agency employee that more than 9,000 such files have been purged. The Iowa lawmaker asked Schapiro to explain whether the SEC routinely destroys documents related to so-called matters under investigation that are dropped in their initial phases. “It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence,” Grassley said in a statement. “If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”

Pope Demands Greater Ethics In Economic Policy (AP)
He said: "Man must be at the center of the economy, and the economy cannot be measured only by maximization of profit but rather according to the common good." "The economy doesn't function with market self-regulation but needs an ethical reason to work for mankind," he told reporters traveling aboard the papal plane. He said the current crisis shows that a moral dimension isn't "exterior" to economic problems but "interior and fundamental."

In Shades Of Panic Past, A Dash To Cash (WSJ)
Investors yanked a whopping $30 billion from equity mutual funds last week, according to the Investment Company Institute. That isn't just the biggest weekly outflow since October 2008, it is also larger than any outflows for a whole month since that time. This flight to cash—both by households and institutions—is a warning sign for growth. Such recurring risk aversion was a key reason the stock market crash of 1929 begat the Great Depression, as none other than current Fed Chairman Ben Bernanke argued in a 1983 research paper.

US Inquiry Eyes S&P Ratings Of Mortgages (NYT)
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews.

Fed May Have Bullets Left, But Are They Blanks? (Reuters)
Y/N/maybe?

BofA Mortgage Risk May Rise in MBIA Case (Bloomberg)
If New York Supreme Court Justice Eileen Bransten and judges in similar cases across the country rule that the issue of “causation” doesn’t apply -- meaning it’s enough to show that the loan was improperly made -- it “could significantly impact” Bank of America’s potential costs, the bank said in a regulatory filing this month. Such court defeats may add as much as $9 billion to what Bank of America owes bond insurers, according to hedge fund Branch Hill Capital, which is betting against its stock and has invested in MBIA. A victory for Armonk, New York-based MBIA may also strengthen claims by mortgage-securities investors that want the Charlotte, North Carolina-based bank to pay more than the $8.5 billion it’s offered them as a settlement.

A Bid To Rename Homo Sapiens (LS)
For about 250 years, our species has been known as Homo sapiens, a scientific name in Latin that means "wise man." Given the havoc humans are wreaking on natural systems, putting ourselves and so many other living things in peril, we don't deserve this name, contends Julian Cribb, an Australian science writer and book author. In a letter published in the Aug. 18 issue of the journal Nature, Cribb makes a proposal. "Changing our species name might risk infringing some of the hallowed rules of nomenclature, but it would send an important signal about our present collective behavior," he writes. Cribb has no suggestion for a new name, "because I want humanity at large to discuss this issue — not just scientists," he said.

Related

Opening Bell: 05.08.12

When Facebook Met Wall Street (WSJ) On Monday, investors piled into the hotel to hear what Mr. Zuckerberg and his lieutenants had to say about the offering. At one point, the line, leading to a second-floor ballroom where the meeting was scheduled to be held at 11:45 a.m., stretched down to the first floor and spilled out of the hotel for nearly half a city block. At least one investor waiting in line said he didn't expect anything to be revealed that wasn't already in Facebook's securities filings. Rather, he was there to take in the show, and lunch (which was Cobb salad and grilled chicken). A 30-minute video about Facebook, which had been widely distributed before Monday, led the lunch, according to attendees. The next part of the presentation was briefly delayed by Mr. Zuckerberg's absence. The CEO was in the bathroom, explained Chief Financial Officer David Ebersman to attendees. (Mr. Ebersman wore a navy suit.) Yahoo CEO Apologizes in Memo, Board Meets (Reuters, earlier) Yahoo Inc's board convened on Monday afternoon to discuss the mounting upset surrounding Chief Executive Scott Thompson, who has apologized to employees after being accused last week by activist investor Daniel Loeb of padding his resume, a source with knowledge of the matter said..."I want you to know how deeply I regret how this issue has affected the company and all of you," Thompson wrote in his first extended memo to employees since the disclosures emerged on May 3. "We have all been working very hard to move the company forward and this has had the opposite effect. For that, I take full responsibility, and I want to apologize to you." Billion-Dollar Traders Quit Wall Street For Hedge Funds (Bloomberg) Wall Street’s biggest banks have lost almost two dozen of their most-profitable credit traders in the past 13 months as regulators limit the kind of risk-taking that amplified the housing crisis four years ago. As banks slash or defer pay and reduce the amount they’re willing to wager, the traders are seeing better opportunities at hedge funds and investment firms that seek to profit in markets lenders are retreating from. Wall Street Banks Depressed In Secular Shift (Bloomberg) To Kevin Conn, who has been analyzing bank stocks for 15 years, the investment climate for Wall Street’s biggest firms has entered the realm of science fiction. “It’s like that Ray Bradbury short story where it rains for months in a row,” said Conn, who works for Massachusetts Financial Services Co., referring to “The Long Rain,” published in 1950. “It’s one of these terrifically depressing short stories where the weather just never changes.” Spain To Spend Billions On Bank Rescue (FT) Spain is planning a state bail-out of Bankia, the country’s third biggest bank by assets, in a move likely to involve the injection of billions of euros of public money into the troubled lender. In an abrupt reversal of policy, the Spanish government, which had previously insisted that no additional state money would be needed to clean up the country’s banking sector, confirmed that an intervention was being prepared. OWS Mom Snubs Plea (NYP) Occupy Wall Street protester Stacey Hessler, 39, arrested in November for resisting arrest and disorderly conduct, yesterday refused an offer to have her charges dismissed and will instead face a trial...Hessler had originally planned to accept the judge’s offer of an adjournment contemplating dismissal, which erases the charge if the defendant stays out of trouble for six months, but later changed her mind, her attorney said. SEC Orders Probe Of Watchdog Office (WSJ) The Securities and Exchange Commission has ordered an independent inquiry into allegations of sexual misconduct by current and former staff working for its office of the inspector general, according to a person familiar with the matter. The complaint includes allegations that the misconduct compromised certain investigations of the SEC, according to the person familiar with the situation. Apollo's Profit More Than Doubles (WSJ) For the first quarter, Apollo reported a profit of $98 million, or 66 cents a share, up from a year-earlier profit of $38.2 million, or 33 cents a share. Economic net income rose to $1.10 from 99 cents a year earlier. Analysts surveyed by Thomson Reuters expected 78 cents a share...Total revenue rose 12% to $776.7 million, far better than the $547 million expected by analysts. Bank of America Offers Principal Reductions to 200,000 Homeowners (CNBC) “If people get these things and toss them, they won’t be eligible,” says Ron Sturzenegger, the Bank of America executive charged with providing solutions to borrowers in need of mortgage assistance. But the offer is real, and eligible borrowers could get as much as $150,000 knocked off the balance of their mortgages. It is all part of the $25 billion settlement reached this year between federal and state agencies and the nation’s five largest mortgage servicers over fraudulent foreclosure document processing (so-called “robo-signing”). No Repeating Slowdown Seen by U.S. With Banks to Housing (Bloomberg) Rising auto sales, improving bank credit and stabilization of housing are among the signs the economy is more resilient now than it was around the same time in 2010 and 2011, according to Marisa Di Natale, an economist at Moody’s Analytics in West Chester, Pennsylvania. “From where we sit right now, we think the economy looks fundamentally stronger,” Di Natale said. “Surveys of business and consumer confidence are better, the labor market data looks a lot better than it did last year, even some of the housing data looks better.” Ex-Tyco CFO: Gimme the $ I didn’t steal! (Reuters) Former Tyco International Chief Financial Officer Mark Swartz, who is serving a prison sentence for looting the company, has sued for $60 million in retirement and other money he says he is owed. The lawsuit, which was made public yesterday, accuses Tyco of breach of contract and unjust enrichment for not paying him some $48 million from an executive retirement agreement, $9 million in reimbursement for New York taxes, and other money. Winner Of Mexican Presidential Debate? Julia Orayen (AP) Who won Mexico's presidential debate? According to the media and Twitter frenzy, at least, the victor wasn't any candidate but a curvaceous model in a tight gown who puzzled millions by appearing on stage for less than 30 seconds during the showdown. Julia Orayen has posed nude for Playboy and appeared barely dressed in other media, but she made her mark on Mexican minds Sunday night by carrying an urn filled with bits of paper determining the order that candidates would speak. She wore a tight, white dress with a wide, tear-drop cutout that revealed her ample decolletage. The image was splashed across newspaper front pages and websites by Monday. "The best was the girl in white with the cleavage at the beginning," tweeted former Mexican Foreign Minister Jorge Castaneda, who is also a New York University professor...Alfredo Figueroa, director of the Federal Electoral Institute responsible for organizing the debate, blamed the incident on a production associate hired by the institute to help with the debate. The institute later issued an apology to Mexican citizens and the candidates for the woman's dress.