(Reuters) - American Express Co (AXP.N) asked on Thursday for permission to repay the $3.4 billion in TARP funds it received, after the U.S. government stress test showed the credit card firm is well capitalized.
According to bank regulators' guidance, American Express has to show it can issue long-term debt in the public markets that is not backed by government guarantees in order to repay the TARP funds, the fourth-largest U.S. credit card company said.
American Express became a bank last November as bond markets closed down and lenders outside the banking system began looking to fund themselves with deposits. Being a bank also helped American Express win access to capital from the government's Troubled Asset Relief Program.
"Since then, financial markets have become more stable, and American Express has made substantial progress in adapting to a very difficult economic environment," the company said in a statement.
The stress test estimated American Express had enough resources to remain profitable, even in a worst case scenario of 20 percent of credit card losses over 2009 and 2010.
Chief Financial Officer Daniel Henry told analysts on a conference call that American Express did not plan to raise common equity.
Read more here
Thursday, May 7, 2009
Wednesday, May 6, 2009
iPhone app tracks stimulus spending
(CNNMoney.com) -- Arkansas said Wednesday it launched the first iPhone application to track state projects funded through the federal stimulus package.
The free application, Arkansas.gov Recovery Project Search, is available through the Apple iTunes Store and can be downloaded to an iPhone or iPod Touch
"We want transparency in the recovery process," said Chris Masingill of the Arkansas State Recovery Office. "This is taxpayers' money, so we want them to have the information and the tools to access it."
Users can search keywords to find Arkansas state project names and descriptions, including location, dollar allocation, start date and percentage completed.
The location lookup feature displays projects by city or county name, and the "Near Me" button uses an iPhone's Global Positioning System to find projects near the user's location.
Read more here
The free application, Arkansas.gov Recovery Project Search, is available through the Apple iTunes Store and can be downloaded to an iPhone or iPod Touch
"We want transparency in the recovery process," said Chris Masingill of the Arkansas State Recovery Office. "This is taxpayers' money, so we want them to have the information and the tools to access it."
Users can search keywords to find Arkansas state project names and descriptions, including location, dollar allocation, start date and percentage completed.
The location lookup feature displays projects by city or county name, and the "Near Me" button uses an iPhone's Global Positioning System to find projects near the user's location.
Read more here
Tuesday, May 5, 2009
Why stimulus money goes unspent
(CNNMoney.com) -- The federal government has made available more than $74 billion in stimulus funds, but the majority of that money has yet to hit the streets.
That's because states have to jump through hoops before they can claim the funds and put them to use. Some have to get approval from their legislatures before they can spend the money. Others must wait for municipalities and school districts to submit applications to state agencies before distributing the dollars.
These are some of the main reasons why states have drawn down only $15.6 billion of the $74 billion made available to them in the 11 weeks since President Obama signed the $787 billion recovery act. Nearly $14 million of that amount has gone to help states handle the crush of Medicaid expenses.
Still, many states are not waiting to get the checks in hand before putting the stimulus funds to use. They are reversing some of their deepest cuts to public services -- particularly for education and social services -- in anticipation of getting the funds.
States have a lot of money to spend. They, along with local governments, are charged with administering about $280 billion of stimulus funds over the next few years, according to the Government Accountability Office, which is tracking states' use of the money. About $49 billion will be doled out this fiscal year, which ends Sept. 30.
Of that amount, about 90% will be spent on health, transportation and education, primarily through the Medicaid, highway infrastructure and state fiscal stabilization for education programs.
Other than for Medicaid, however, the majority of the money has yet to leave Washington. States have spent only $7.9 million in highway funds, about 10% of what's been made available, according to a federal Department of Transportation report from April 24. And they haven't claimed any of the $5.4 billion in state stabilization funds for education, though eight states have had their applications approved over the past two weeks.
Of course, in some cases, federal agencies dole out the funds over time. For road projects, states request reimbursement from the federal government as they pay the bills. So spending will always lag behind the dollars committed.
"Some outlays happen over years," said Lana Hurdle, the federal Department of Transportation's acting assistant secretary for budget and programs. "It's not something that happens over weeks. There's more than just one single bill per project."
States have even more work to do before they can claim other funds. Some programs, such as energy efficiency and law enforcement, require the states to apply for dollars. For others, such as job training for youths, states have to receive proposals from companies or social service agencies before they can award the money.
Read more here
That's because states have to jump through hoops before they can claim the funds and put them to use. Some have to get approval from their legislatures before they can spend the money. Others must wait for municipalities and school districts to submit applications to state agencies before distributing the dollars.
These are some of the main reasons why states have drawn down only $15.6 billion of the $74 billion made available to them in the 11 weeks since President Obama signed the $787 billion recovery act. Nearly $14 million of that amount has gone to help states handle the crush of Medicaid expenses.
Still, many states are not waiting to get the checks in hand before putting the stimulus funds to use. They are reversing some of their deepest cuts to public services -- particularly for education and social services -- in anticipation of getting the funds.
States have a lot of money to spend. They, along with local governments, are charged with administering about $280 billion of stimulus funds over the next few years, according to the Government Accountability Office, which is tracking states' use of the money. About $49 billion will be doled out this fiscal year, which ends Sept. 30.
Of that amount, about 90% will be spent on health, transportation and education, primarily through the Medicaid, highway infrastructure and state fiscal stabilization for education programs.
Other than for Medicaid, however, the majority of the money has yet to leave Washington. States have spent only $7.9 million in highway funds, about 10% of what's been made available, according to a federal Department of Transportation report from April 24. And they haven't claimed any of the $5.4 billion in state stabilization funds for education, though eight states have had their applications approved over the past two weeks.
Of course, in some cases, federal agencies dole out the funds over time. For road projects, states request reimbursement from the federal government as they pay the bills. So spending will always lag behind the dollars committed.
"Some outlays happen over years," said Lana Hurdle, the federal Department of Transportation's acting assistant secretary for budget and programs. "It's not something that happens over weeks. There's more than just one single bill per project."
States have even more work to do before they can claim other funds. Some programs, such as energy efficiency and law enforcement, require the states to apply for dollars. For others, such as job training for youths, states have to receive proposals from companies or social service agencies before they can award the money.
Read more here
Monday, May 4, 2009
AIG nears $1B sale of Japanese HQ
(Reuters) -- American International Group Inc. is near a deal to sell its Japanese headquarters for about $1 billion in what would be one of its largest asset sales since a September rescue, a source familiar with the matter said Monday.
A Japanese insurance company is expected to buy the prized building in the Otemachi section of Tokyo, although at least two parties were looking at the property, the source said.
A deal for the building, which overlooks the Imperial Palace, is expected to be announced later this week, the source said.
AIG (AIG, Fortune 500) declined to comment on the news, which was first reported by the Wall Street Journal. The source did not want to be identified because the deal has not been announced yet.
The price for the building is in line with what was expected when it was put on the market in February.
Merrill Lynch (MWL) is running the auction for the Tokyo building.
Read more here
A Japanese insurance company is expected to buy the prized building in the Otemachi section of Tokyo, although at least two parties were looking at the property, the source said.
A deal for the building, which overlooks the Imperial Palace, is expected to be announced later this week, the source said.
AIG (AIG, Fortune 500) declined to comment on the news, which was first reported by the Wall Street Journal. The source did not want to be identified because the deal has not been announced yet.
The price for the building is in line with what was expected when it was put on the market in February.
Merrill Lynch (MWL) is running the auction for the Tokyo building.
Read more here
Sunday, May 3, 2009
World Bank Bonds Show What Happens in State Rescues
(Bloomberg) -- Federal guarantees by 13 countries on more than $400 billion of financial company bonds are punishing the AAA-rated World Bank Group with record borrowing costs -- an indication of what can go wrong when government gets in the way.
The Washington-based World Bank, founded in 1944 to rebuild economies after World War II, sold $6 billion of three-year notes March 26 priced to yield 30 basis points more than the benchmark for such borrowings. The so-called spread was the widest for a dollar-denominated bond offering by the supranational lender, said George Richardson, the institution’s head of capital markets, in an interview.
Just seven months ago, the World Bank paid a record low 35 basis points less than the midswap rate, a market measure for exchanging fixed- and floating-rate cash flows. The sudden rise in World Bank relative bond yields is an unintended consequence of sales of taxpayer-backed debt by more than 50 companies, including Goldman Sachs Group Inc., Bank of America Corp. and JPMorgan Chase & Co. While these special offerings were designed to bring stability to the credit markets after $1.4 trillion in losses and writedowns in the past 28 months, no one realized the World Bank would be depreciated by such government policies.
“Governments started announcing guarantees for their banks, and then the whole world changed,” said Richardson, a former Goldman Sachs banker.
Rising Sales
Rising risk premiums are also affecting the Washington- based Inter-American Development Bank, which lends to Latin American and Caribbean countries, and Germany’s state-owned Kreditanstalt fuer Wiederaufbau, whose credit supports housing, education and small business.
Banks and financial companies worldwide sold 320 billion euros ($424 billion) of state-guaranteed debt since October, denominated in euros, dollars and U.K. pounds, according to Leef Dierks, a fixed-income analyst at Barclays Capital in Frankfurt.
They may issue a total of 900 billion euros in bonds for all of 2009, Dierks said.
The total includes $235 billion of dollar-denominated debt in the U.S. with backing from the Federal Deposit Insurance Corp. as of yesterday, according to data compiled by Bloomberg.
Lenders backed by multiple governments, known as supranationals, have the flexibility to borrow billions in multiple currencies and at any part of the yield curve, making their bonds among the most liquid securities.
Read more here
The Washington-based World Bank, founded in 1944 to rebuild economies after World War II, sold $6 billion of three-year notes March 26 priced to yield 30 basis points more than the benchmark for such borrowings. The so-called spread was the widest for a dollar-denominated bond offering by the supranational lender, said George Richardson, the institution’s head of capital markets, in an interview.
Just seven months ago, the World Bank paid a record low 35 basis points less than the midswap rate, a market measure for exchanging fixed- and floating-rate cash flows. The sudden rise in World Bank relative bond yields is an unintended consequence of sales of taxpayer-backed debt by more than 50 companies, including Goldman Sachs Group Inc., Bank of America Corp. and JPMorgan Chase & Co. While these special offerings were designed to bring stability to the credit markets after $1.4 trillion in losses and writedowns in the past 28 months, no one realized the World Bank would be depreciated by such government policies.
“Governments started announcing guarantees for their banks, and then the whole world changed,” said Richardson, a former Goldman Sachs banker.
Rising Sales
Rising risk premiums are also affecting the Washington- based Inter-American Development Bank, which lends to Latin American and Caribbean countries, and Germany’s state-owned Kreditanstalt fuer Wiederaufbau, whose credit supports housing, education and small business.
Banks and financial companies worldwide sold 320 billion euros ($424 billion) of state-guaranteed debt since October, denominated in euros, dollars and U.K. pounds, according to Leef Dierks, a fixed-income analyst at Barclays Capital in Frankfurt.
They may issue a total of 900 billion euros in bonds for all of 2009, Dierks said.
The total includes $235 billion of dollar-denominated debt in the U.S. with backing from the Federal Deposit Insurance Corp. as of yesterday, according to data compiled by Bloomberg.
Lenders backed by multiple governments, known as supranationals, have the flexibility to borrow billions in multiple currencies and at any part of the yield curve, making their bonds among the most liquid securities.
Read more here
Tuesday, April 28, 2009
AIG: Doomed to fail?
(CNNMoney.com) -- Once a titan in the insurance world, AIG is a shadow of its former self, and experts say the company is likely doomed for failure.
That's partly because AIG (AIG, Fortune 500) is slowly getting rid of its strong, moneymaking businesses as it attempts to pay back the roughly $130 billion it has borrowed on its $182 billion government bailout.
The company had to give up more than it had anticipated to pay back taxpayers because of the horrid credit environment, and analysts believe AIG may be giving up too much for it to survive on its own. Not that there was much choice.
"The plan has been, since the first days of the bailout, to sell off the crown jewels including its investment arm and very strong insurance units, because that's all the market will accept now," said Julie Grandstaff, managing director of StanCorp Investment Advisers. "It was the only way to save the organization, but it's questionable if there will be a freestanding AIG in the end."
What AIG is losing: On March 2, AIG transferred its property and casualty businesses into a new, separate company called AIU Holdings. AIG did the same with its AIA Asian life insurance business and ALICO foreign life insurance unit.
The government will eventually take a stake in AIA and ALICO, and on April 22, AIG began the process of selling off a minority stake in AIU to investors. Eventually, all three companies will have their own boards, management and could even trade on the stock market separately from AIG.
AIG has also attempted to sell off many of its other subsidiaries, but those purchases have been small in number and value. The largest of the 10 sold-off units was AIG's car insurance unit, which the company earlier this month announced it would sell for $1.9 billion. The next largest unit was its Hartford Steam Boiler unit, which fetched $745 million.
Read more here
That's partly because AIG (AIG, Fortune 500) is slowly getting rid of its strong, moneymaking businesses as it attempts to pay back the roughly $130 billion it has borrowed on its $182 billion government bailout.
The company had to give up more than it had anticipated to pay back taxpayers because of the horrid credit environment, and analysts believe AIG may be giving up too much for it to survive on its own. Not that there was much choice.
"The plan has been, since the first days of the bailout, to sell off the crown jewels including its investment arm and very strong insurance units, because that's all the market will accept now," said Julie Grandstaff, managing director of StanCorp Investment Advisers. "It was the only way to save the organization, but it's questionable if there will be a freestanding AIG in the end."
What AIG is losing: On March 2, AIG transferred its property and casualty businesses into a new, separate company called AIU Holdings. AIG did the same with its AIA Asian life insurance business and ALICO foreign life insurance unit.
The government will eventually take a stake in AIA and ALICO, and on April 22, AIG began the process of selling off a minority stake in AIU to investors. Eventually, all three companies will have their own boards, management and could even trade on the stock market separately from AIG.
AIG has also attempted to sell off many of its other subsidiaries, but those purchases have been small in number and value. The largest of the 10 sold-off units was AIG's car insurance unit, which the company earlier this month announced it would sell for $1.9 billion. The next largest unit was its Hartford Steam Boiler unit, which fetched $745 million.
Read more here
Monday, April 27, 2009
Deutsche Bank Chief’s Contract Extended After Navigating Crisis
(Bloomberg) -- Josef Ackermann, who helped Deutsche Bank AG navigate the financial crisis, will have his contract as chief executive officer extended by three years.
Ackermann, 61, acceding to a supervisory board request, will remain CEO until the annual general meeting in 2013, Frankfurt-based Deutsche Bank said in a statement late yesterday. He was scheduled to step down in May of next year.
The Swiss-born CEO, who has been at the helm since 2002, helped Deutsche Bank skirt the worst of the U.S. subprime mortgage market crash and resist taking government aid. The German bank returned to profit in the first quarter, analyst estimates show, bouncing back from the first annual loss in more than 50 years in 2008.
“This is about continuity,” said Manfred Jakob, a Frankfurt-based analyst at SEB AG. “Ackermann has best exemplified the company’s strategy of both pursuing investment banking and expanding retail banking. Overall, it’s not a bad move.”
Deutsche Bank, which reports first-quarter earnings today, may post net income of 773 million euros ($1.02 billion), compared with a loss of 131 million euros a year earlier, according to the median estimate of 13 analysts surveyed by Bloomberg.
Ackermann “steered the bank safely through the crisis,” said supervisory board Chairman Clemens Boersig in the statement. “Our performance in the first quarter 2009 is impressive evidence of this.”
‘Secures’ Leadership
Deutsche Bank rose 55 percent so far this year in Frankfurt trading. The stock is the third-biggest gainer in the Bloomberg index of 65 European banks, following a 69 percent slump last year. The company has a market value of 26.9 billion euros.
Ackermann said on Feb. 5 at the annual earnings press conference in Frankfurt that he was sticking to his plan to step down in May 2010, when asked by Bloomberg News whether he’d consider extending his contract.
Deutsche Bank appointed four executives to its management board in March, stoking speculation one of them would be selected to succeed Ackermann. Investment banking co-heads Anshu Jain and Michael Cohrs were named to the board, as was Rainer Neske, the head of private and business clients, and regional management chief Juergen Fitschen.
The decision to extend the contract “secures leadership continuity for the bank,” Boersig said in the statement.
Read more here
Ackermann, 61, acceding to a supervisory board request, will remain CEO until the annual general meeting in 2013, Frankfurt-based Deutsche Bank said in a statement late yesterday. He was scheduled to step down in May of next year.
The Swiss-born CEO, who has been at the helm since 2002, helped Deutsche Bank skirt the worst of the U.S. subprime mortgage market crash and resist taking government aid. The German bank returned to profit in the first quarter, analyst estimates show, bouncing back from the first annual loss in more than 50 years in 2008.
“This is about continuity,” said Manfred Jakob, a Frankfurt-based analyst at SEB AG. “Ackermann has best exemplified the company’s strategy of both pursuing investment banking and expanding retail banking. Overall, it’s not a bad move.”
Deutsche Bank, which reports first-quarter earnings today, may post net income of 773 million euros ($1.02 billion), compared with a loss of 131 million euros a year earlier, according to the median estimate of 13 analysts surveyed by Bloomberg.
Ackermann “steered the bank safely through the crisis,” said supervisory board Chairman Clemens Boersig in the statement. “Our performance in the first quarter 2009 is impressive evidence of this.”
‘Secures’ Leadership
Deutsche Bank rose 55 percent so far this year in Frankfurt trading. The stock is the third-biggest gainer in the Bloomberg index of 65 European banks, following a 69 percent slump last year. The company has a market value of 26.9 billion euros.
Ackermann said on Feb. 5 at the annual earnings press conference in Frankfurt that he was sticking to his plan to step down in May 2010, when asked by Bloomberg News whether he’d consider extending his contract.
Deutsche Bank appointed four executives to its management board in March, stoking speculation one of them would be selected to succeed Ackermann. Investment banking co-heads Anshu Jain and Michael Cohrs were named to the board, as was Rainer Neske, the head of private and business clients, and regional management chief Juergen Fitschen.
The decision to extend the contract “secures leadership continuity for the bank,” Boersig said in the statement.
Read more here
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