Government officials are huddling with executives from American International Group Inc. (NYSE: AIG) to hatch a scheme to accelerate the company's plan to regain its independence and repay in full what the insurer owes U.S. taxpayers, according to a report from The Wall Street Journal.
Under the plan, the Treasury Department is likely to convert $49 billion of AIG preferred shares it holds into common shares, a move that could bring the government's ownership stake in AIG to above 90%, from 79.8% currently, The Journal reported, citing sources familiar with the matter.
The common shares would then be gradually sold off to private investors, a move that would reduce U.S. ownership and potentially earn the government a profit if the shares rise in value.
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Money Morning Mailbag: Small Business Owners Find Hope in Big Banks' Lending Promises
Larger financial institutions are increasing loans to big companies, but small business owners are still feeling the credit crunch.
U.S. Federal Reserve Chairman Ben S. Bernanke noted at a lending conference in July that there was a serious gap developing between large businesses that were building up cash and smaller ones still unable to get credit, and blamed tight credit for preventing small businesses from hiring.
"Making credit accessible to sound small businesses is crucial to our economic recovery," Bernanke said at the conference.
According to the National Small Business Association's 2010 Mid-Year Economic Report, 41% of small businesses were still having trouble obtaining credit in July.
U.S. Federal Reserve Chairman Ben S. Bernanke noted at a lending conference in July that there was a serious gap developing between large businesses that were building up cash and smaller ones still unable to get credit, and blamed tight credit for preventing small businesses from hiring.
"Making credit accessible to sound small businesses is crucial to our economic recovery," Bernanke said at the conference.
According to the National Small Business Association's 2010 Mid-Year Economic Report, 41% of small businesses were still having trouble obtaining credit in July.
The Tobin Tax: The Deficit-Busting Levy Wall Street Hates
After the Nov. 2 midterm elections, the Obama administration and Congress are going to have to scramble to fill a trillion-dollar hole in the U.S budget, and tax increases may be the only option.
A tax increase won't be good news for an already wheezing economic recovery that seems to get weaker with each new report or indicator that's issued. But the type of tax that's chosen will go a long way in determining just how much damage the U.S. economy will have to endure.
With a deficit in excess of $1 trillion, there aren't a lot of options. One possibility would be to allow the 2001 and 2003 Bush tax cuts to expire, which would have a depressing effect on the economy and most people's pocketbooks.
But a better option would be to devise some new taxes that may prove less damaging. Indeed, there's even one possibility that might even do some economic good if it's implemented correctly.
It's called a "Tobin tax."
To see how a reasonably set "Tobin tax" could help U.S. leaders to fix the nation's finances, please read on...
A tax increase won't be good news for an already wheezing economic recovery that seems to get weaker with each new report or indicator that's issued. But the type of tax that's chosen will go a long way in determining just how much damage the U.S. economy will have to endure.
With a deficit in excess of $1 trillion, there aren't a lot of options. One possibility would be to allow the 2001 and 2003 Bush tax cuts to expire, which would have a depressing effect on the economy and most people's pocketbooks.
But a better option would be to devise some new taxes that may prove less damaging. Indeed, there's even one possibility that might even do some economic good if it's implemented correctly.
It's called a "Tobin tax."
To see how a reasonably set "Tobin tax" could help U.S. leaders to fix the nation's finances, please read on...
Spain's Banco Santander Stands Strong Against Debt Crisis with Confident Global Expansion
The Eurozone's largest bank, Banco Santander, S.A. (NYSE ADR: STD) of Spain, showed the European debt crisis has not hurt its prospects by announcing today (Wednesday) it would buy Bank of America Corp.'s (NYSE: BAC) stake in its Mexico unit. The $2.5 billion purchase increases Santander's exposure to the high growth opportunities of Mexico's banking sector.
Despite Eurozone debt concerns and rocky markets, Santander's move to expand into Mexico shows a healthy balance sheet that has stood strong against the debt problems plaguing other European banks. Santander has managed to keep solid footing among Spain's unstable banking sector, where the nation's debt has hurt financing conditions and smaller unlisted savings banks have been suffering losses on property and housing loans.
"Santander is showing that it can still make decisions and go on with its business plan despite the liquidity problems in the markets," Venture Finanzas analyst Ignacio Mendez told Reuters.
Despite Eurozone debt concerns and rocky markets, Santander's move to expand into Mexico shows a healthy balance sheet that has stood strong against the debt problems plaguing other European banks. Santander has managed to keep solid footing among Spain's unstable banking sector, where the nation's debt has hurt financing conditions and smaller unlisted savings banks have been suffering losses on property and housing loans.
"Santander is showing that it can still make decisions and go on with its business plan despite the liquidity problems in the markets," Venture Finanzas analyst Ignacio Mendez told Reuters.
The Tobin Tax: The Fix-It Plan Wall Street Hates ... But Can't Seem to Kill
German Chancellor Angela Merkel recently came out in favor of a "Tobin tax" - a small tax on financial transactions, proportionate to the size of the transaction. The Tobin tax idea also has been proposed by Britain's former prime minister, Gordon Brown, and was proposed in Congress by U.S. Rep. Peter DeFazio, D-OR.
Every time a Tobin tax is proposed, it has failed to gain traction - which isn't surprising: Wall Street, with its international affiliates and legion of lobbyists, hates the idea.
Even so, the Tobin tax idea just refuses to die - which is a good thing, since it is probably the best way of curing some of Wall Street's pathologies.
Every time a Tobin tax is proposed, it has failed to gain traction - which isn't surprising: Wall Street, with its international affiliates and legion of lobbyists, hates the idea.
Even so, the Tobin tax idea just refuses to die - which is a good thing, since it is probably the best way of curing some of Wall Street's pathologies.
To understand how the Tobin tax can benefit investors, please read on...
Downgrades Crush Goldman Sachs Stock On News of Criminal Investigation
Goldman Sachs Group, Inc (NYSE: GS) fell 9.39% Friday after being downgraded on news released Thursday that federal prosecutors started a criminal investigation into whether Goldman committed securities fraud.
Standard & Poor's Financial Services LLC downgraded Goldman to sell from hold and lowered its price target to $140 from $180.
"Though traditionally difficult to prove, we think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman's outlook," S&P analysts wrote in a note to clients Friday morning.
Standard & Poor's Financial Services LLC downgraded Goldman to sell from hold and lowered its price target to $140 from $180.
"Though traditionally difficult to prove, we think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman's outlook," S&P analysts wrote in a note to clients Friday morning.
Seven Cash Cows That Point the Way to Profit
In uncertain economic times, every investor needs a little extra cash in their pocket. These stocks should do the trick. We're not talking about commodity plays here, rather these "cash cows" are the companies with enough "moo-lah" to invest in their own growth... something that should definitely pay off in the long run for investors. Check out our "cash cow" stocks in this report.
Ride Wall Street's "Great Global Commodities Grab" for Potential 10-Bagger Returns
Virtually every investor has heard about how the emergence of China and India promise to send commodity prices skyward in the months and years to come. The promised run-up has yet to begin in earnest, but prognosticators say it's merely a matter of time and just the "right" catalyst.
Money Morning Contributing Editor Peter Krauth - a noted commodities expert and editor of the Global Resource Alert advisory service - says he's found that "just right" catalyst. He's calling it the "Great Global Commodities Grab," and says it's being engineered by some of Wall Street's biggest investment banks.
But here's the key point: Because Wall Street is essentially "gaming" the system, this commodities grab is a chance for investors to reap bigger returns than they would get with the leverage afforded through options and futures - but without the risk.
Investors have reached the point where this physical commodities grab "gets really interesting," Krauth said in an interview with Money Morning. "JPMorgan Chase & Co. (NYSE: JPM) now owns ships overseas and storage tanks in Canada, Asia and Europe [that hold] millions of barrels of oil. And it's far from being the only one. Back in December, one report stated that if all the tankers being used as offshore storage tanks were placed end to end, that string of ships would stretch 26 miles."
Added Krauth: "We're talking about oil supplies being physically taken off the market... that can't help but affect market prices. And that's just with oil - Wall Street investment banks are taking major physical stakes in such commodities as gold and other precious metals, too."
Krauth - a highly regarded market analyst and expert in metals, mining and energy stocks - recently sat down with Money Morning Executive Editor William Patalon III to talk about how the "Great Global Commodities Grab" is going to ignite a rally in the prices of oil, gold, other precious metals and even agricultural commodities. During the question-and-answer session, Krauth also:
Money Morning Contributing Editor Peter Krauth - a noted commodities expert and editor of the Global Resource Alert advisory service - says he's found that "just right" catalyst. He's calling it the "Great Global Commodities Grab," and says it's being engineered by some of Wall Street's biggest investment banks.
But here's the key point: Because Wall Street is essentially "gaming" the system, this commodities grab is a chance for investors to reap bigger returns than they would get with the leverage afforded through options and futures - but without the risk.
Investors have reached the point where this physical commodities grab "gets really interesting," Krauth said in an interview with Money Morning. "JPMorgan Chase & Co. (NYSE: JPM) now owns ships overseas and storage tanks in Canada, Asia and Europe [that hold] millions of barrels of oil. And it's far from being the only one. Back in December, one report stated that if all the tankers being used as offshore storage tanks were placed end to end, that string of ships would stretch 26 miles."
Added Krauth: "We're talking about oil supplies being physically taken off the market... that can't help but affect market prices. And that's just with oil - Wall Street investment banks are taking major physical stakes in such commodities as gold and other precious metals, too."
Krauth - a highly regarded market analyst and expert in metals, mining and energy stocks - recently sat down with Money Morning Executive Editor William Patalon III to talk about how the "Great Global Commodities Grab" is going to ignite a rally in the prices of oil, gold, other precious metals and even agricultural commodities. During the question-and-answer session, Krauth also:
- Detailed how two leading investment banks just spent more than $2 billion to buy precious-metals-storage companies.
- Talked about how gold, throughout history, always ends up taking over for fiat (paper) currencies.
- Explained how the aggressive price forecasts Wall Street investment banks have made for both oil and gold are certain to become self-fulfilling prophecies.
- And described two companies - one an energy player and the other a junior miner - that he recently recommended to his advisory service, using them as illustrations to underscore his commodity-price predictions.
Buy, Sell or Hold: Bank of America Corp. Could Offer Investors a "Double Play"
On October 6, 2008, I recommended readers buy shares of Bank of America Corp. (NYSE: BAC).
Bank of America at the time had just agreed to acquire Merrill Lynch and Co. The strategy I recommended called for taking a prudent position in the bank by buying increasing amounts of shares on any market pullbacks.
The strategy appeared to go as planned at the very beginning as the shares dropped in value as predicted, improving the average buying price. But Bank of America subsequently revealed large amounts of troubled assets that had not been evident in prior releases. The company's president and chairman lost his job as a result, and the stock continued to drop. Today, after a very strong recovery BofA stock is still trading some 30% below our initial recommended entry price. So, depending on how one executed the entry strategy, one would be some 10-15% down even today.
Bank of America at the time had just agreed to acquire Merrill Lynch and Co. The strategy I recommended called for taking a prudent position in the bank by buying increasing amounts of shares on any market pullbacks.
The strategy appeared to go as planned at the very beginning as the shares dropped in value as predicted, improving the average buying price. But Bank of America subsequently revealed large amounts of troubled assets that had not been evident in prior releases. The company's president and chairman lost his job as a result, and the stock continued to drop. Today, after a very strong recovery BofA stock is still trading some 30% below our initial recommended entry price. So, depending on how one executed the entry strategy, one would be some 10-15% down even today.
Bankster Gangsters: Global Commodities Grab Causes Major Bank Profits to Soar
Major bank profits are up. Way up.
Goldman Sachs Group Inc. (NYSE: GS) just reported that its first-quarter earnings nearly doubled to $3.46 billion, the investment-banking giant's second-most-profitable quarter since going public a decade ago.
JPMorgan Chase & Co. (NYSE: JPM) recently said its first-quarter earnings came in at $3.3 billion, up 55% from a year ago.
And Bank of America Corp. (NYSE: BAC) reported that its earnings for the first three months of the year rang in at $2.83 billion.
For all three of these banking giants, the first-quarter results blew past analyst expectations. Their stock prices? Approaching levels not seen since the start of the financial crisis. In fact, JPMorgan's stock is within 10% of its five-year high.
Major bank profits are zooming - despite the fact that U.S. consumers are struggling to repay loans.
So how are these guys pulling this off? Well, if you dig, you'll find that the bulk of major bank profits are coming from stronger trading revenue and other segments that are enabling the largest banks to overcome weakness in the lending area, which decades ago was the banking sector's bread-and-butter business.
If you dig deeper still, as I've done, you unearth one of the key reasons these banking behemoths are booking such massive profits. They've been moving enormous amounts of capital into one area of the market.
I'm talking about commodities.
For an inside look at how banks can reap 15-fold returns on their physical-commodities stakes, please read on...
Goldman Sachs Group Inc. (NYSE: GS) just reported that its first-quarter earnings nearly doubled to $3.46 billion, the investment-banking giant's second-most-profitable quarter since going public a decade ago.
JPMorgan Chase & Co. (NYSE: JPM) recently said its first-quarter earnings came in at $3.3 billion, up 55% from a year ago.
And Bank of America Corp. (NYSE: BAC) reported that its earnings for the first three months of the year rang in at $2.83 billion.
For all three of these banking giants, the first-quarter results blew past analyst expectations. Their stock prices? Approaching levels not seen since the start of the financial crisis. In fact, JPMorgan's stock is within 10% of its five-year high.
Major bank profits are zooming - despite the fact that U.S. consumers are struggling to repay loans.
So how are these guys pulling this off? Well, if you dig, you'll find that the bulk of major bank profits are coming from stronger trading revenue and other segments that are enabling the largest banks to overcome weakness in the lending area, which decades ago was the banking sector's bread-and-butter business.
If you dig deeper still, as I've done, you unearth one of the key reasons these banking behemoths are booking such massive profits. They've been moving enormous amounts of capital into one area of the market.
I'm talking about commodities.
For an inside look at how banks can reap 15-fold returns on their physical-commodities stakes, please read on...
JPMorgan Posts Big Gains but Financial Reform Threatens Profitability
JPMorgan Chase & Co. (NYSE: JPM) posted a 55% rise in first-quarter net income led by fixed-income trading and investment banking. But to ensure its profits remain in tact, the bank continues to fight against proposed financial reform.
JPMorgan, the second-largest U.S. bank by assets, beat analysts' estimates with net income of $3.33 billion, or 74 cents a share. Estimates averaged 64 cents a share.
Investment banking brought in $2.47 billion, 74% of total net income. The area is usually a strong contributor to profits, kicking in 57% in the previous quarter and 75% in the first quarter of 2009.
JPMorgan claims the results are a strong indication of global financial economic improvement.
JPMorgan, the second-largest U.S. bank by assets, beat analysts' estimates with net income of $3.33 billion, or 74 cents a share. Estimates averaged 64 cents a share.
Investment banking brought in $2.47 billion, 74% of total net income. The area is usually a strong contributor to profits, kicking in 57% in the previous quarter and 75% in the first quarter of 2009.
JPMorgan claims the results are a strong indication of global financial economic improvement.
Obama Reveals $14 Billion Housing Program Aimed at Unemployed and Underwater Homeowners
The Obama administration on Friday announced a $14 billion program to shore up the housing market by giving lenders incentives to slash some mortgage debt and reduce mortgage payments for the unemployed. As the housing market struggles under the weight of an epidemic of foreclosures there was disturbing evidence last week that the malaise is […]
Europe-China Connection Could Rattle Stocks
I was watching the Asia Edge show on Bloomberg television Wednesday night when the lovely and smart Susan Li broke in breathlessly on her guest with news about China's consumer inflation numbers. Inflation was reported up just a touch in January, which was considered good news because if it was higher it would have made Chinese banking authorities more anxious to clamp down on interest rates and if it was lower it would have raised the awful specter of deflation.
The Shanghai stock market ended a fraction higher, so it was a bit anticlimactic. But the key thing to know is that the Chinese market still appears to be in a downtrend and that bodes ill for the rest of the emerging markets. The 50-day moving average of iShares FTSE/Xinhua China 25 Index (NYSE: FXI) has turned emphatically negative, as has the slightly longer 100-day average. The index fund also is already beneath its 200-day average, which tends to distinguish bull cycles from bear cycles.
The Shanghai stock market ended a fraction higher, so it was a bit anticlimactic. But the key thing to know is that the Chinese market still appears to be in a downtrend and that bodes ill for the rest of the emerging markets. The 50-day moving average of iShares FTSE/Xinhua China 25 Index (NYSE: FXI) has turned emphatically negative, as has the slightly longer 100-day average. The index fund also is already beneath its 200-day average, which tends to distinguish bull cycles from bear cycles.
Read more about the Europe-China connection...
CIT Taps Former Merrill Chief Thain as New CEO
In a move that unites two prominent casualties of the financial crisis, CIT Group Inc. (NYSE: CIT) ended a prolonged search by naming John Thain, the former chief of Merrill Lynch & Co., as its new chairman and chief executive officer.
Thain, who left Bank of America Corp. (NYSE: BAC) 13 months ago amid controversy over its takeover of Merrill, will have his hands full rebuilding CIT, an embattled commercial lender that nearly collapsed in 2009.
CIT still operates under restrictions that were imposed after receiving $2.3 billion in funding under terms of the Troubled Asset Relief Program (TARP). Those measures include being banned from the commercial paper market, its traditional source of funding.
Thain, who left Bank of America Corp. (NYSE: BAC) 13 months ago amid controversy over its takeover of Merrill, will have his hands full rebuilding CIT, an embattled commercial lender that nearly collapsed in 2009.
CIT still operates under restrictions that were imposed after receiving $2.3 billion in funding under terms of the Troubled Asset Relief Program (TARP). Those measures include being banned from the commercial paper market, its traditional source of funding.
Obama's Budget Adds $1 Trillion in Taxes, Balloons Federal Deficit
President Barack Obama yesterday (Monday) unveiled a $3.8 trillion budget proposal that includes big tax increases on individuals and businesses, and expands the federal deficit by more than $5.5 trillion by the end of the decade, including a record $1.6 trillion next year.
The budget blueprint for the fiscal year that begins Oct. 1 reflects the administration's struggle to find a balance between containing the spiraling federal deficit with the need to boost the economy and create jobs - both of which figure to be political bombshells in the upcoming 2010 elections.
"We're trying to accomplish a soft landing in terms of our fiscal trajectory," Peter Orszag, director of the White House Office of Management and Budget, said at a press briefing.
But the budget is certain to add fuel to the debate over the size and scope of government. As expected, Republicans railed against the administration's big spending programs and tax increases.
The budget blueprint for the fiscal year that begins Oct. 1 reflects the administration's struggle to find a balance between containing the spiraling federal deficit with the need to boost the economy and create jobs - both of which figure to be political bombshells in the upcoming 2010 elections.
"We're trying to accomplish a soft landing in terms of our fiscal trajectory," Peter Orszag, director of the White House Office of Management and Budget, said at a press briefing.
But the budget is certain to add fuel to the debate over the size and scope of government. As expected, Republicans railed against the administration's big spending programs and tax increases.