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Thursday, November 19, 2009


Moody's says it might downgrade debt sold by major banks
Moody's Investors Service changed the assumptions it uses to set credit ratings on debt, a move that will affect hundreds of hybrid and subordinated notes issued by financial institutions worldwide. "The key concern is whether the ratings downgrades trigger investment mandate breaches which could force investors to sell," said Ben Byrne, a credit analyst at Nomura Australia. "We think the majority of the selling has already occurred, given that hybrids have been trading at prices significantly lower than their current ratings suggest are appropriate." Bloomberg (11/19)

Wells Fargo to pay ARS customers $1.4 billion to settle lawsuit
Wells Fargo customers across the U.S. will receive a total of $1.4 billion from the bank to settle a lawsuit brought by California Attorney General Jerry Brown regarding the bank's marketing and sale of auction-rate securities. The bank is also required to pay as much as $600,000 in expenses. "Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold," Brown said. Recorder (19 Nov.)

Clearer rules needed for counting stimulus jobs, GAO says
The Obama administration needs to give recipients of stimulus money better instructions on how to report the number of jobs created or saved by the spending, the Government Accountability Office said. Nearly 4,000 recipients authorized to receive stimulus money but have not gotten any reported saving or creating more than 58,000 jobs, the GAO said. At the same time, recipients that got a total of $965 million reported no job creation. The Washington Post (19 Nov.)

Low corporate-bond yields narrow life insurers' investment options
Tiny yields offered by corporate bonds, driven by this year's bond rally, are making it difficult for life insurers to invest their cash. Such companies are still buying bonds, but they are worried that small yields will make them vulnerable to losses if there is inflation, which could drive up interest rates. Residential-mortgage bonds by government agencies were once a popular refuge, but executive said broad competition for them is making the bonds too expensive. The Wall Street Journal (19 Nov.)

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