Today's Headlines

Bloomberg:

• Europe Banks Have $410 Billion Credit Risk: IMF. The European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks, the International Monetary Fund said, calling for capital injections to reassure investors and support lending. Political squabbling in Europe over ways to fight contagion and delays in implementing agreed measures are raising concerns about the risk of defaults by governments, the IMF said. Banks in turn face “funding challenges” because of investor concern about their potential losses from government bonds they hold, with some relying heavily on the European Central Bank for liquidity, it said. “A number of banks must raise capital to help ensure the confidence of their creditors and depositors,” the IMF wrote in its Global Financial Stability Report released today. “Without additional capital buffers, problems in accessing funding are likely to create deleveraging pressures at banks, which will force them to cut credit to the real economy.”
• ESRB Says Risks to EU Financial System Increased 'Considerably' on Crisis. The European Systemic Risk Board, Europe’s risk watchdog, said threats to the financial system have increased “considerably” as the region’s sovereign debt crisis weakens economic growth and pressures banks. “Key risks stem from potential further adverse feedback effects between sovereign risks, funding vulnerabilities within the European Union banking sector, and a weakening of growth outlooks both at global and EU levels,” the ESRB, hosted by the Frankfurt-based European Central Bank, said today in a statement. “Decisive and swift action is required from all authorities.” Concerns are mounting that European banks may not have sufficient capital to withstand a default by Greece and slowing economic growth caused by governments’ austerity measures. Lloyd’s of London has stopped depositing money with some banks in Europe’s peripheral economies, Luke Savage, finance director of the world’s oldest insurance market, said today in a phone interview.
  
• Lloyd's Pulls Some Euro Bank Deposits. Lloyd’s of London, concerned European governments may be unable to support lenders in a worsening debt crisis, has pulled deposits in some peripheral economies as the European Central Bank provided dollars to one euro-area institution. “There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Luke Savage, finance director of the world’s oldest insurance market, said today in a phone interview. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.”
• SocGen CEO Tells Figaro Funds Pulled Money From Europe's Banks. Societe Generale (GLE) SA Chief Executive Officer Frederic Oudea told Le Figaro in an interview that U.S. monetary funds have progressively withdrawn money from the European bank financing market for regulatory reasons since the start of 2011. The response of central banks in terms of dollars has been a strong one and liquidity in euros is abundant, Oudea said in the interview. The situation now is not ideal and the current role of central banks musn’t become a permanent one, Oudea told Le Figaro.
• Fed Will Shift Treasury Holdings to Longer-Term Securities. Federal Reserve policy makers will replace some bonds in their portfolio with longer-term Treasuries in an effort to further reduce borrowing costs and keep the economy from relapsing into a recession. The central bank will buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less, the Federal Open Market Committee said today in Washington after a two-day meeting. The action is intended to “put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the FOMC said in a statement. The Fed will also reinvest maturing mortgage debt into mortgage-backed securities instead of Treasuries. Three officials dissented, the same as at the prior meeting in August. Chairman Ben S. Bernanke expanded use of unconventional monetary tools for a second straight meeting after job gains stalled and the government lowered its estimate of second- quarter growth. Today’s action, dubbed “Operation Twist” by economists after a similar Fed action in 1961, may lower interest rates and avoids reprising the money creation that sparked Republican criticism last year. “There are significant downside risks to the economic outlook, including strains in global financial markets,” the Fed statement said. Stocks and 10-year Treasury yields declined after the statement. The Fed left unchanged its pledge to keep the benchmark interest rate near zero through at least mid-2013 as long as unemployment remains high and the inflation outlook stays “subdued.”
• BofA(BAC), Wells Fargo(WFC) Downgraded by Moody's. Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) had long-term credit ratings downgraded by Moody’s Investors Service, which said U.S. support is less likely in an emergency. Citigroup Inc. (C)’s short-term rating also was cut.
  
• Alpha Natural(ANR), Walter Energy(WLT) Plunge After Cutting Coking Coal Forecasts. Alpha Natural Resources Inc. (ANR) and Walter Energy Inc. (WLT), two U.S. producers of coal used in steelmaking, tumbled after they cut output and sales forecasts respectively. Shares of Alpha fell $2.65, or 9.7 percent, to $24.31 at 9:33 a.m. in New York Stock Exchange composite trading. Walter declined $11.00, or 15 percent, to $64.00. Alpha’s full-year production will be 102.5 million to 109.5 million tons, compared with a previous prediction of 104 million to 112 million tons, the Abingdon, Virginia-based company said today in a statement. Alpha cited “unexpectedly curtailed customer activity” in Asia and lower-than-expected output from some mines.
• Sales of U.S. Existing Homes Rise 7.7%. Sales of previously owned U.S. homes rose more than anticipated in August as investors scooped up distressed properties with cash. The 7.7 percent increase left purchases at a five-month high 5.03 million annual rate, the National Association of Realtors said today in Washington. The August pace compares with a peak of 7.08 million in 2005, before the housing boom turned into a subprime-mortgage bust that dragged the economy into an 18-month recession. “Housing’s been down for so long, we should take whatever good news we can get,” said Brian Jones, an economist at Societe Generale in New York, whose forecast was among the highest in the Bloomberg survey. “Interest rates are low and pricing is attractive and people are responding.”
• China Faces Surge in 'Hot Money' Inflows on Market Turmoil, PBOC Data Show.
  
• HP(HPQ) Board Said to Weigh Ousting Apotheker as CEO. Hewlett-Packard Co. (HPQ)’s board plans to meet to consider whether to oust Leo Apotheker as chief executive officer after less than 11 months on the job, two people familiar with the matter said. Under a scenario being considered, Hewlett-Packard’s directors may appoint former EBay Inc. (EBAY) CEO Meg Whitman as his successor, possibly on an interim basis, said one of the people, who asked not to be named because the plans aren’t public.
• Buffett Is Obama's Fundraising Surrogate. Warren Buffett will be the featured speaker at a Chicago-area fundraiser on Oct. 27 to benefit President Barack Obama’s re-election bid, marking the second time this year the billionaire investor has agreed to help the man who has named a tax-increase proposal after him. The fundraiser in Obama’s political base will follow a Sept. 30 event in New York City that Buffett is also attending. The Chicago event, with a ticket price of $35,800 per person, will be at the home of Byron Trott, the managing partner and chief investment officer at Chicago-based BDT Capital Partners, according to a copy of the invitation obtained by Bloomberg News. Obama isn’t scheduled to be present. “I trust him completely,” Buffett once wrote of Trott, a former Goldman Sachs Group Inc. (GS) managing director. Trott confirmed this week that his firm is part of a group that has bought the landmark Wrigley Building along Chicago’s Michigan Avenue.

Wall Street Journal:

• SEC Pushes Plan for Audit System. U.S. regulators, responding to concerns about their ability to keep pace with fast-evolving markets, are pushing forward with a plan to build a multibillion-dollar computer system to monitor stock trading in real time despite criticism from traders who could foot the bill.
• Another Losing Investment for John Paulson. John Paulson may not have enough buckets to catch all his leaky investments. First, his bank stocks went kaboom. Then he bought Hewlett-Packard at exactly the wrong time. The gold mining investments went south. And now: Coal. One of the stocks in Paulson’s portfolio, Alpha Natural Resources(ANT), is getting clobbered today after the company and rival Walter Energy(WLT) warned that output for steelmaking-coal will fall short of expectations. (The warning also is whacking railroad stocks today. Given Paulson’s luck this year, he probably bought a bunch of those stocks recently.)
• GOP Seeks House Votes on Small-Business Bills By Year's End. House Republicans plan to quickly move forward with a series of bills aimed at increasing small businesses' access to capital, with the goal of passing legislation through the chamber by year's end.

CNBC.com:

• Are Hedge Fund Investors Running for the Exits? Despite a summer that saw several of the hedge fund industry’s biggest titans suffer debilitating losses, investors across the industry generally aren’t panicking or looking for the exits—not yet.

Zero Hedge:

• Bank Downgrades Jump The Atlantic: S&P Cuts Numerous Italian Banks.

Frankfurter Allgemeine Zeitung:

• German Labor Minister Ursula von der Leyen said euro-area nations that breach debt rules should face sanctions to protect the euro, citing an interview with the minister.
• Budesbank President Jens Weidmann invited fellow European Central Bank council members to a meeting to shore up opposition to the ECB's bond purchases. Yves Mersch, governor of Luxembourg's central bank, and Klaas Knot, president of the Dutch central bank, were among those invited.