Fannie, Freddie Get Blank Checks; Holiday Retail Sales Rise 3.6%; Fed to Banks: Set Up CDs with Us; Health Care Bill Likely to Resemble Senate Version; JPMorgan Sues Former Bank Exec; Oil Tops $79 for First Time in Four Weeks
- In what's been called a "perplexing" move by one analyst, the U.S. Treasury lifted a $200 billion cap on the amount of taxpayer dollars that can be injected into ailing mortgage firms Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) , providing unlimited support to them. The Treasury put into $60 billion into Fannie and $51 billion into Freddie, and were unlikely to need more than the $200 billion cap, wrote Keefe, Bruyette & Woods Inc. analyst Bose George in a note to investors yesterday (Monday). George views the Treasury's move as a way to more aggressively prop the U.S. housing market, and said the government could step up efforts of its Home Affordable Modification Program (HAMP), a mortgage-modification program designed for homeowners who can no longer afford them. But so far, HAMP and other government props have failed to stop a continuing wave of foreclosures, as Money Morning reported last fall. Shares of the firms, both government-sponsored enterprises (GSE) skyrocketed in trading yesterday. Fannie was up 20.95% to close at $1.27, while Freddie gained 26.98% to close at $1.60.
- Retail sales gained 3.6% year-on-year from Nov. 1 through Dec. 24, according to SpendingPulse, a unit of MasterCard Advisors (NYSE: MA) . However, there was an extra day between Thanksgiving and Christmas this year, and it's unclear how much this factor skews the data, which could be anywhere from 2% to 4%, SpendingPulse said. The National Retail Federation (NRF) expects holiday sales will have declined 1%. Sales in the same period last year declined 2.3% as consumers began reeling from October's meltdown of the financial markets.
- The U.S. Federal Reserve proposed a program to set up what essentially amounts to certificates of deposits at the central bank, in an attempt to mop up some of the $1 trillion in excess liquidity in the banking system. Under the proposal, the Fed would offer so-called "term deposits" that would pay interest, providing banks with another incentive to keep their money at the central bank instead of having it flow back into the economy. Despite this, the Fed says its proposal "has no implications for monetary policy decisions in the near term."
- The final version of the proposed healthcare bill in the U.S. House Representatives and Senate will likely resemble the Senate version when it's submitted to President Barack Obama, top Democrats said on Sunday. The Senate version of the bill omits a government-sponsored insurance program that would compete with private insurers. Instead, companies like UnitedHealth Group Inc. (NYSE: UNH) and Aetna Inc. (NYSE: AET) would get 31 million new customers who would receive coverage by 2019, according to an estimate by the Congressional Budget Office (CBO). House Democratic Congressional Campaign Committee Chairman Chris Van Hollen, D-MD, told "Fox News Sunday" that maintaining the Senate's 60 votes is important, but the House is "not going to rubber-stamp the Senate Bill. On the other hand, we recognize the realities in the Senate."
- JPMorgan Chase & Co. (NYSE: JPM) is suing Hernan Arbizu, a former private banking executive, accusing him of stealing $2.8 million from a customer's account. Arbizu, who was arrested last year in Argentina on criminal charges, "committed this theft by lying to JPMorgan employees, falsifying documents, and forging the JPMorgan customer's signature on wire transfer authorizations, in order to mislead JPMorgan to believe that the JPMorgan customer had directed these transfers," a complaint in a Manhattan federal court said. Arbizu told Reuters in an e-mail he "had no idea" about the lawsuit and would consult with his lawyer.
- Benchmark crude oil for February delivery gained 72 cents to settle at $78.77 per barrel in light trading on the New York Mercantile Exchange (NYMEX) yesterday (Monday). At one point during trading, prices rose above $79 per barrel for the first time in four weeks.