HSBC Mortgage laying off 225 workers in US
The Associated Press November 19, 2008, New York:
HSBC Mortgage Corp. is laying off 225 workers at its Buffalo-area headquarters as it shifts away from brokers toward direct lending to consumers.
The cuts represent about 20 percent of the 1,100 employees at the mortgage division of New York City-based HSBC Bank USA.
Spokeswoman Kate Durham says HSBC Mortgage stopped originating loans through wholesale and third party channels on Tuesday, but continues to write mortgages through the bank's 460 branches.
She says the company will help the affected employees find new jobs with HSBC where possible. They will stay on for 60 days.
110 banks have asked for $170B under bailout plan
By CHRISTOPHER S. RUGABER – WASHINGTON (AP)
At least 110 banks have requested more than $170 billion from the Treasury Department's rescue fund, and many more are expected to have submitted applications before Friday's deadline.
The requests would come from the $250 billion the Treasury set aside from the $700 billion fund to purchase stock in banks.
Analysts at Keefe, Bruyette & Woods estimated that 62 banks have received full or preliminary approval from the Treasury for $173 billion from the Troubled Asset Relief Program. The government said Monday that American International Group Inc. also would receive $40 billion from the program.
That $40 billion, however, won't come from the $250 billion set aside for the banks.
Another 48 banks have applied for about $6.5 billion, according to the Keefe, Bruyette & Woods report. Several banks that have filed applications said they haven't yet decided whether to accept any funds.
The tally doesn't include requests from four life insurance companies that are seeking regulatory approval to purchase savings and loans in order to become eligible for government funds.
One of those companies, Hartford Financial Services Group Inc., said it would be eligible to receive between $1.1 billion and $3.4 billion if its purchase of Federal Trust Bank is approved. Generally, only banks and savings and loans are eligible for direct investment from the TARP. AIG is the only nonbank company to receive such funds so far.
The total also doesn't include American Express Co., which said Monday it has restructured as a bank holding company, reportedly to seek up to $3.4 billion in funding.
Publicly-held banks were required to file their applications by Friday. Private banks have been given an extended, though unspecified, deadline.
Industry sources expect a flurry of last-minute applications will be filed Friday. Treasury spokeswomen on Friday wouldn't disclose how many applications have been filed or how much has been requested.
Nine large banks, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and JPMorgan Chase & Co., received $125 billion last month.
Neel Kashkari, interim director of the bailout at Treasury, told lawmakers Friday that about 20 more banks would receive funds that day.
The Treasury has "approved dozens of applications from banks across the country," he said.
Several banks announced Friday that they have received funds under the plan, including Huntington Bancshares Inc., Comerica Inc. and KeyCorp.
Some healthy local banks seeking bailout money
By PURVA PATEL and BRAD HEM , Houston Chronicle, Nov. 15, 2008,
Several local banks say they don’t need the federal government’s money, but they’re asking for it anyway.
MetroCorp Bancshares is one that has applied to participate in the U.S. Treasury’s Troubled Assets Relief Program, which is meant to inject capital into banks and get them lending again, even though it’s well-capitalized.
“With the uncertainty moving ahead for the Houston economy, it just would be prudent to have additional capital,” said David Choi, chief financial officer of the $1.6 billion bank.
The bank is looking to use the money to help shore up capital in case energy prices keep dropping and drag Houston’s economy with them.
A steadily appreciating housing market and strong oil and natural gas prices in recent years helped keep the economy — and its banks — strong relative to the rest of the nation.
The exception so far has been Franklin Bank SSB, which regulators seized last week after it failed largely because of troubled real estate loans it made in California and other parts of the country riddled with housing woes.
While local banks may not need the money, they don’t want to pass up an opportunity for cheap capital that would allow them to make more loans or acquire other banks.
“There is so much loan growth in Houston, this could help you not have to go back to investors to raise money,” said Dan Bass, managing director of Houston investment bank Carson-Medlin Co. and an analyst who follows Texas banks.
Banks can receive capital injections worth between 1 percent and 3 percent of its risk-based assets. The Office of Thrift Supervision has received 120 applications under the program, a spokesman said.
That level of participation indicates banks are closing in on the $250 billion the Treasury set aside from the $700 billion bailout fund to buy stock in banks.
Houston’s Encore Bancshares has preliminary approval to receive $34 million, CEO Jim D’Agostino said.
The bank isn’t at risk, but the money would allow Encore to provide more loans, he said.
“As we’ve analyzed the program, we believe the capital is a reasonable cost,” he said, adding that the bank won’t decide if it will accept the money until December.
Houston-based Amegy Bank is slated to get about $350 million of the $1.4 billion its parent, Zion’s Bank, will receive, CEO Paul Murphy said.
“This will allow us to continue our loan growth,” he said, noting the amount could change. “The bank will focus on small-business loans.”
The money has to be paid back with 5 percent interest, but that increases to 9 percent after five years.
“We can’t just let this money sit there and do nothing,” Murphy said.
Patriot Bank officials also said they don’t need the capital, but the $965.8 million bank has applied.
Whether “we accept really will depend on where the final details come out on how they structure it,” CEO Don Ellis said.
“If there are too many strings attached, we might not take it.”
It’s still unclear how much influence the government will want in the operations of those who take the money, giving some banks pause.
“Some banks are asking, ‘Do they really want the government second-guessing them on not just lending decisions, but executive compensation and how they pay dividends?’ ” said Ken Thomas, a Miami-based bank consultant and economist. “So why take it if you don’t need it?”
Others worry that applying or being rejected could wrongly imply they’re having problems, he said.
Some banks balked at taking the money after weighing the costs.
“It’s a lot more expensive than it appears,” said Larry Fraser, chairman of Independence Bank.
If the $134 million bank needs more capital in the future, Fraser said he’d rather let shareholders raise it rather than be diluted by government money.
“We’re just a little bitty bank,” he said. “We don’t need the government or anyone else messing with our business.”
Houston’s Tradition Bank also decided against the bailout money, CEO Downy Vickery said.
In addition to not needing the money, he said, Tradition didn’t like the strings attached, such as having to pay dividends to the government before paying them to individual investors.
Prosperity Bank decided against applying as the deadline for public companies loomed Friday.
“We just decided we were well-capitalized,” said CEO Dan Rollins. Houston-based Prosperity recently took over $3.7 billion in deposits from failed Franklin.
Woodforest National Bank, based in The Woodlands, is waiting for more details before deciding, Michael Richmond, vice chairman, said through a spokeswoman.
A spokesman for Houston-based Sterling Bank declined to comment Friday evening on the bank’s status.
G20 nears deal for global oversight of banks
Eoin Callan, Financial Post November 15, 2008 Washington, DC –
The Bretton Woods conference held in the dying days of World War II at a rural retreat in New Hampshire started off with modest expectations, but went on to create a new global financial system after weeks of painstaking work by mostly-anonymous officials from 44 countries.
In contrast, world leaders are gathering Saturday morning in a grand hall of towering marble columns and classical splendour tasked with the lofty ambition of remaking history in a single day.
After the grand rhetorical flourishes from the likes of French President Nicolas Sarkozy that have preceded the summit on the financial crisis in Washington, it is all but inevitable a conference that was convened with such high expectations will be seen to fall short, and that the outcome will initially be judged to be more prosaic than promised.
Yet, as leaders including Prime Minister Stephen Harper, Brazil's Lula da Silva, and Germany's Angela Merkel were poised to raise their glasses in an opening toast at a welcome dinner in the State Room of the White House, a working consensus appeared to have emerged on key principles and institutional pillars that will amount to a new framework for the world's banking system with far-reaching implications.
The outline of the agreement is scheduled to be announced later Saturday, and will then be handed over to a cluster of international working groups that will try to negotiate details in select areas in as little as 100 days before a second summit expected to usher in a new era for global banks, according to diplomats, finance officials, central banker officials and chief executives from Canada and other members of the Group of 20 most economically influential nations.
The new approach to the way finance is regulated that appeared within reach does not so much constitute a major reform of the capitalist system, but rather redoubles its defences. U.S. President Gerorge W. Bush will deliver his account of the deal as summit host in the afternoon at the National Building Museum in DC, after world leaders have headed back to their hotels and embassies to provide their own take in separate briefings.
While each leader will strike their own tone, their shared objectives will be included in a joint statement along with fiscal and monetary initiatives, according to a European diplomat.
The plans to spend money to stimulate growth will be pursued with urgency because of a worsening global economic slowdown. Officials assigned to develop proposals for a redesign of financial regulation will be given "marching orders by political leaders" to have them ready before the next summit due as early as March, a technical adviser to the process said.
While strong disagreements appear to remain between nations over important issues and the pace of implementation, the overall statement is expected to win the backing of President-elect Barack Obama's two representatives at the summit, veteran diplomat Madeleine Albright, and former Republican lawmaker Jim Leach.
Significantly, the weight of the world's largest banks is squarely behind the package of measures, which they had a hand in shaping. After being severely weakened by heavy losses that have claimed many casualties and may fell more, the world's top banks have embraced both an analysis that acknowledges their role in creating the crises and the need to change the way they operate and are supervised.
"We are not proposing self-regulation any more," said a chief executive who will lead the industry's contribution to one of the issue-specific working groups.
The international teams of technocrats are expected to be tasked with addressing a handful of areas where there is high-level agreement, but need for more practical grunt work.
A shared goal is to boost the minimum capital and liquidity reserves of banks and reduce overall leverage in the system, though there is agreement this will take time to carry out safely without triggering crises at institutions that are under pressure.
Leaders will also likely agree for the first time that bonus systems for bankers that encourage high-risk bets should be scrutinized by authorities when assessing the safety and soundness of financial institutions.
The opaque nature of complex credit markets, reliance on ratings agencies beset by conflicts of interest, and the role of accounting standards in compounding volatility, are all likely to be singled out for attention.
One of the most highly charged debates in the run-up to the summit has been the vexed issue of answering the call for a new overarching global structure to coordinate national implementation and manage emergency responses, plus who gets to be in charge.
While there was still the possibility for simmering political tensions to boil over into angry discord, there appeared to be a loose consensus developing with buy-in from Ottawa and leaders in Latin America, Europe and Asia.
The proposal being advanced would see the International Monetray Fund, first created at Bretton Woods, given only limited new surveillance powers, and instead see the lead global role go to a little-known organization that had a short and inauspicious existence before becoming the main forum over the last year for financial chiefs to debate ideas, hammer out differences, and appeal to other countries for joint action.
Known as the Financial Stability Forum, the organization has a tiny staff based in Basel, Switzerland, and currently draws all its authority from its membership of finance ministries, central banks, supervisors and regulators from an eclectic mix of countries and territories first brought together by the Asian financial crises, from Canada and the U.K. to Singapore and Hong Kong.
It has acted in the last year as a workshop where financial chiefs have rolled up their sleeves behind closed doors and tried to figure out what to do in the face of the kind of financial crisis that occurs once in a lifetime.
"The Financial Stablity Forum has stepped up," said one central banker.
Several of the recent market interventions by Ottawa have their genesis in meetings of the FSF, while banks have worked closely with the body.
"I think the FSF is a very viable vehicle," said the head of a Canadian bank.
But one of the first tasks in preparing the FSF for its new expanded role is widening its membership to include the big emerging economies, he said.
"We need China, Russia, Brazil at the table because that is where the growth is," said the Canadian bank head.
An IMF official told the Financial Post that the stability forum was likely to expands it membership long before the monetary fund reformed an outdated quota system that gives European nations disproportionate representation on its board at the expense of fast-growing economies.
The official said the chance of a sudden breakthrough at the IMF seemed remote, and indicated the momentum for a radically new role for the fund had dissipated.
Taro Aso, Japan's prime minster, will pledge $100-billion to help the IMF assist emerging markets hit by the crisis, and will urge the fund to address global currency imbalances.
But the Asian leader said that it comes to detecting signs of financial stability, the fund should report to the FSF, of which it is a member along with the World Bank and international accounting bodies.
In a sign of how low the IMF's standing has sunk, Sammer Dossan, the head of a non-governmental organization that has spent 12 years opposing the fund's neo-liberal policies, said a protest planned in Washington would be the group's last.
"The IMF has done such a good job of shooting itself in the foot we feel our resources could be better spent elsewhere," he said, explaining the group would be winding down after a final march demanding a small fee be levied on all currency transactions and used to fund for development and deter speculation.
But where the IMF has been slow to adapt to the rise of new economic powers, Mario Draghi, chairman of the FSF and governor of the Bank of Italy, said the forum would expand quickly.
The alumnus of Goldman Sachs who took over chairmanship of the forum last year, also this week praised the contribution to the international debate of Jim Flaherty, Canada's Finance Minister.
Mr. Flaherty has backed the FSF and a complimentary proposal to create a "college of supervisors" so regulators in each country where a major cross-border financial institution operates pool intelligence. Royal Bank of Canada would likely qualify for this treatment while TD Bank Financial Group and Scotiabank might also breach the threshold.
Bank executives are generally supportive of this shift towards a supranational system, partly because it would lower costs associated with having multiple regulators, and also beause creates a level playing field, they say.
But there is another more fundamental reason: banks don't trust each other. This was evident in the freeze up in interbank lending, and is an ongoing obstacle to implementation of steps executives feel strongly are in banks best interest, like tackling perverse pay incentives.
It takes only a handful of banks to break ranks for an industry-led effort to rein in pay to fail, though it remains to be seen if the creation of a new cross-border regulatory system would raise standards or lead to a downward leveling.
While these steps towards a new system for regulating financial institutions does not approach the scale of what was achieved at Bretton Woods or meet much more pressing global economic needs, today's summit may yet be seen as the day the risks posed by banks behaviour was elevated to a global challenge.
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