Five banks shut down by regulators on Friday

Mutual Bank was closed Friday by the Illinois Department of Financial Professional Regulation's division of banking, which appointed the Federal Deposit Insurance Corp. as receiver.

United Central Bank of Garland, Texas, is assuming Mutual's $1.6 billion in deposits and essentially all of its $1.6 billion in assets.

In addition, the FDIC and First United Central Bank entered into a loss-sharing agreement covering $1.3 billion of the assets of Mutual Bank. Its 12 branches will reopen Saturday as offices of United Central Bank.

The FDIC estimates that Mutual Bank’s failure will cost the deposit insurance fund $696 million.

Mutual Bank was the largest of five banks shut down Friday in the U.S. The others were in Florida, New Jersey, Ohio and Oklahoma. The FDIC was appointed receiver of all five banks.

The written agreement between First Mutual Bancorp of Illinois Inc. and the Federal Reserve Bank of Chicago, signed May 8, required First Mutual to show how it would boost its capital, which as of March 31 was below minimum levels required by regulators, according to filings with the Fed.

The agreement was the second regulatory action against the bank in recent months. In December the FDIC, along with state banking regulators, issued a “cease and desist” order requiring the bank to raise capital and recognize more loan losses.

First Mutual posted a $15-million loss in the first three months of 2009, after adding $17 million in the first quarter to its reserves for losses from bad loans. That followed a $68-million loss in 2008.

A whopping $496 million — or 37% — of the bank’s $1.35 billion in loans were at least 30 days past due as of March 31, according to the Fed filing. Seriously delinquent loans, those at least 90 days past due, totaled $247 million, or 18%.

The 69 bank failures nationwide this year compare with 25 last year and three in 2007.

As the economy has soured — with unemployment rising, home prices tumbling and loan defaults soaring — bank failures have cascaded and sapped billions out of the deposit insurance fund. It now stands at its lowest level since 1993, $13 billion as of the first quarter.

While losses on home mortgages may be leveling off, delinquencies on commercial real estate loans remain a hot spot of potential trouble, FDIC officials say. If the recession deepens, defaults on the high-risk loans could spike. Many regional banks hold large numbers of them.

The number of banks on the FDIC's list of problem institutions leaped to 305 in the first quarter — the highest number since 1994 during the savings and loan crisis — from 252 in the fourth quarter. The FDIC expects U.S. bank failures to cost the insurance fund around $70 billion through 2013.

Islamic Finance Centre Launched by Thomson Reuters

Thomson Reuters today announced the addition of the Islamic Finance Centre on the Westlaw Business global legal platform.

Westlaw Business combines transactional and legal guidance with tools designed specifically for business lawyers. "The Islamic Finance Centre leverages the best assets from across Thomson Reuters, along with legal guidance from, and in close partnership with, Islamic finance standards boards," said Kevin Ritchey, senior vice president, Westlaw Business. "It is the first legal resource of its kind designed specifically for lawyers working on Sharia-compliant transactions. Our goal is to advance transparency and legal insight into this growing area of practice to better serve legal professionals on a global basis."

The Westlaw Business Islamic Finance Centre is a unique service, including deals, documents and precedents, as well as terms and conditions on over 6,000 Sharia-compliant deals. The Centre features standards from Islamic finance boards, and also highlights coverage of industry events, trends, news and exclusive expert guidance; discussions of recent developments in Islamic finance regions; and relevant legislation and case law.

Westlaw Business is seen as a key global platform for business lawyers. "To develop the new Islamic Finance Centre on Westlaw Business required an extraordinary level of teamwork across Thomson Reuters," said Helen Owers, chief operating officer for Thomson Reuters, Legal. "Islamic finance is an underserved and rapidly expanding market, and Thomson Reuters is delighted to advance this space and help position lawyers around the world to grow it even further."

The Islamic finance market, estimated at $700 billion to $1 trillion in assets, is growing at a rate of 10 to 15 percent annually. "The Islamic Finance Centre on Westlaw Business is the first of its kind in the legal community," said Rushdi Siddiqui, global head of Islamic Finance and OIC Countries for Thomson Reuters. "The Centre will provide a unique level of transparency into Islamic finance deals for the global community in these challenging times. It will become the global go-to platform for examining industry body regulations and standards, as well as central bank policies relating to Islamic finance, for lawyers, investment bankers and product-structuring teams."

Ruth Madoff Faces Lawsuit From Picard to Recover $48 Million

Irving L. Picard, the trustee appointed to liquidate the business of Bernard L. Madoff Investment Securities LLC, (BLMIS) filed a lawsuit yesterday against Ruth Madoff, wife of Bernard Madoff, who was convicted of securities fraud and sentenced to 150- years in prison last month. Picard is seeing to recover $44.8 million in funds that were transferred from BLMIS during the past six years directly to Ruth Madoff or for her benefit to companies in which she was an investor.

In the trustee's complain, filed in a Manhattan bankruptcy court by Picard's law firm, Baker & Hostetler LLP, Picard details 111 transactions, which he alleges were fraudulent transfers or conveyances recoverable under the bankruptcy code.

"For decades, Mrs. Madoff lived a life of splendor using the money of BLMIS's customers," stated Picard in the release summarizing the complaint. Picard argued in the complaint that "regardless of whether or not Mrs. Madoff knew of the fraud her husband perpetrated,' money she received from BLMIS should be recovered "to the extent possible for the benefit of BLMIS and its defrauded customers."

On June 26, 2009, when Bernard Madoff was sentenced to a 150-year jail term, Ruth Madoff agreed to forfeit all of their assets to the U.S. government, which in turn agreed not to contest Mrs. Madoff's claim to $2.5 million. But according to the compliant, that forfeiture "does not in any way preclude Picard.as trustee for the liquidation of the business of defendant Bernard L. Madoff Investment Securities LLCfrom seeking to recover the funds from Ruth Madoff."

In the complaint filed yesterday, Picard stated that "While Madoff's crimes have left many investors impoverished and some charities decimated, Mrs. Madoff remains a person of substantial means. The complaint focuses on "the inequity between Mrs. Madoff's continuing financial advantages and the economic distress of Madoff's customers (which) compels the trustee to bring this action."

This Day in Wall Street History 1912: Milton Friedman is born

This day in 1912 marks the birth of Brooklyn, N.Y.'s leading conservative economist, Milton Friedman.

Born in New York's largest borough, Friedman picked up a string of degrees from schools including Rutgers University and Columbia University, before taking up a post in the University of Chicago's mighty economics department.

An ardent proponent of laissez-faire economics, Friedman readily articulated his faith in a fiscal system that depended less on policy than "natural" forces. Along the way, Friedman became the leading light of the "monetarist" school, which, in the laissez-faire tradition, dismissed the government's role as the supposed engine of business. Rather, Friedman and his fellow monetarists believed in stable interest rates and robust money supplies.

Friedman used a number of his publications, including "Capitalism and Freedom," (written with his wife, Rose) to further stump against "big government." While Friedman's beliefs aroused considerable criticism from liberals, leftists and even a few government-centric voices on the right, he was honored with the Nobel Prize for Economics in 1976. The lofty award hardly slowed Friedman, who continued his battle against the perceived inanity of the federal government's fiscal policy.

Source: History.com

SEC adds to short selling rules

The Securities and Exchange Commission (SEC) has launched a series of new measures aimed at preventing abusive short sales.

The commission has made permanent a temporary rule that reduces the opportunity for so-called "naked" short selling, which involves an investor selling shares short before borrowing them.

Under the new legislation, known as Rule 204, broker-dealers are now required to purchase or borrow securities promptly in order to deliver on a short sale.

The SEC also said that it is working alongside a number of self-regulatory organizations (SROs) in order to increase the availability of short sale volume and transaction information on SRO websites.

"Today's actions demonstrate the commission's determination to address short selling abuses," SEC chairman Mary Schapiro stated, adding that the move will also increase the level of public disclosure regarding such activity.

SEC halts alleged Ponzi scheme in Detroit

The Securities and Exchange Commission (SEC) has moved to halt a Ponzi scheme that is allegedly being conducted by two firms in Detroit.

It has obtained a court order against Michigan residents John Bravata and Richard Trabulsy after they were accused of misusing investors' money.

The pair obtained over $50 million from more than 440 investors who believed they were buying into a real estate fund that offered annual returns of up to 12 per cent.

However, at least half the money was used to make payments to early investors, with a proportion of it being spent on personal items, the SEC states.

"Investors thought they were investing in a safe and profitable real estate investment fund," Merri Jo Gillette, director of the SEC's office in Chicago, stated.

CBOE’s Q2 profit up 11%

The Chicago Board Options Exchange said on Thursday second-quarter net income rose 11 percent as increased trading helped offset higher costs.

The largest U.S. options exchange, which has been operating as a for-profit model since January 2006, said quarterly revenue was up 12 percent to $109.4 million from $97.6 million a year ago as trading volume rose 8 percent.

"CBOE 's top strategic priority remains building the strong fundamentals of our core business, and we are totally focused on investing prudently in growth initiatives that leverage CBOE 's existing infrastructure and expertise," Chairman and Chief Executive William Brodsky said in a statement.

Quarterly expenses were up 15 percent to $61.9 million compared with $53.7 million a year ago.

Net income for the second-quarter ending June 30, rose to $28.1 million from $25.4 million a year earlier. Before taxes, the profit was $47.5 million, compared with $43.9 million a year ago, the exchange said.

Options trading volume for the quarter rose to 296.9 million contracts up from 275.2 million last year.

CBOE said the increase in quarterly revenues was mainly due to a $9.6 million gain related to other member fees. This included $8.3 million in temporary member access fees and a $4.2 million increase in volume-related transaction fees.

Former Chicago Board of Trade members who are now part of CME Group Inc., who continue to have trading rights on the CBOE , were assessed access fees for the first 6 months of 2009.

The CBOE may be best known as the home of the Volatility Index or VIX , which is Wall Street's favorite gauge of investor sentiment. The VIX often rises when the benchmark Standard & Poor's 500 Index declines.

In addition to options on stocks, indexes and exchange-traded funds, other products offered on the CBOE include interest-rate options on the yield of U.S. Treasury bills, notes and bonds.

Last October, CBOE announced plans to launch an electronic options platform called C2 to attract new customers.

CBOE previously indicated that C2 expenditures would be about $25 million. The alternative exchange, expected to be launched this year, would complement CBOE's hybrid platform, which features both electronic and open auction trade.

Goldman Sachs and Deutsche Bank issued with subpoenas

A US Senate panel has issued subpoenas to Goldman Sachs and Deutsche Bank, it has emerged.

According to the Wall Street Journal, the two financial institutions are being investigated for evidence of wrongdoing or fraud in the collapse of the mortgage market last year.

The probe will focus on whether internal memos from executives at the bank indicate that they were privately unsure of the financial viability of the mortgage securities they were assembling.

Citing people familiar with the matter, the news source said that Washington Mutual, which is now largely owned by JP Morgan Chase, has also been issued with a subpoena.

"It appears likely that several other financial institutions also have received subpoenas," the newspaper stated.

Both Goldman Sachs and Deutsche Bank reported strong second-quarter earnings earlier this month.

Goldman Sachs' earnings rose 33 per cent, while net profit at Deutsche Bank rose 68 per cent over the three-month period.

Stop Oil Speculation Now

Stop Oil Speculation Now is a multi-industry coalition of businesses, associations and concerned citizens united in support of responsible energy policies and prices. Public outrage and congressional debate helped deflate the oil bubble and return prices to reasonable levels. You can help make a difference again this year.

While fuel costs have declined this year in comparison to last, there is still quite a bit of volatility in the prices that affect not only our business, but you personally-- in the prices you pay for fuel for your vehicles as well as goods that are transported to the stores.

Increasingly over the past few years, a growing group of financial players with no direct stake in the physical delivery of oil has exercised undue and unchecked influence on the price of oil, causing great pain for consumers and wreaking havoc on American businesses of all kinds - including airlines and their customers. Recently, the Wall Street Journal reported that continued speculation could "worsen the global economic downturn." We cannot allow this to happen.

We need your help. Get more information and contact Congress by visiting the
S.O.S. Now website. http://www.stopoilspeculationnow.com/

You can also follow S.O.S. Now on Facebook and Twitter.

Bank of America may close US branches

Bank of America (BoA) may reduce the size of its branch network in the coming years.

The firm, which operates over 6,100 sites across the US, said that its clients are increasingly using the internet and their mobile phones to manage their banking requirements.

Speaking to Bloomberg, president of consumer and small business banking Liam McGee stated that there has been a "strong acceleration" in the number of customers opting to use "virtual channels".

The number of customer deposits made through automated teller machines has also increased, Mr McGee noted.

The Wall Street Journal reported chief executive officer Kenneth Lewis as saying that the number of branches may be decreased by as much as ten per cent, however Mr McGee said that the bank has not set a target number.

"We could possibly have fewer branches, but we have no specific plan around how many banking centers we will have," he remarked.

CBOE-CBOT settlement gets judge’s OK

After a nearly two-month delay, a Delaware judge entered an order approving the settlement of a long-running dispute between the Chicago Board Options Exchange and the Chicago Board of Trade, moving the options exchange closer to joining its competitors as a shares-based company.

The entry of a “final implementing order” starts a 30-day period in which any appeals must be filed, CBOE Chairman William Brodsky told members in a memo Wednesday. The judge initially approved the settlement in early June. The deadline for appeals is Aug. 28.

The exchanges have been battling in court for almost three years over whether Board of Trade members, whose exchange CME Group Inc. bought in 2007, are entitled to a stake in CBOE. The settlement, which gives certain Board of Trade members an 18% stake in CBOE and $300 million in cash, paves the way for CBOE to strike a deal with another exchange or to hold an initial public offering.

Those options weren’t open to CBOE without the settlement.

The dispute between the exchanges dates to 1973, when CBOT members funded the start-up options market, giving themselves the right to trade there.

CBOT members and the Board of Trade sued CBOE in August 2006, arguing that the trading rights also conferred equity ownership in the options exchange.

CME Group has bankrolled the lawsuit since it bought the CBOT.

The dispute raised enough questions about who really owned the CBOE that it kept the options market from pursuing an IPO or merging with another exchange.

SEC files suspicious trading charges

An Abu Dhabi trader has been accused of carrying out suspicious trading by the Securities and Exchange Commission (SEC).

Khaled Mohammed Sharif Al Sayed Al Hashemi allegedly made a profit of more than $450,000 after buying shares in the weeks leading up to an announcement that International Petroleum Investment would be taking over Nova Chemicals.

According to the SEC, Mr Al Hashemi, who works for the Abu Dhabi government, bought 120,000 shares in Nova through an online brokerage account in the fortnight before the takeover became public, with 54 per cent of his total purchases being made on the last trading day prior to the news breaking.

Following the merger, shares in Nova rose 289 per cent, prompting him to sell his entire stake in the firm.

"Today's actions demonstrate the commission's determination to address short selling abuses," chairman Mary Schapiro explained.

Earlier this week, a Kuwaiti trader accused by the SEC of profiting from suspicious trades involving two US firms was found dead in an apparent suicide.

SEC compromises as it makes short-selling rules permanent

The Securities and Exchange Commission's rules on short-selling require additional disclosure, although the information will be delayed by a month. The rules keep positions by individual money managers confidential but aggregate data on short positions for individual stocks. Hedge funds will not be required to disclose to regulators details about their short positions.

more at

http://www.nytimes.com/2009/07/28/business/28naked.html

UBS Brokerage Suspends U.S. Sales of Leveraged ETFs

UBS AG’s U.S. brokerage business stopped selling exchange-traded funds that use leverage because the products don’t conform to its emphasis on long-term investing.

UBS Wealth Management Americas suspended sales of inverse and leveraged ETFs immediately, citing the “short-term nature of these securities,” the New York-based brokerage said in a statement today. Edward Jones, a St. Louis-based brokerage, and Minneapolis-based Ameriprise Financial Inc. have also halted leveraged-ETF sales.

The Financial Industry Regulatory Authority and Massachusetts Secretary of the Commonwealth William Galvin said in the past two months that leveraged and inverse ETFs might not be appropriate for individual investors. The funds’ assets have increased 51 percent to $32.8 billion this year, according to data from State Street Corp., a Boston-based company that sells ETFs and tracks the industry.

more at

http://www.bloomberg.com/apps/news?pid=20601014&sid=a9dwb9dnGdsY

SunGard Teams with iShares to Launch New Exchange-Traded Funds Retirement Plan Solution

SunGard, in conjunction with iShares, a leading global provider of exchange-traded funds (ETFs), will be launching a new solution to help advisors and third party administrators (TPAs) seamlessly incorporate ETFs as standard options in retirement plans. SunGard’s ETF solution offers a cost-effective and automated solution to help defined contribution plans add ETFs to their retirement plans, an otherwise traditionally expensive and operationally burdensome process.

TPAs and advisors using SunGard’s Omni and Relius recordkeeping platforms for benefit administration will be able to access and trade iShares ETFs through an integrated link to the SunGard Transaction Network (STN). ETF custodial services will be provided by Mid Atlantic Trust Company’s ETFxChange platform.

While ETF trading has increased significantly over the last several years, the operational barriers of trading ETFs using mutual fund-driven recordkeeping systems has limited their growth in retirement plans. SunGard will help retirement plan providers that choose to invest in ETFs to do so efficiently using proven systems for mutual funds with enhanced processing specifically for ETFs. SunGard’s ETF solution, integrating STN Funds, Omni and Relius, will help TPAs and advisors trade and settle ETFs like no-load mutual funds. The new SunGard solution will help TPAs or their advisors to integrate both ETFs and mutual funds within 401(k), 457 or 403(b) retirement plans, while helping to minimize operational overhead and disruption.

Darek Wojnar, head of product strategy at iShares, said, “ETFs have continued to experience tremendous growth as investors seek alternative options to fund their retirement. SunGard’s ETF solution will help provide the trading support and operational efficiencies that TPAs and their advisors need to help clients better manage risk through portfolio diversification.”

Kevin Rafferty, president of SunGard’s wealth management business, said, “ETFs are gaining momentum by infusing more transparency and performance into defined contribution plans and the personal investment management process. SunGard’s expertise in integrated trading, recordkeeping and administration will support ETFs within retirement plans, providing investors and their service providers with a broader set of investment options from iShares, a leader in this space.”

Energy trading limits considered by feds

Federal regulators may be moving toward imposing limits on speculative energy trading, blamed by some for the volatility that has left consumers trying to stay a step ahead of punishing price swings.

Gary Gensler, chairman of the Commodity Futures Trading Commission, said his agency must "seriously consider" imposing stringent limits on speculative trading of energy futures contracts, a move that would mark a major shift for the government.

Not everyone believes that the federal government should step in.

Craig S. Donohue, the CEO of CME Group Inc. — owner of the Chicago Mercantile Exchange where energy futures are traded — said it is his firm, not the government, that is the proper authority to set new limits on energy trading. The CME is "prepared to act in the near term, before the (CFTC) or Congress," Donohue said.

At a hearing organized by the agency, Gensler said the futures exchanges have generally not used their authority to limit the size of positions taken by speculative players — something the Chicago Mercantile Exchange on Tuesday expressed willingness to do. And he cited the CFTC goal of preventing market power from being concentrated in a small number of powerful financial players.

"I believe we must seriously consider setting strict position limits in the energy markets," Gensler said.

Gensler said last week the agency may propose new rules setting limits in the fall, timing he didn't refute on Tuesday.

However, he said, the agency has opened the debate to determine how new limits could reduce excessive speculation, "not how we can eliminate speculation." He said the CFTC recognizes the positive role played by the Wall Street firms and other speculators in the futures markets, which enable farmers, oil producers and oil users to hedge their risks and "have a marketplace where prices are determined in a fair and orderly way."

The CFTC is hearing from consumers, business, traders and big financial firms in a series of public hearings as it weighs whether to restrict the amount of trading in energy futures by those who are solely financial investors.

The volatility in oil prices "is totally unacceptable to the airline industry," testified Ben Hirst, general counsel of Delta Air Lines Inc., who was representing the industry's Air Transport Association. Delta itself consumes about 4 billion gallons a year of jet fuel and is hit with hundreds of millions in higher costs when crude oil prices rise, Hirst said. Any exemptions from limits on the size of trading positions should only go to companies in the energy industry and users of oil such as airlines, he said.

The futures contracts are supposed to reduce price volatility. But speculators use them to bet on market prices, and critics say this magnifies price swings. Regulators, they maintain, have long let speculation in energy markets inflict financial pain, triggering wild price swings, hurting gasoline wholesalers, damaging airlines and squeezing consumers at the gas pump and airline ticket counter.

By law, the CFTC sets limits on the amount of futures contracts in agricultural products like wheat, corn and soybeans that can be held by each market participant to protect the market against manipulation. But for energy commodities — crude oil, heating oil, natural gas, gasoline and other energy products — it is the futures exchanges themselves that set the position limits.

That divergent approach has prompted the examination by the CFTC of whether it should step in. The CFTC could adopt the new restrictions by late summer or early fall.

Experts and economists are divided on whether speculative trading in the futures markets fans price volatility. Part of the confusion is that "hot" speculative money flows into energy commodities in numerous ways. The CFTC doesn't track all of them. So it's hard to quantify the impact of speculation.

The agency doesn't, for example, keep records of the speculative side bets that traders make. Nor does it monitor markets that include over-the-counter swaps — those that aren't traded on exchanges — by pension funds and other investors.

The free-market sentiment that held sway in Washington for years helps explain why regulators kept their hands off the volatile oil futures markets. The Bush administration generally opposed tighter regulation in the financial industry.

Among hedge funds and Wall Street banks that invest in and manage billions in commodities trading, the shift to a Democratic White House and a CFTC chairman appointed by President Barack Obama has raised fears of tighter regulation.

Gensler's confirmation was held up for months by senators who felt his stance had been overly deregulatory when he served in the Clinton administration's Treasury Department. But now Gensler seems eager to cast himself as a tough overseer.

Another reason why the agency's hands-off approach prevailed for so long, critics say, was the deep-pocketed financial industry and its lobbying muscle. The industry opposes new limits on speculative trading, arguing they would crimp the cash flowing through the market and drive business overseas.

SEC sues over false takeover profits; fraud suspect found dead

Hazem Khalid al-Braikan, who was charged by the Securities and Exchange Commission (SEC) last week, was discovered in his bed with a gunshot wound on Sunday (July 26th), according to a security official.

Mr Al- Braikan was chief executive officer of Al-Raya Investment, which is partly owned by Citigroup.

The SEC had frozen $5 million in profits that were believed to have been made by conducting deals on the back of fraudulent takeover speculation involving Harman International Industries and Textron.

His company, along with the United Gulf Bank and KIPCO Asset Management, was said to have traded shares in the two firms after their values rose on suggestions that they were to be the subject of buyouts.

Once the rumors were found to be false, the shares prices of the two firms fell.

===========
Securities regulators in the US have filed a lawsuit against a Kuwaiti businessman who is alleged to have made millions of dollars by profiting from bogus takeover rumors involving two US companies.

The Securities and Exchange Commission (SEC) has sued Hazem Khalid al-Braikan, the chief executive of Al Raya Investment Company - which is partly owned by Citigroup - as well as a number of related entities.

A court order freezing more than $5 million in trading profits has been obtained by the SEC, which alleges that the money was made after hoax offers were made for Harman International Industries and Textron.

Shares in the Harman International rose on Monday after media outlets received a false notification that an offer had been submitted to purchase the firm.

"Harman International's share price ... climbed more than 40 percent in pre-market trading." the SEC said, adding that the price closed at $20.80 on Monday after the company rejected the claim.

According to the Financial Times, the SEC has previously been criticized for not acting fast enough following suspicious trading activity.

Upstart ELX adding Morgan Stanley to its battle with CME

ELX Futures is preparing to sign Morgan Stanley to its list of big-name backers as the weeks-old competitor to CME Group Inc. looks to bolster its standing.

New York-based Morgan Stanley would join J. P. Morgan Chase & Co., Goldman Sachs Group Inc., Citadel Investment Group and nine other firms as an investor in the new electronic marketplace as soon as next month, three people with knowledge of the situation said. They declined to be identified because they aren’t authorized to speak before the agreement is finalized. Spokeswomen for Morgan Stanley and ELX declined to comment.

Terms of the deal and the amount of the investment could not be determined.

Adding a new partner — particularly Morgan Stanley, one of the few big Wall Street firms not already on board — is a coup for the New York-based startup, which has won about 2% of the market for U.S. Treasury futures since it opened July 10.

But to truly threaten CME — which dominates the Treasury futures market through its ownership of the Chicago Board of Trade, where the contracts got their start more than 30 years ago — ELX must expand its customer base to include money managers, said Richard Repetto, a New York-based analyst at Sandler O’Neill & Partners L.P. who covers exchanges and brokers.

U.S. urges EU to ease proposed regulations for hedge funds

The U.S. is quietly wading into the fight between the U.K. and Continental Europe over the strictness of regulations for hedge funds and private-equity firms, said a senior U.S. Treasury official. Hedge funds and private-equity companies that do business in Europe could be required to adhere to tough regulations under the proposals.

more at

http://online.wsj.com/article/SB124864567973282125.html

BlackRock fund gives ordinary Americans a crack at PPIP

BlackRock is putting together an investment fund that it says will give ordinary Americans a chance to profit from the financial bailouts that they are paying for. The company quietly filed plans on Friday to raise money for the vehicle.

For investors, the potential risks are considerable. The closed-end fund is to buy distressed mortgage securities from financial companies — the very investments that have hurt so many banks. It would be the first product aimed specifically at Main Street that is linked to the government’s now-diminished Public-Private Investment Program, which is meant to help purge these institutions of their worrisome investments.
more at
http://www.nytimes.com/2009/07/27/business/economy/27fund.html

Firms opt against selling leveraged ETFs after FINRA's warning

The Financial Industry Regulatory Authority recently warned that leveraged exchange-traded funds "typically are unsuitable for retail investors" because such investors tend to hold them for longer than a day. The warning prompted Edward D. Jones, LPL Investment Holdings and Ameriprise Financial to ban sales of some leveraged ETFs. Direxion Funds is arguing that the ETFs can be used successfully and is trying to get the brokerage firms to reconsider their bans.

more at

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090724/REG/907249982

Credit rating agencies need massive overhaul

Arturo Cifuentes, a principal with New York financial advisory firm Atacama Partners, writes that although the reputation of credit rating agencies is in tatters, the firms continue to give opinions and influence markets. Cifuentes argues that substantial changes to the agencies are needed, but proposed reforms "are likely to be ineffective as they are based on misunderstandings."

more at

http://www.ft.com/cms/s/0/d948647e-7abe-11de-8c34-00144feabdc0.html

Group exonerates fair-value rules in controversial decision

The Financial Crisis Advisory Group, an influential group of policymakers, concluded that mark-to-market accounting rules probably understated, rather than overstated, losses in the banking sector. The International Accounting Standards Board and the Financial Accounting Standards Board established the group to discuss issues related to the credit crisis, including off-balance-sheet vehicles and fair-value accounting.

more at

http://www.ft.com/cms/s/0/9f512566-7ad3-11de-8c34-00144feabdc0.html?nclick_check=1

Government reports this week

Date	Time*	Report
7-28	9:00	Consumer Confidence
7-29	8:30	Durable Orders
7-29	2:00	Fed Beige Book
7-31	8:30	GDP
7-31	9:45	Chicago PMI

*All Times Eastern

Fed proposes sweeping rules for consumer protection

As the Federal Reserve defends its role as a consumer-protection agency, officials at the central bank proposed overhauling disclosures made on mortgages and home-equity loans to consumers. "I think the general thrust of this is to make more intelligent shoppers of households, have them make better decisions," said Fed Vice Chairman Donald Kohn. The proposals include a ban on side payments made to mortgage brokers for getting consumers into pricier loans.

more at

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/23/AR2009072303261.html

CME : E-micro Forex Futures Are Building Liquidity Quickly

1/10 the standard contract size. Six Currency Pairs. Quoted in Interbank Terms.
This past March, CME Group launched six different E-micro Forex futures contracts. With the addition of these new products, the CME Group FX product suite consists of 49 futures and 32 options based on 20 currencies. These smaller sized contracts are a cost-effective way to access the security, transparency and liquidity of CME Group's FX Products. And since launching in March, liquidity has built quickly to ADV of 5,555.

E-micro Forex futures are quoted in Interbank terms and contracts are available in the following six currency pairs: EUR/USD, USD/JPY, GBP/USD, USD/CAD, AUD/USD, USD/CHF.

For more information and additional resources on E-micro Forex futures, including a list of preferred brokers, visit www.cmegroup.com/forexmicros

To view free real-time prices on CME Group FX futures and options, including E-micro Forex futures, please visit www.cmegroup.com/equivalents

Dow Breaks 9000 for the First Time Since January

Gains continue a rally that has driven the stock market up 44 percent since its March 9 low, including an 11 percent gain in the last two weeks.

It's important to notice that the Dow manage to cross its 50-week moving average for the first time since late 2007 (see chart above). The S&P500 has a similar chart and it has crossed its 50-week m.a. for the first time since late 2007

Housing Affordability Being Restored In Many Markets

Fiserv, Inc (NASDAQ: FISV), today released an analysis of home price trends in more than 375 U.S. markets based on the Fiserv Case-Shiller Home Price Index, which is owned and generated by Fiserv, and data from FHFA, the Federal Housing Finance Agency.

The U.S. housing market continues its price correction, with single-family home prices across the U.S. falling 19 percent over the 12-month period ending March 31, 2009. On average, compared to family income, U.S. home prices at the end of the 2009 first quarter were just 7 percent above the levels of early 2000, at the start of the real estate bubble. In about 10 percent of U.S. metro markets, home prices, relative to income, are now lower than they were prior to the bubble. In Los Angeles, for example, home prices more than doubled relative to income between 2000 and 2006. Currently, homes in the Los Angeles market are only 25% more expensive than they were in 2000, representing a closer return to pre-bubble levels and a substantial improvement in affordability.

"The Fiserv Case-Shiller Home Price Index numbers continued to show falling home values in sand states such as California and Florida," said David Stiff, chief economist, Fiserv. "But there is a silver lining in the cloud of rapidly falling prices. Housing affordability is quickly being restored in many markets and the pool of buyers who can afford to purchase homes is increasing at a rate not seen in recent years, setting the stage for home price stabilization."

"Over the next year, Fiserv forecasts that national home prices will drop another 11 percent, and bottom out in early 2010," Stiff continued. "While affordability has been or will shortly be restored in most markets, it must be noted that the recovery in home prices will be tentative and weak. Even with lower prices, potential home buyers who have not lost their jobs may lack the confidence to buy a home when the economy is performing so badly. Even those who are confident their jobs are secure may not have access to mortgage credit. Further, even as housing demand improves there will be a large overhang of foreclosed properties that will continue to be a drag on prices."

Home price declines remained sharp across California, Arizona and Florida, while other metro areas showed smaller declines and are better positioned for recovery.

Observations from the data include:
- One-time bubble markets in Florida, California and Arizona, which have already seen home values fall 40 percent to 50 percent since prices peaked in 2006, are showing no sign of moderation in declining prices. In San Jose, for example, average home prices declined 31 percent over the past year, and are projected to fall another 12 percent over the next year. In Tucson, Arizona, average home prices declined almost 20 percent over the past year. Similarly, the Orlando, Florida market saw a decline of just over 29 percent in home values over the past year, with a projected decline of another 26 percent over the next year.

The Fiserv Case-Shiller Home Price Indexes, which include data covering thousands of zip codes, counties, metro areas and state markets, are owned and generated by Fiserv. The historical and forecast home price trend information in this report is calculated with Fiserv's proprietary Case-Shiller indexes, supplemented with data from the FHFA. The historical home price trends highlighted in this release are for the 12-month period that ended March 31, 2009. One-year forecasts are for the 12 months ending on March 31, 2010.

Nationally, home prices have fallen just over 19 percent over the past year, leaving the median price at $167,300. The median monthly mortgage payment in the 2009 first-quarter dropped to 14%.

CME’s Nymex buy helped it beat Q2 forecasts

CME Group Inc.’s second-quarter profit jumped 10%, beating analyst expectations, as the company cut expenses and boosted per-contract trading fees.

The exchange operator’s second-quarter results include operations at the New York Mercantile Exchange, which were not included in the year-earlier figures. CME Group acquired Nymex during the third quarter of 2008.

Net income for the quarter ended June 30 rose to $222 million from $201 million a year earlier. Revenue rose 15% to $648 million. Earnings per share declined to $3.33, from $3.67, after the acquisition of Nymex increased CME’s shares outstanding.

When Nymex’s results are included in the 2008 figures, combined profits fell 15% from the year-earlier period.

Still, that was better than most analysts projected. Analysts polled by Thomson Reuters, on average, forecast earnings of $3.23 per share.

Factoring in Nymex’s 2008 quarterly results, revenue declined 14% amid slowing trading volume. Meanwhile, CME cut expenses by 13% on a combined basis.

CME average daily trading volume fell 21% to about 8.8 million trades per day during the second quarter. New York Mercantile Exchange volume dipped 8% to about 1.7 million trades per day. With lower volume, fewer traders hit thresholds qualifying them for fee discounts, and average per-contract fees rose to 67 cents from 64.8 cents a year earlier.

Despite the year-over-year decline in trading, CME Group said it started to see a recovery in trading at the end of the second quarter as markets began to strengthen.

“As the economy showed signs of stability, we saw increased volumes in June, particularly in interest rates, foreign exchange and agricultural markets,” Terrence A. Duffy, CME Group executive chairman, said in a statement.

Looking forward, CME expects to bring in new revenue from a range of initiatives, including broadening its over-the-counter clearing services to beyond its current energy- and agricultural-based contracts.

Competitor IntercontinentalExchange Inc. has been clearing one such target market, credit default swaps, since March. But CME Chief Executive Officer Craig S. Donohue said ICE’s head start doesn’t put CME out of the game.

“We are still very committed to a multi-asset class service capacity in over-the-counter clearing, including credit default swaps,” Mr. Donohue said in an interview. “We have dealers that are working with us and spending valuable time and resources to understand the operational issues.”

CME also is working on an interest-rate swap clearing service, an undertaking Mr. Donohue describes as a “major transformation in the way that swaps dealers actually conduct their business,” a move that takes time and money to complete. The interest-rate swaps market is many times bigger than the credit default swaps market. He declined to say which service is closer to launch.

Regulatory reform also will affect CME’s growth potential, either positively — by creating incentives for more exchange-based trading — or negatively, by encouraging some traders to turn to foreign or off-exchange markets. Mr. Donohue said the exact nature of such reform is not yet clear, but he and other CME brass are doing what they can to shape it. He and Mr. Duffy were both in Washington, D.C., Wednesday, and next week Mr. Donohue testifies in a Congressional hearing.

One thing won’t change, Mr. Donohue said. Although Chicago Board Options Exchange Chairman William Brodsky was in Washington this week calling for the merger of two federal agencies that regulate financial markets, Mr. Donohue said he’s convinced such a merger is off the table.

“It very distinctly is not part of the president’s proposals,” he said. Among Senate and House leaders as well, he said, “There is very little to no interest or appetite in considering a merger.”