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Thursday, July 30, 2009


FDIC to start breaking up failed banks to attract buyers
The Federal Deposit Insurance Corp. is expected to split up financial institutions that have failed into appealing pieces and distressed chunks to attract favorable bids. Investors, such as private-equity firms, might consider taking on a bank's troubled assets, while traditional banks might bid on portions deemed more appealing. "We want banks to participate in the resolution process, but we know it's a tough time for banks to participate in the resolution process," said Joseph Jiampietro, a senior adviser to Sheila Bair, chairwoman of the FDIC. The Wall Street Journal (7/30)

Default fees make lenders reluctant to modify mortgages
The main factor blocking the Obama administration's campaign for mortgage modifications is the profitability of fees charged by lenders for delinquent mortgages, lawyers and industry experts said. Margery Golant, a lawyer in Florida who helps homeowners fight foreclosures, said lenders have no incentive to modify loans. "I don't think they're motivated to do modifications at all," Golant said. "They keep hitting the loan all the way through for junk fees. It's a license to do whatever they want." The New York Times (29 Jul.)

Reports of lending cuts in China prompt rise in risk aversion
The two largest state-owned banks in China reportedly plan to cut back on new loans during the last six months of this year. The news prompted risk aversion to increase, with the brunt of sales being felt by commodities and emerging-market assets. In the first half of the year, Chinese banks lent record amounts as Beijing lifted loan restrictions. "If China's policies are responsible for digging the global economy out of a hole earlier this year, then what happens next in China is unlikely to go unnoticed," said Andrew Wilkinson, a senior market analyst at Interactive Brokers. Financial Times (tiered subscription model) (29 Jul.)

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