Today's Headlines

Bloomberg:

• Banks 'Dodged a Bullet' as Congress Dilutes Rules. Legislation to overhaul financial regulation will help curb risk-taking and boost capital buffers. What it won’t do is fundamentally reshape Wall Street’s biggest banks or prevent another crisis, analysts said. A deal reached by members of a House and Senate conference early this morning diluted provisions from the tougher Senate bill, limiting rather than prohibiting the ability of federally insured banks to trade derivatives and invest in hedge funds or private equity funds. Banks “dodged a bullet,” said Raj Date, executive director for Cambridge Winter Inc.’s center for financial institutions policy and a former Deutsche Bank AG executive. “This has to be a net positive.”
• U.S. commercial bank revenue from trading over-the-counter derivatives and securities surged more than 400% to $8.3 billion in the first quarter compared with fourth quarter 2009. The increase was led by trading credit products, including default swaps, which rose 100-fold to $2.7 billion from $27 million, the Office for the Comptroller of the Currency said today. JPMorgan(JPM) retained its top spot among U.S. commercial banks as of March 31, with $76 trillion of derivatives contracts as measured by notional amount, OCC said. Bank of America(BAC), Goldman Sachs(GS) and Wells Fargo(WFC) were the next four biggest users. The five firms accounted for 97% of the $216.5 trillion in derivatives held by U.S. banks as of March.
• Bank Ownership Cap on OTC Clearing, Execution Dropped. Banks may not have to limit their ownership of derivatives clearinghouses or execution services after a plan to restrict them to 20 percent stakes was excluded from U.S. legislation.
• European Yield Spreads Widen on Concern Debt Crisis Deepening. Belgian, Italian and French 10-year bonds declined, sending their yield differences with benchmark German bunds wider, on concern the region’s debt crisis is deepening as the economic recovery sputters. “This is a supply shock” as banks consider dumping their holdings to repay the ECB, said Kornelius Purps, a fixed-income strategist at UniCredit SpA in Munich. “Banks are checking out the market. I anticipate this will intensify next week.”
  
• National Iranian Tanker Co. released eight of 25 supertankers being used to store crude oil, Arctic Securities ASA said. The vessels will offload their cargoes and increase the number of tankers available for hire, Arctic said today.
• Gulf Begins Storm Watch as Weather System Lingers Off Honduras. Residents and business owners along the Gulf of Mexico face a weekend of watching and planning as a weather system that may become the year’s first tropical storm, or hurricane, lingers on their doorstep.
• U.K. Banks 'Vulnerable' to Asset Writedowns, BOE Says. U.K. banks remain “vulnerable” to further writedowns on their assets because of a potential decline in investor appetite for risk, the Bank of England said. Derivatives and other financial instruments accounted for 40 percent of U.K. banks’ total assets at the end of 2009, the central bank said in its semiannual financial stability report published in London today. Globally, mark-to-market losses on assets rose to $7.8 trillion in June from $4.5 trillion in March, it said. “If sovereign risk concerns rise or risk appetite continues to diminish, asset prices could fall further,” the BOE said. “This would have a significant impact on the solvency positions of holders of these assets, including both U.K. and global banks.”
• KB Home(KBH) Falls After Posting Wider Loss Than Estimated. KB Home, the U.S. homebuilder that targets first-time buyers, tumbled to the lowest price in almost a year in New York trading after reporting a wider-than- estimated loss and a drop in new orders.
• Bove Says 'Buy' Banks as Regulatory Overhaul Won't Hurt Them. Investors should buy bank stocks, as they will be able to pass on to consumers the cost of the most sweeping overhaul of U.S. financial regulation since the Great Depression, according to Dick Bove of Rochdale Securities LLC. “They can increase prices,” Bove, who is based in Lutz, Florida, said in a telephone interview. “You’ll see prices on just about every bank product soar. Everybody else will be negatively impacted by this bill, but not the banks. The industry has been pummeled because everybody believed that banks caused the financial crisis. That pummeling is over.”

CNBC:

• Why Wall Street Will Love The 3% Solution in Reform Bill. The new limits on proprietary trading and hedge fund investments may actually benefit big banks more than harm them—especially in the hedge funds they market to clients.

NY Times:

• A New Plan for Valuing Pensions. The board that writes accounting rules for states and cities has proposed a new approach for pension disclosures that falls far short of what some financial experts hoped, but which would still force many governments to highlight pension shortfalls they have played down. The current standard has come under heavy fire from mainstream economists, who say it makes virtually all government pension benefits look less costly than they really are. Government officials have granted pensions to teachers, police, judges and other public workers for years, without reflecting the true cost, analysts say. Now the bills are coming due, and in many cases there is not enough money set aside, adding to the fiscal distress across the country.

NY Post:

• Debit Cards' $20B Issue Merchants, Banks' Bitter DC Battle Over Swipe-Fee Cuts. The move on Capitol Hill to cut the $20 billion a year in debit-card "swipe fees" charged by banks could come back to bite consumers. Under a proposal in the new financial reform package being hammered out last night in Washington, the 3 percent fee that banks charge retailers may be halved -- but banks might look to make up for the loss by ending free checking for bank customers plus hiking other fees, experts say. "This is going to squeeze a good revenue stream for banks and financial institutions," said Greg McBride, senior financial analyst at BankRate.com. "Banks will make up for it by pricing for their services."

Zero Hedge:

• ECRI Leading Economic Index Plunges at -6.9% Rate, Back to December 2007 Levels When Recession Officially Started.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).

Politico:

• Obama Losing Hill Liberals on War.
  

USA Today:

• Whooping Cough Epidemic Hits California. Whooping cough is now an epidemic in California, and is on pace to break a 50-year record for infections for the year. As of June 15, California had 910 recorded cases of the highly contagious disease, and five babies — all under 3 months of age — have died from the disease this year. "Children should be vaccinated against the disease and parents, family members and caregivers of infants need a booster shot," California Department of Public Health director Dr. Mark Horton said Wednesday.

Shulte Roth & Zabel:

• Financial Crisis Inquiry Commission Sends Out Hedge Fund Industry Market Risk Survey.

CBCNews:

• Ottawa Aware of Foreign Influence: Sources. Sources tell CBC News the highest levels of the Canadian government have known for years that foreign countries have been trying to win influence over Canadian politicians and public servants. That information comes a day after CSIS director Richard Fadden said he had never warned officials close to Prime Minister Stephen Harper that some provincial cabinet ministers may be under the sway of countries like China — even though he told the CBC earlier this week the agency was discussing the issue with the Privy Council Office. In an exclusive interview with CBC News earlier this week, Fadden said Canada's spy agency suspects that some municipal politicians and cabinet ministers in two provinces are being swayed by their connections to foreign governments. China was one of the countries Fadden mentioned. Senior intelligence sources say the highest levels of the Canadian government were "absolutely" aware of the issue. "These problems are very well-known," one source said. "This information did not blindside the government." A source suggested the prime minister was personally aware of the issue of foreign agents trying to win influence over politicans and bureaucrats — even if he didn't know the details. "The prime minister is strongly of a view that this is a problem," a source said.
  

Yonhap News:

• N.Korea Vows to Bolster Nuclear Arms on War Anniversary: Report. Marking the 60th anniversary Friday of the outbreak of the Korean War, North Korea vowed to bolster its nuclear weapon capability to cope with U.S. hostilities, the country's main radio station said.