- BankUnited's CEO Kansas Says U.S. May Lose a Third of Its Banks. The U.S. may lose about a third of its banks as the weakening economy weeds out the least healthy institutions, said John Kanas, chief executive officer of BankUnited.
- Cigna, Restaurants Seek Low-Wage Health-Plan Waivers. U.S. restaurants have asked the federal government to waive health overhaul rules that may force companies to abandon low-cost “mini-med” plans that insure 1.4 million minimum-wage and part-time employees. Cigna Corp., the Philadelphia-based health insurer, has also asked for a waiver on behalf of its “limited-benefit” customers, and expects to hear back soon from federal officials, Gloria Barone Rosario, a spokeswoman, said today in an e-mail.
- Why Debtholders Need to Get Ready for a Haircut: Peter Coy. There is no end in sight to Ireland’s debt crisis, but here’s one thing we know: The Irish will not get kicked out of their own country. No matter how many multiples of the nation’s gross domestic product are owed to German and U.K. banks, sovereign foreclosure isn’t an option. In most other respects, though, the state of Ireland is similar to the predicament that one in five American homeowners with mortgages find themselves in -- owing more than their property is worth, so burdened with debt that the economy is stalled by their inability to borrow and spend as they used to.
- Post-Enron Audit Watchdog Shows Consumer Bureau What to Avoid, Turner Says. In 2002, Congress sought to make sure publicly traded companies couldn’t deceive investors the way Enron Corp. did. So it created a watchdog to monitor the accountants that audit the corporations and gave it a gawky name: the Public Company Accounting Oversight Board. In eight years the board has brought 32 disciplinary cases, only one of which was against one of the so-called big four accounting firms. It has also approved six standards governing how auditors must do their work. Eight others adopted in August await Securities and Exchange Commission sign-off. Some of the board’s advocates find that slender record underwhelming, Bloomberg Businessweek reports in its Oct. 4 issue. “They need to be more forceful in setting the audit standards, and even more importantly, they need to be more forceful in enforcement,” says Edward Ketz, an accounting professor at Pennsylvania State University. “It just doesn’t seem they are doing enough.”
- Arahura in Funding Talks for $964 Million Rare Earths Project. Arafura Resources Ltd. is in talks to raise funds for its A$1 billion ($964 million) rare earth project in Australia after China capped exports of the metals used in hybrid cars and laptops this year and prices soared. “With the outlook of the market, the robustness of the project, we have every chance of raising the money,” Chief Executive Officer Steve Ward said in an interview in Perth. “The money will come from a combination of sources from all over the globe. It will come from debt, equity, maybe some financial instruments, and maybe some involvement with some customers and some raw-material suppliers.” China, which controls more than 90 percent of the global market of the metallic elements, in July reduced export quotas for the rest of the year by 72 percent, sending prices up as much as ninefold.
- Geithner Says No Threat of China Trade War or Currency Wars. U.S. Treasury Secretary Timothy F. Geithner today said he was confident tensions over China’s currency, the yuan, won’t lead to escalating trade sanctions or feed into a broader global currency conflict. “We’re not going to have a trade war,” Geithner said in remarks to a Washington conference hosted by The Atlantic magazine and the Aspen Institute.
- Mexico Files Support of U.S. Court Order Blocking Arizona Illegal Immigration Law. Mexico said it supports a U.S. court ruling that blocks the central provisions of an Arizona law requiring police to determine the immigration status of people stopped for questioning. Lawyers for Mexico told the U.S. Court of Appeals in San Francisco in a court filing today that the law interferes with its relations with the U.S. and encourages “an imminent threat of state-sanctioned bias or discrimination.” Nine Latin American countries including Argentina, Brazil, Bolivia, Costa Rica, Nicaragua and Peru asked for permission to join Mexico’s request that the appeals court uphold the lower- court’s ruling that Arizona can’t require police to try to determine if someone is legally in the U.S. and then detain that person if they suspect he isn’t. “Mexico seeks to ensure that its citizens present in the U.S. are accorded the human and civil rights granted under the U.S. Constitution,” Mexico said in its filing. For the almost 20 million Mexican workers, tourists and students admitted to the U.S. and those already in the country, the Arizona law “adversely impacts U.S.-Mexico bilateral relations, Mexican citizens and other people of Latin-American descent present in Arizona,” according to the filing.
- Correa Claims Ecuador Coup Attempt After Scuffling With Police. Ecuador declared a state of emergency as hundreds of police protesting wage cuts blocked roads, shut the airport for several hours and sprayed teargas on President Rafael Correa.
- Roubini Says 2008 Bank Mergers Created 'Too Bigger to Fail' Risk for U.S. “The ‘too big to fail’ problem has become an even too bigger to fail” problem, Roubini said today at the Bloomberg Dealmakers Summit in New York. “That is what happens when you do mergers that don’t make any sense.” The federal government rescued institutions whose potential collapse could have disrupted the financial system in 2008, including mortgage lender Fannie Mae and insurer American International Group Inc. JPMorgan Chase & Co. acquired the brokerage Bear Stearns Cos. and assets of Washington Mutual Inc. in 2008 after the two companies suffered market routs and regulators stepped in. Bank of America Corp. bought brokerage Merrill Lynch & Co. and mortgage lender Countrywide Financial Corp.
- California Man Charged in $225 Million 'Scratch and Dent' Property Scheme. A California businessman was charged with fraud and money laundering in what prosecutors said was a $225 million Ponzi scheme that solicited investments in rehabilitated “scratch and dent” real estate. Bruce Fred Friedman, 60, the owner of Sherman Oaks, California-based Diversified Lending Group Inc., was arrested Sept. 13 in Cannes, France, U.S. Attorney Andre Birotte Jr. in Los Angeles said today in a statement. He faces a prison sentence of as long as 360 years if convicted on all 23 counts that he’s charged with, according to the statement.
- Irish Crisis Shakes Europe. Dublin to Spend Billions More to Shore Up Lenders; Jitters Over Euro's Future. Ireland scrambled to contain its financial crisis—and convince investors it won't need an emergency bailout by its European peers—by promising to pump billions more into its hardest-hit lenders. The move, coming after efforts two years ago to rescue the troubled banks, underscores Ireland's new and unwanted status as the center of Europe's continuing financial turmoil. The convulsions in Dublin are adding to concerns that Ireland and other stricken nations may need to tap a rescue mechanism for euro-zone members that was cobbled together to save Greece this spring. The Irish government said Thursday that the total cost of fixing its banks, battered by an epic housing bust, could in the worst case total as much as €50 billion ($68 billion), or about a third of the country's economic output last year. That's much higher than the government's previous commitment of a total of €33 billion for the bailout. As a result of its bank rescues, Ireland's budget deficit will rise to 32% of its economic output this year—roughly 10 times the European Union limit and the biggest in the euro zone's 11-year history. Ireland is betting it can show that it has fully absorbed its banks' problems and that the worst is over. But more trouble may loom. The government has already mounted one of the toughest budget-cutting programs in Europe, but it will now likely make even deeper cuts in its new budget in November. If the new cuts further stifle the economy, concern will build that Ireland—like Greece—will one day need to seek financial assistance from the rescue fund established earlier this year by the EU and the International Monetary Fund. Similar fears are building in Spain and Portugal, where concerns about government debt are mounting. Investors are also nervous about Portugal, fearing that political wrangling there could prevent the country from cutting its own debts. On Thursday, ratings company Moody's Investors Service downgraded Spain's top-notch triple-A rating to Aa1, citing its weak growth prospects and deteriorating finances. Ireland's lingering woes offer a cautionary tale of how difficult it will be for Europe's weaker economies to cut their debts while coping with economic stagnation and high unemployment. Following weeks of relative calm in Europe, the flaring of Ireland's crisis has put European officials back on the defensive, renewing questions about the long-term viability of the 16-nation euro zone. Ireland's troubles also highlight the difficulty the European Central Bank faces in setting a single monetary policy for a region of starkly different economic fortunes. Ireland, Portugal, Spain and Greece appear to be slipping deeper into economic malaise, while Germany and other northern European countries are recovering. If this divide continues to grow, as a number of economists predict, ECB officials will face uncomfortable questions about whose interests they are putting first. Making things worse, Ireland's economy unexpectedly shrank almost 5%, on an annualized basis, in the second quarter, after emerging from recession earlier this year. A weak economy—or worse, a "double-dip" recession— will make it harder to generate tax revenue and pay down debt.
- Icahn Gains Leverage to Press Merger of MGM, Lions Gate. Billionaire investor Carl Icahn bought a significant chunk of Metro-Goldwyn-Mayer Inc.'s debt and is pushing the beleaguered film studio to merge with rival Lions Gate Entertainment Corp., said people familiar with the matter.
- Gymboree(GYMB) Solicits Potential Buyers. Children's clothing retailer Gymboree Corp. is exploring the possibility of a sale to private equity firms, people familiar with the matter said.
- Massey Bashes Mine Regulator. Massey Energy Co. said federal mine safety officials insisted on ventilation changes that cut the flow of fresh air in half at its Upper Big Branch mine in the days leading up to the April 5 explosion that killed 29 workers. In a 12-page letter posted on its website, Massey said its engineers resisted the change but were pressured by the Mine Safety and Health Administration, the federal agency charged with policing mines. Massey also repeated its calls for the agency to conduct its hearings into the accident in public.
- Microsoft(MSFT), AT&T(T) to Unveil New Smartphones. Corp. will formally unveil a lineup of smartphones using the revamped version of its mobile operating system on Oct. 11, and Inc. will begin offering them four weeks later, according to people familiar with the launch plans.
- Fed's Bernanke, Pianalto Say Recovery Disappointing. The U.S. economic recovery remains disappointingly slow with unemployment too high, two top Federal Reserve officials said on Thursday, as they discussed the role of the U.S. central bank in spurring a stronger economy. Federal Reserve Chairman Ben Bernanke, in remarks at a town hall event held by the Fed, commented on the pain still felt by many Americans, but spoke only in generalities about the Fed's commitment to stimulate growth. The president of the Cleveland Fed, Sandra Pianalto, said growth is currently too slow to significantly reduce the "stubbornly high" unemployment rate. She said she is currently assessing the effectiveness of the tools that the central bank could employ if the Fed were to decide the economic recovery needs an extra boost.
- Medical Waste Disposal Industry Defies The Recession. Unfazed by housing downturns, terrorist attacks, recessions, oil spills and like misfortune, Stericycle (SRCL) keeps on growing.
- HP(HPQ) Stock Tanks After It Hires No-Name CEO. After HP named Apotheker CEO, its stock is down 4% in after hours trading, which means he's already destroyed $4.45 billion in shareholder value!
- Warning: With All These Bank Failing, Know Your FDIC Status.
- This is What a Housing Boom Gone Bust and an Economy Gone Terribly Wrong Looks Like. (video) This video from WSJ.com does a fantastic job at displaying the complexities of what it going on in Spain.
- Guest Post:Algorithms Should Be Monitored On A Daily Basis. Leading derivative expert, author and regular contributor at the Econotwist’s, , says algorithms have many weaknesses and should be monitored on a daily basis by people with extensive knowledge and experience.
- This Has to be a Joke: SEC About to Blame Entire Flash Crash on Waddell and Reed's E-Mini Trades.
- Federal Reserve Balance Sheet Update. We believe that within one week the Fed will surpass Japan as the second largest holder of Treasurys, and China, the current top holder, in just over a month.
- The Heavy Hand of Kathleen Sebelius. Writing in the Wall Street Journal she warns, “we will review large premium increases and identify those that are unreasonable.” This is one way ObamaCare imposes price controls. The legislation requires lots of new health insurance benefits—benefits that come with a cost. But Democrats sold it by telling people they would get more and pay less. It was a lie, and now Sebelius has to fain shock at the price increases.
- Rising Medicaid Costs to Blow Hole in State Budgets. (graph) States will have to dig deeper into their already empty coffers next year in order to pay for rising Medicaid costs. Next fiscal year states will spend 7.4% more on the health care coverage -- which is already one of their biggest expenses -- according to a report released Thursday by the Kaiser Family Foundation.
The American Spectator:
- No, You Can't Keep Your Current Health Coverage. The law is only just beginning to take effect, and already insurers are dropping coverage for tens of thousands of Americans because of its burdensome mandates. There will be a lot more of this as additional Obamacare regulations become active. And yet the president still claims that the law won't make you change your coverage or your doctor. Is it any wonder he doesn't want Americans to get their information from news outlets that will check his claims?
- Wisconsin Senate: Johnson (R) Jumps to Largest Lead Yet Over Feingold (D). Republican Ron Johnson now leads incumbent Democrat Russ Feingold by 12 points in Wisconsin’s race for the U.S. Senate. The latest Rasmussen Reports statewide telephone survey of Likely Voters shows Johnson picking up 54% support, while Feingold, who is running for his fourth term in the Senate, gets 42% of the vote with leaners included.
- Democrats Defend Agenda as They Exit Hill. Hours after adjourning a week early and punting on tax cuts and appropriations bills, House Democratic leaders offered a broad defense of their agenda, framing their accomplishments as historic while casting Republicans as obstructionists not worthy of the public trust. Speaking in a studio in the Capitol Visitors Center, House Speaker Nancy Pelosi (D-Calif.), Majority Leader Steny Hoyer (D-Md.), Majority Whip Jim Clyburn (D-S.C.) and Democratic Congressional Campaign Committee Chairman Chris Van Hollen (D-Md.) touted their health-care reform legislation, Wall Street regulatory reform, the deeply unpopular stimulus bill and support for the military.
- Health Reform to Worsen Doctor Shortage: Group. The U.S. healthcare reform law will worsen a shortage of physicians as millions of newly insured patients seek care, the Association of American Medical Colleges said on Thursday. The group's Center for Workforce Studies released new estimates that showed shortages would be 50 percent worse in 2015 than forecast. "While previous projections showed a baseline shortage of 39,600 doctors in 2015, current estimates bring that number closer to 63,000, with a worsening of shortages through 2025," the group said in a statement. "The United States already was struggling with a critical physician shortage and the problem will only be exacerbated as 32 million Americans acquire health care coverage, and an additional 36 million people enter Medicare." The U.S. healthcare reform plan signed into law by President Barack Obama in March is designed to provide insurance to 32 million Americans who now lack it. The AAMC projected a shortage of 33,100 physicians in specialties such as cardiology, oncology and emergency medicine in 2015.
- Currency Tensions Rising Ahead of IMF Meeting. Fears some countries may resort to currency depreciation to boost exports will be one of the hottest issues at the International Monetary Fund's annual meeting next week.
- Christopher & Banks(CBK) Posts Wider-Than-Expected Q2 Loss. Women's apparel retailer Christopher & Banks Corp (CBK) reported a wider second-quarter loss than expected, hurt by weak sales towards the end of the quarter, sending its shares down 8 percent after the bell.
- Pre-Crisis Jobs Level Regained Only in 2015 - ILO. Global employment will not recover to pre-crisis levels until 2015 if current policies are pursued, fuelling social tension, the International Labour Organisation said on Friday. For the United States -- where persistent unemployment has become one of the main issues in this November's elections -- the number of jobs still needed to regain pre-crisis levels is 6.9 million, ILO economist Steven Tobin said. The extended loss of employment and growing perceptions of unfairness risked increasing social tension, the ILO said.
- Hedge Funds Hold Ireland to Ransom Over Anglo Irish Bank Bail-Out. Hedge funds are holding the Irish government to ransom over its €30bn (£26bn) bail-out of one of the country's biggest lenders, Anglo Irish Bank. The investors are attempting to force the Irish authorities to pay them more for the debt they hold in Anglo Irish Bank and say if their demands are not met they could trigger a default crisis. The London and US-based hedge funds are fighting moves to pay them no more than current market prices for their holdings of junior debt in Anglo and are understood to be prepared to take the Irish government to court. Anglo junior debt is trading in a range of 23 to 25 cents in the euro and the investors are thought to be looking for a payout of 35 to 40 cents. However, the authorities are unwilling to offer a premium to the market price, according to a source close to the Irish government. The hedge funds in turn argue that the government has no legal right to force them to accept a haircut on the value of their holdings.
- European Central Bank Governing Council member Ewald Nowotny said that the ECB will continue buying government bonds as long as there are inefficiencies in the markets.
- Former Federal Reserve Vice Chairman Donald Kohn, who retired Sept.1, said U.S. inflation could remain sluggish for a number of years, citing an interview.
- Reiterated Buy on (MMC), target $27.
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 117.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 110.0 -1.0 basis point.
- S&P 500 futures +.23%.
- NASDAQ 100 futures +.34%.
Earnings of Note
- None of note
8:30 am EST
- Personal Income for August is estimated to rise +.3% versus a +.2% gain in July.
- Personal Spending for August is estimated to rise +.3% versus a +.4% gain in July.
- The PCE Core for August is estimated to rise +.1% versus a +.1% gain in July.
- Final Univ. of Mich. Consumer Confidence for September is estimated to rise to 67.0 versus a prior estimate of 66.6.
- ISM Manufacturing for September is estimated to fall to 54.5 versus a reading of 56.3 in August.
- ISM Prices Paid for September is estimated to fall to 59.0 versus a reading of 61.5 in August.
- Construction Spending for August is estimated to fall -.4% versus a -1.0% decline in July.
- Total Vehicle Sales for September are estimated to rise to 11.5M versus 11.46M in August.
- None of note
- The Fed's Dudley speaking, Fed's Evans speaking and the Fed's Fisher speaking could also impact trading today.