MORNING BRIEFS

Obama administration leans toward bank-asset guarantees
The Obama administration is moving toward leaving illiquid assets on banks' balance sheets while backing the assets with government guarantees, as the other main option, putting distressed assets into a "bad bank," increasingly falls out of favor. U.S. Treasury Secretary Timothy Geithner has had reservations about the bad-bank approach, and Sen. Charles Schumer, D-N.Y., has joined him in those doubts. Bloomberg (04 Feb.)

Toxic-Asset Guarantees Gain Momentum in U.S. Bank-Rescue Talks
By Robert Schmidt

Feb. 4 (Bloomberg) -- The Obama administration, aiming to overhaul the $700 billion financial-rescue program, is refocusing on an effort to guarantee illiquid assets against losses without taking them off banks’ balance sheets.

Treasury Secretary Timothy Geithner is skeptical of setting up a so-called bad bank to hold the toxic securities, an option that still may form part of the final package, people familiar with the matter said. Senator Charles Schumer yesterday said debt guarantees are becoming “a favorite choice” of options because a bad bank would be too costly.

The debate comes as some former officials warn against measures that stop short of stripping banks of the illiquid investments tied to mortgages and related securities. Government protection for $400 billion of Citigroup Inc. and Bank of America Corp. assets hasn’t sparked investor confidence in the firms’ viability.

“The tough decisions need to be made,” Frederic Mishkin, a former Federal Reserve governor and research collaborator with Fed Chairman Ben S. Bernanke, said in a Bloomberg Television interview. “You have to make sure that when all is said and done, you actually have financial firms that are either healthy and the ones that are not healthy can’t stay in business.”

Time Warner Falls Into the Red
Time Warner and Time Warner Cable posted fourth-quarter losses on more than $24 billion in write-downs as the cable business saw subscribership drop.

Seeking Clues on Tech Sector From Cisco
Investors will be watching Cisco Systems' results after the market close for signs that the drop in tech spending has bottomed out.

Costco Wholesale Corp. warned that its fiscal second-quarter earnings will likely be well below consensus expectations. The warehouse retailer said earnings per share for the quarter ending Feb. 15 are likely to come in "substantially below" the current First Call estimate of 70 cents a share. Costco, which is due to report second-quarter results March 4, also said it won't provide earnings estimates for the rest of the fiscal year.