Opening Bell: 08.07.13
Bank of England ties future rate rises to drop in unemployment (Reuters)
The Bank of England plans to keep interest rates at a record low until unemployment falls to 7 percent - something unlikely for another three years - in a major new departure for British monetary policy. Barely a month after Canadian Mark Carney took over from the long-serving Mervyn King as BoE governor, the central bank said on Wednesday that it would keep interest rates at 0.5 percent unless inflation threatened to get out of control or there was a danger to financial stability. "Until the margin of slack within the economy has narrowed significantly, it will be appropriate to maintain the current exceptionally stimulative stance of monetary policy," the BoE said.
Obama Outlines Plans for Fannie Mae and Freddie Mac (NYT)
Mr. Obama on Tuesday endorsed the thrust of bipartisan legislation from a Senate group that would “end Fannie and Freddie as we know them.” The so-called government-sponsored enterprises for decades bought and sold mortgages from financial institutions to provide money for the banks to keep lending to home buyers. Under Mr. Obama’s principles, which he said were reflected in the Senate bill taking shape, Fannie Mae and Freddie Mac would further shrink their portfolios and lose the implicit guarantee of a federal government bailout. Instead, private investors would be most at risk, with the government a secondary guarantor. “First, private capital should take a bigger role in the mortgage markets. I know that sounds confusing to folks who call me a socialist,” Mr. Obama said, drawing laughs and applause. “I believe that our housing system should operate where there’s a limited government role,” he added, “and private lending should be the backbone of the housing market.”
SEC's Hunt for Crisis-Era Wrongdoing Loses Steam (WSJ)
Securities and Exchange Commission enforcement officials have decided not to recommend filing civil charges against hedge-fund firm Magnetar Capital LLC, which teamed up with Wall Street firms to create mortgage securities that suffered billions of dollars in losses during the financial crisis, according to people familiar with the situation. The decision is a sign the SEC's investigations into whether companies or individuals broke the law with their conduct ahead of the crisis are running out of gas.
Libor Settlements Said to Ease CFTC’s Path in Rate-Swaps Probe (Bloomberg)
The $2.5 billion of settlements reached in the London interbank offered rate rigging scandal are compelling banks to hand over information in the probe of a separate financial benchmark tied to interest-rate derivatives. Barclays Plc, UBS AG and Royal Bank of Scotland Group Plc, the lenders fined in the Libor case, risk criminal prosecution in the U.S. under the settlement agreements if they’re seen as withholding evidence related to potential manipulation of the benchmark known as ISDAfix, according to a person with knowledge of the matter, who asked not to be identified because details of the investigation aren’t public.
Weiner calls 69-year-old opponent 'grandpa' at AARP mayoral forum (NYP)
Anthony Weiner went after his elder GOP opponent George McDonald yesterday, sarcastically referring to him as “grandpa” at, of all places, a forum sponsored by the AARP. The standoff started just before the debate, when the 48-year-old Weiner put his hands on the 69-year-old McDonald’s chest as he walked by, possibly to say hello. ... “He said, ‘What you going to do about it, grandpa?’ ”McDonald told The Post afterward. McDonald said he became outraged after feeling “two hard slaps on my chest.” “He reached around and slapped me with an open hand. It wasn’t some love tap,” McDonald said. The feud between the two has been simmering since at least last week, when McDonald called Weiner a “self-pleasuring freak” at a forum at a church in Laurelton, Queens.
Private-Equity Investors Take Profits on Bank Stakes (WSJ)
A handful of private-equity investors who poured money into banks during the financial crisis are cashing out, reaping billions of dollars in profits—in some cases doubling their money—even as many small lenders continue to struggle. Their success stands in contrast to dozens of other big investors who scooped up failed institutions but are still stuck with far less profitable holdings. The different outcomes show that, during banking crises, the lowest price doesn't necessarily make for the best deal. The investors who do better "are the ones who bought good franchises cheap, not distressed franchises very cheap," said Joshua Siegel, managing principal and chief executive of StoneCastle Partners LLC, a New York firm formed in 2003 to invest in banks.
TPG looks for more time to spend key fund (FT)
TPG, one of the world’s largest private equity companies, has taken the unusual step of asking investors in its $19bn flagship fund if it can have an extra year to spend $3bn of undeployed capital, underscoring the difficulty finding good deals in the aftermath of the global recession. ... In a handout accompanying a call with investors last week, TPG said the extension would allow the firm “to continue intense focus on performance” and would mean there would be “no need to begin raising TPG VII prematurely.”
Sony Brush-Off Leaves Daniel Loeb With Few Options (BreakingViews)
The civil brush-off from Sony appears to leave Mr. Loeb with few options. Even in a country more receptive to activist investors than Japan, it would not be easy to force a company to list a subsidiary against its will. Sony’s shares fell 5 percent on news of the board’s decision, suggesting investors expect Mr. Loeb to walk away. However, he does not appear to be giving up just yet. Though Mr. Loeb’s Third Point hedge fund said it was “disappointed” by the board’s decision, it welcomed Sony’s commitment to greater transparency – and promised further ideas for creating value.
Consumers Find Investors Eager to Make 'Peer-to-Peer' Loans (WSJ)
With more money chasing the loans, lenders such as Prosper are working hard to come up with enough borrowers to meet the demand. Each month, Prosper mails more than a million preapproved loan applications. In June, the company arranged $27.5 million in loans, a bit short of its goal. In July, it originated $30.3 million. Prosper and Lending Club together originated about $871 million in loans last year, more than double the prior year's total and up tenfold since 2008. Lending Club says it is on track to lend $2 billion this year.
A blunt Pope Francis targets free market economics (CNBC)
Analysts say Pope Francis—leader of some 1.2 billion Catholics—is not necessarily calling for the demise of free market theory. Instead, he's issuing a very strong warning to economic leaders over its future. "Like many people he thinks capitalism won't survive unless it decreases income disparity," said George Haley, professor of marketing and international business at the University of New Haven. ... "I don't think he's attacking capitalism or the wealthy, because if he did, that strategy would fail," said Joseph Pastore, a business professor at Pace University.
Manhattan Homes Under $3 Million Never Harder to Buy (Bloomberg)
Manhattanites with budgets that would buy mansions in most of America are discovering it’s tough to find even a two-bedroom apartment in New York as the inventory of homes shrinks. The number of available units for less than $3 million -- those generally considered nonluxury -- has plunged by the most on record, creating a shortage that’s unlikely to be alleviated any time soon as developers focus on ultra high-end condos that have set price records by wealthy investors.
French woman offers breast-feeding service to gay parents (Reuters)
A woman has posted an offer on a French website to breast-feed babies of homosexual male couples for 100 euros ($130) a day, stirring up media interest just weeks after a divisive same-sex marriage law was passed. ... "Our legal advisers are sure of this. It's illegal in France to sell maternal milk but this is a person proposing a service, not selling the milk in flasks."
Cop 'Upset' By Speeding Woman's Dying Dad Lie, Arrests Her (ABC)
A New Hampshire cop was so miffed when he discovered an "emotional" woman had lied to him about speeding in her car to get to her dying father that he later went to the woman's house and arrested her for driving with a suspended registration. "I'm pretty used to people trying to bend the truth to get out of speeding citations, but this woman preyed on my emotions as a human being," Christopher J. Cummings, the state trooper who made the arrest, told ABC News today. "She told me her father had stage four cancer, that he was breathing only six breaths a minute, and that she was trying to make it to the hospital before he passed," Cummings said.
