Merrill `Co-Opted' Analysts Backed Auction-Rate Debt

http://www.bloomberg.com/apps/news?pid=20601087&sid=aH7fMLO4eagk&refer=home# Aug. 1 (Bloomberg) -- Four days before Merrill Lynch & Co. stopped supporting the auction-rate securities market and left thousands of individual investors stuck with securities they couldn't sell, the firm's analysts recommended clients buy.

``Reports of the imminent demise of the auction market seem to be greatly exaggerated, again,'' analyst Kevin Conery wrote in a Feb. 8 research note. ``We continue to be impressed by the auction market's resiliency.''

The remarks show Merrill's researchers were ``co-opted'' during a seven-month drive by the New York-based firm's sales force to prevent a meltdown in the $330 billion market, Massachusetts Secretary of State William Galvin alleged yesterday in an administrative complaint filed in Boston. As the sales desk pushed analysts to publish upbeat notes, managers used gallows humor to complain about a ``collapsing'' market and the end of $2,000 dinners.

``Come on down and visit us in the vomitorium!!'' the auction-rate desk's managing director, Frances Constable, wrote to a co-worker in August, as demand began to dry up. ``Market is collapsing,'' another executive cited in Galvin's complaint said in a November 2007 personal e-mail. ``No more $2K dinners at CRU,'' a Manhattan restaurant where the wine list includes dozens of bottles for more than $1,000.

Bank losses shame disgruntled Swiss

http://news.bbc.co.uk/2/hi/business/7532251.stm

Bank losses shame disgruntled Swiss

 

In Zurich's central square trams rumble past the tourist stalls doing a gentle trade in Swiss souvenirs.

But while local chocolate, miniature cuckoo clocks and pen knives are still proving popular in the summer sunshine, another icon of Swiss identity is desperately trying to hold onto its good name.

Paulson suggests covered bonds

http://www.reuters.com/article/newsOne/idUSWEQ00007020080728
WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson said the nation's four biggest banks were ready to kick-start a market for covered bonds that could help significantly expand home mortgage financing.

"I believe covered bonds have the potential to increase mortgage financing, improve underwriting standards and strengthen U.S. financial institutions by providing a new funding source," Paulson said in prepared remarks for a press conference on Monday.

Covered bonds, issued by banks and secured by pools of assets like home loans, are widely used in Europe but have only become attractive in the United States since the segment of the mortgage securitization market driven by investment banks dried up last year amid a wave of foreclosures.

http://www.portfolio.com/views/blogs/market-movers/2008/07/08/what-is-a-covered-bond Covered Bonds Explained

http://en.wikipedia.org/wiki/Covered_bonds

http://europe.pimco.com/LeftNav/Bond+Basics/2006/Covered+Bond+Basics.htm Pimco explains covered bonds

http://www.iht.com/articles/2007/11/22/bloomberg/bxloan.php German banks agreed Thursday to suspend trading in pfandbrief mortgage bonds to "calm down" the market following a slump that has shut down trading in the securities, which are the biggest source of funds for home lenders in Europe.

The Association of German Pfandbrief Banks, an industry group that represents securities firms and borrowers in the $1.3 trillion German market, was following advice Wednesday from the European Covered Bond Council to withdraw from interbank trading until Nov. 26.

 

 

 

Cuil debuts

Ex-Google engineers debut 'Cuil' way to search www.cuil.com

By MICHAEL LIEDTKE – 4 hours ago

SAN FRANCISCO (AP) — Anna Patterson's last Internet search engine was so impressive that industry leader Google Inc. bought the technology in 2004 to upgrade its own system.

She believes her latest invention is even more valuable — only this time it's not for sale.

Patterson instead intends to upstage Google, which she quit in 2006 to develop a more comprehensive and efficient way to scour the Internet.

The end result is Cuil, pronounced "cool." Backed by $33 million in venture capital, the search engine plans to begin processing requests for the first time Monday.

Cuil had kept a low profile while Patterson, her husband, Tom Costello, and two other former Google engineers — Russell Power and Louis Monier — searched for better ways to search.

Now, it's boasting time.

For starters, Cuil's search index spans 120 billion Web pages.

Patterson believes that's at least three times the size of Google's index, although there is no way to know for certain. Google stopped publicly quantifying its index's breadth nearly three years ago when the catalog spanned 8.2 billion Web pages.

Cuil won't divulge the formula it has developed to cover a wider swath of the Web with far fewer computers than Google. And Google isn't ceding the point: Spokeswoman Katie Watson said her company still believes its index is the largest.

After getting inquiries about Cuil, Google asserted on its blog Friday that it regularly scans through 1 trillion unique Web links. But Google said it doesn't index them all because they either point to similar content or would diminish the quality of its search results in some other way. The posting didn't quantify the size of Google's index.

A search index's scope is important because information, pictures and content can't be found unless they're stored in a database. But Cuil believes it will outshine Google in several other ways, including its method for identifying and displaying pertinent results.

Rather than trying to mimic Google's method of ranking the quantity and quality of links to Web sites, Patterson says Cuil's technology drills into the actual content of a page. And Cuil's results will be presented in a more magazine-like format instead of just a vertical stack of Web links. Cuil's results are displayed with more photos spread horizontally across the page and include sidebars that can be clicked on to learn more about topics related to the original search request.

Finally, Cuil is hoping to attract traffic by promising not to retain information about its users' search histories or surfing patterns — something that Google does, much to the consternation of privacy watchdogs.

Cuil is just the latest in a long line of Google challengers.

The list includes swaggering startups like Teoma (whose technology became the backbone of Ask.com), Vivisimo, Snap, Mahalo and, most recently, Powerset, which was acquired by Microsoft Corp. this month.

Even after investing hundreds of millions of dollars on search, both Microsoft and Yahoo Inc. have been losing ground to Google. Through May, Google held a 62 percent share of the U.S. search market followed by Yahoo at 21 percent and Microsoft at 8.5 percent, according to comScore Inc.

Google has become so synonymous with Internet search that it may no longer matter how good Cuil or any other challenger is, said Gartner Inc. analyst Allen Weiner.

"Search has become as much about branding as anything else," Weiner said. "I doubt (Cuil) will be keeping anyone at Google awake at night."

Google welcomed Cuil to the fray with its usual mantra about its rivals. "Having great competitors is a huge benefit to us and everyone in the search space," Watson said. "It makes us all work harder, and at the end of the day our users benefit from that."

But this will be the first time that Google has battled a general-purpose search engine created by its own alumni. It probably won't be the last time, given that Google now has nearly 20,000 employees.

Patterson joined Google in 2004 after she built and sold Recall, a search index that probed old Web sites for the Internet Archive. She and Power worked on the same team at Google.

Although he also worked for Google for a short time, Monier is best known as the former chief technology officer of AltaVista, which was considered the best search engine before Google came along in 1998. Monier also helped build the search engine on eBay's online auction site.

The trio of former Googlers are teaming up with Patterson's husband, Costello, who built a once-promising search engine called Xift in the late 1990s. He later joined IBM Corp., where he worked on an "analytic engine" called WebFountain.

Costello's Irish heritage inspired Cuil's odd name. It was derived from a character named Finn McCuill in Celtic folklore.

Patterson enjoyed her time at Google, but became disenchanted with the company's approach to search. "Google has looked pretty much the same for 10 years now," she said, "and I can guarantee it will look the same a year from now."

www.cuil.com

More banks fail in Nevada

http://apnews.myway.com/article/20080726/D925G0B00.html CARSON CITY, Nev. (AP) - The 28 branches of 1st National Bank of Nevada and First Heritage Bank, operating in Nevada, Arizona and California, were closed Friday by federal regulators.

Bad news for banks

http://online.wsj.com/article/SB121672195606273245.html?mod=hps_us_whats_news Bank of America led the way with a 13.3% jump. On the year, the Dow is down 13%.

Financial stocks surged even after Wachovia and a number of regional banks posted bleak quarterly numbers. Wachovia shares soared 27.4%.

Mexico halts USD sale

http://www.reuters.com/article/bondsNews/idUSN2539033720080725 MEXICO CITY, July 25 (Reuters) - Mexico's central bank said on Friday it would suspend a daily sale of foreign reserves after the government bought $8 billion from the bank to cover foreign exchange requirements for the coming months.

Bankruptcies Soar for Small Biz

http://www.mcclatchydc.com/227/story/44717.html
WASHINGTON — Driven by a sour economy and skittish consumers, U.S. business bankruptcies saw their sharpest quarterly rise in two years, jumping 17 percent in the second quarter of 2008, according to an analysis by McClatchy.

Commercial filings for the first half of 2008 are up 45 percent from last year, as the national climate for commerce continues to deteriorate amid rising energy and food costs, mounting job losses, tighter credit and a reticence among consumers to part with discretionary income.

Congress Pursues $80 Oil With Trading Limits, Disclosure Rules

http://www.bloomberg.com/apps/news?pid=20601109&sid=aI3KfJ0v2akE&refer=home July 23 (Bloomberg) -- Congress may outlaw elements of oil futures trading that lawmakers found distorted demand and contributed to the 69 percent surge in prices in the past year.

U.S. legislators are considering limits on the number of oil contracts an investor can hold and may increase disclosure requirements. Speculators such as Goldman Sachs Group Inc. use the practices to bet on price swings, which may drive up prices, though they have no intention of taking delivery of underlying goods, lawmakers say.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aMz0dl3IdwjU&refer=home July 23 (Bloomberg) -- Fannie Mae, the largest U.S. mortgage finance company, couldn't find a buyer who would pay $6,900 for the three-bedroom house at 1916 Prospect St. in Flint, Michigan. So broker Raymond Megie, who is handling the foreclosure sale, advised cutting the price to $5,000.

Megie still couldn't sell it. ``There's oversupply,'' he said. The home sold in 2005 for $110,000.

Assured Guaranty Plunges, Bond Risk Soars on Review

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMef1JhNKKcQ July 22 (Bloomberg) -- Assured Guaranty Ltd., one of two bond insurers with a AAA ranking from the three major ratings companies, fell as much as 58 percent in New York trading after Moody's Investors Service said it may downgrade the firm. The cost to protect against a default by Assured Guaranty soared to a record. Credit-default swaps on Financial Security Assurance Holdings Ltd., the unit of Europe's Dexia SA that was also placed under scrutiny by Moody's, also rose to a record.

American Express Profit Falls on Higher Defaults

http://money.cnn.com/2008/07/21/real_estate/mortgage_delinquencies.ap/index.htm?postversion=2008072111 Delinquencies among commercial mortgages rose slightly in June due to increases in delinquencies among office and retail sectors, credit ratings agency Fitch Ratings said Monday.

http://www.bloomberg.com/apps/news?pid=20601087&sid=adfHH7wZsJjY&refer=home

American Express Profit Falls on Higher Defaults (Update2)

By Hugh Son

July 21 (Bloomberg) -- American Express Co., the biggest U.S. credit-card company by purchases, withdrew its 2008 earnings forecast after second-quarter profit fell 37 percent on worse-than-expected consumer defaults. The shares slumped 11 percent in extended trading.

Profit from continuing operations declined to $655 million, or 56 cents a share, from $1.04 billion, or 86 cents a year earlier, the company said today in a statement. The average estimate of 17 analysts surveyed by Bloomberg was 82 cents. American Express said it added $600 million before taxes to reserves for U.S. loan losses.

``By almost any measure, the U.S. economy and business environment are much weaker than the assumptions'' the company had in January, Chief Executive Officer Kenneth Chenault said today in a conference call. ``Unemployment rates took the largest jump in over twenty years. Home prices declined at the fastest rate in decades and consumer confidence is at one of its all-time low points.''

The U.S. economic slowdown worsened in June, affecting even American Express's wealthier cardholders with high credit scores, Chenault, 57, said in the call. Late and uncollectible loans were higher than expectations in the quarter and will rise as the year progresses, Chenault said. The U.S. lost 62,000 jobs in June, the sixth straight period of shrinking payrolls.

American Express fell $4.55 to $36.40 in trading after the close of regular U.S. markets at 5:58 p.m. The company's results sparked a 0.9 percent decline in Standard & Poor's 500 Index futures contracts expiring in September.

Previous Forecast

``They're like any other consumer lender right now, caught behind the 8-ball,'' Craig Maurer, analyst at New York-based Calyon Securities who rates the company ``buy,'' said in a Bloomberg Television interview. ``I don't think the environment's going to be helpful to the company over the next nine to 12 months.''

American Express is ``no longer tracking'' to a prior forecast for 4 percent to 6 percent earnings per share growth for this year, he said. The company won't meet longer-term targets until the U.S. economy improves, Chenault said.

Profit in the company's U.S. card business dropped 96 percent to $21 million from $580 million a year earlier as provisions for losses more than doubled to $1.5 billion from $640 million. Uncollectible debt in the unit rose to 5.3 percent of loans from 2.9 percent a year earlier.

``We are seeing very affluent people who have had historically very, very strong spending history with us cutting back,'' Chenault said.

Discontinued operations related to American Express Bank Ltd., which the lender sold last year, resulted in a loss of $2 million, compared with income of $17 million a year ago.

Negative Outlook

American Express, Capital One Financial Corp. and Discover Financial Services shares have dropped by more than a third in the past year as consumers have a harder time repaying debt of all kinds.

Moody's Investors Service has a negative outlook on credit- card lenders and said defaults ``will most certainly'' rise this year. Stressed consumers are tapping plastic as access to home- equity loans falls off, New York-based Moody's said in a February report.

American Express's net income declined to $653 million, or 56 cents a share, from $1.06 billion, or 88 cents a year earlier, the New York-based company said.

Consumer prices surged 1.1 percent in June on higher food and fuel prices, more than analysts had expected, the Labor Department said this month. The cost of living rose 5 percent in the year leading to June, the biggest increase since 1991.

Rising Defaults

Delinquent credit-card accounts rose more than a full percentage point from a year earlier to 3.99 percent in May, according to Bloomberg data.

Rising defaults hurt second-quarter profit at Capital One, where earnings fell 40 percent to $452.9 million. The McLean, Virginia-based company said it expected as much as $7 billion in soured loans in the next year. Discover, based in Riverwoods, Illinois, said last month that profit from continuing operations in the quarter ended May 31 fell 19 percent to $202 million.

Some of American Express's rising loan losses will be cushioned by about $4 billion in settlement payments from Visa Inc. and MasterCard Inc. American Express said last month it settled an antitrust suit against MasterCard for $1.8 billion. Visa and bank partners settled in November for $2.25 billion.

American Express was ranked first by the total value of purchases and cash advances to U.S. cardholders in the first half of 2007, according to the Carpinteria, California-based Nilson Report, a trade publication. JPMorgan Chase & Co. and Bank of America Corp. are ranked second- and third-largest.

Billionaire Warren Buffett's Berkshire Hathaway Inc. owns the largest American Express stake with 151.6 million shares, 13 percent of outstanding stock at year-end, according to Bloomberg data.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: July 21, 2008 18:52 EDT

The global economy is at the point of maximum danger

It feels like the summer of 1931. The world's two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution.

The International Monetary Fund has abdicated into schizophrenia. It has upgraded its 2008 world forecast from 3.7pc to 4.1pc growth, whilst warning of a "chance of a global recession". Plainly, the IMF cannot or will not offer any useful insights.

Its "mean-reversion" model misses the entire point of this crisis, which is that central banks have pushed debt to fatal levels by holding interest too low for a generation, and now the chickens have come home to roost. True "mean-reversion" would imply debt deflation on such a scale that would, if abrupt, threaten democracy.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/21/ccview121.xml

Fed Panics

In a dizzying day, investors grappled with a spate of mostly bleak economic developments, including pessimistic testimony from Ben S. Bernanke, the Federal Reserve chairman, who warned that significant economic risks remained and that inflation would accelerate.... http://www.nytimes.com/2008/07/16/business/worldbusiness/16markets.html?em&ex=1216267200&en=cecc9c6e9874f84c&ei=5087%0A

In his zeal to crack down on false market rumors, here are a couple of places for Securities and Exchange Commission Chairman Christopher Cox to start looking: the U.S. Treasury Department and the Office of Federal Housing Enterprise Oversight.... http://www.bloomberg.com/apps/news?pid=20601039&sid=aODKrCjnCK0Q&refer=home

The US Treasury may have just days to act before foreign patience snaps, writes Ambrose Evans-Pritchard

Merrill Lynch has warned that the United States could face a foreign "financing crisis" within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.... http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/16/ccusdebt116.xml

Run on Wall St. Banks as White House begins to purchase equity

Feds spell out FREDDIE-FANNIE backstop plan...
White House Will Ask for Authority to Buy Stock...

Not expected to help more companies...

Government as the Big Lender...

'Unmitigated Disaster'...
CITIGROUP's $1.1 Trillion of Mysterious Assets Shadows Earnings...

Down and out in Vegas

http://www.independent.co.uk/news/world/americas/down-and-out-in-las-vegas-860513.html

Financial losses can top 1.6 Trillion http://www.earthtimes.org/articles/show/217143,financial-market-losses-could-top-1600-billion-dollars-report.html