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Wednesday, September 16, 2009


Comerica Inc., Marshall & Ilsley Corp. and Regions Financial Corp. led bank stocks to their best gains in two months after Warren Buffett said the economy “hit a plateau at the bottom.”
Marshall & Ilsley, the biggest bank in Wisconsin, and Alabama’s Regions jumped as much as 11 percent. Comerica advanced more than 10 percent and Zions Bancorporation, the largest based in Utah, gained as much as 12 percent.
Buffett, the billionaire who runs Berkshire Hathaway Inc., said the residential real estate slump may be easing. That helped lenders held by Berkshire including Bank of America Corp. and Wells Fargo & Co., which both told an investor conference in New York this week they’re expecting more losses on home loans.

JPMorgan Chase & Co., the second- biggest U.S. bank, sold $2.53 billion of bonds backed by credit- card payments, according a person familiar with the transaction.
The top-rated securities, which will mature in a little less than one year, priced to yield 45 basis points more than the one-month London interbank offered rate, said the person, who declined to be identified because terms aren’t public. The sale was increased from $2 billion and was offered without the aid of a Federal Reserve program to encourage lending.
The issue provides evidence of growing appetite for bonds backed by consumer loans after the market was shuttered last year when the credit crisis sapped demand. The finance arm of General Electric Co. also sold bonds backed by credit-card payments this week outside of the Fed’s Term Asset-Backed Securities Loan Facility.
“The non-leveraged market for these bonds is deep enough for top-tier issuers to sell outside of TALF,” said Dan Castro, chief risk officer at Huxley Capital Management, an investment- management firm in New York. “Less-well-known names or issuers with less pristine portfolios still need the government support to issue.”
The TALF was opened in March to revive the market for securities backed by consumer loans. The program offers Fed loans toward the purchase of top-rated debt.
Average yields on credit-card asset-backed securities similar to those sold today relative to benchmark interest rates have fallen as much as 1.55 percentage points since March, according to JPMorgan data.
Sales of securities backed by auto loans, credit cards and student loans plunged 42 percent last year to $134 billion as scarce credit and the recession reduced demand for the debt, according to data compiled by Bloomberg.
Banks and finance companies have sold about $79 billion in debt eligible for the Fed program backed by borrowings ranging from automobile leases to small-equipment loans, according to Bank of America data. Asset-backed debt issuance in 2009 stands at roughly $124 billion, according to the data.

Fed Reviewing Banks' Commercial Real Estate Exposure
The Federal Reserve is involved a broad review of commercial real estate exposures at the nation's largest regional banks, which Fed sources say is both the result of concern in that area but part of the "new normal" for how they will be supervising banks.
People familiar with the examinations say the fed is "getting granular" looking, for example, at the differences in banks' concentration of construction loans vs. multifamily vs. motels and retail.
The effort began after the stress tests earlier this year identified commercial real estate as a major area of concern but recently ramped up in intensity. It principally involves what fed sources call "horizontal reviews" which is looking at the loss rates and concentrations of similar assets across different banks. This is how fed officials have said recently they would be normally reviewing banks.

WASHINGTON — Americans decidedly oppose the government's efforts to save struggling companies by taking ownership stakes even if failure of the businesses would cost jobs and harm the economy, a new poll shows.
The Associated Press-National Constitution Center poll of views on the Constitution found little support for the idea that the government had to save AIG, the world's largest insurer, mortgage giants Fannie Mae and Freddie Mac, and the iconic American company General Motors last year because they were too big to fail.
Just 38 percent of Americans favor government intervention — with 60 percent opposed — to keep a company in business to prevent harm to the economy. The number in favor drops to a third when jobs would be lost, without greater damage to the economy.
Similarly strong views showed up over whether the president should have more power at the expense of Congress and the courts, if doing so would help the economy. Three-fourths of Americans said no, up from two-thirds last year.

CMBS gets lift from mortgage modification tax rules
WASHINGTON, Sept 16 (Reuters) - Commercial mortgage backed securities got a lift on Wednesday from new U.S. Internal Revenue Service rules that make it easier to modify securitized mortgages without tax penalties.
The rules allow distressed property owners and servicers of mortgage-backed securities to negotiate over modifying the property's loan at any time. The mortgage no longer needs to be in default or imminent default to procure a modification under the rules.
The rule change, one of several actions the Treasury has considered to ease financing pressures in the recession-hit commercial real estate sector, applies mainly to borrowers, servicers and investors in loans that are part of trusts called real estate mortgage investment conduits (REMICs).
"We think the primary impact from this change will be a reduction of, and delay, in the ultimate loss realization to a trust," JP Morgan analysts Alan Todd, Michael Reilly and Meghan Kelleher wrote in a research report issued on Wednesday.
"Allowing a more proactive dialogue between borrowers and special servicers likely takes the most severe loss scenarios, in which properties are sold via forced liquidations into the trough of the market, off the table," they wrote.
CMBS indexes rallied on Wednesday, especially portions tied to riskier classes of bonds. The CMBX-5 "AJ" index jumped nearly 5 points to a mid-market price of 53.75, according to one dealer. The price has climbed about 15 points in the past month.
The rules, which take effect on Wednesday, allow modifications to include changes in collateral, guarantees, credit enhancements and changes to recourses associated with a loan, as long as the loan continues to be principally secured by real property.
The guidance comes as the industry is facing hundreds of billions of real estate loans that mature and need refinancing in the next three years. Financing is difficult to find as the value of commercial property, hit hard by the recession, continues to fall.

LONDON (Reuters) - Steel producers were too quick to restart idled capacity as demand remains weak and increased supply is putting downward pressure on steel prices, the chairman of a leading steel association said.
"Producers around the world very quickly ramped up their production, overfeeding the market," said Mel Wilde, chairman of UK-based International Steel Trade Association (ISTA), which has 85 members, including divisions of steel giants such as ArcelorMittal and Corus.
Wilde's comments late on Tuesday came after the chairman of the world's top steel producer ArcelorMittal braced to say that he believes U.S. and European steel markets will not return to pre-crisis levels next year.
"There is not enough discipline overall from the producers to allow sustainable price increases or stability because everybody's desperate to get more cash flow," said Wilde, who is also the managing director of UK-based steel trader Metalloyd.

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