Late-Night Headlines
Bloomberg:
- House Speaker Nancy Pelosi signaled a readiness to use to a parliamentary maneuver to circumvent Republican opposition in the Senate to passing health-care legislation, providing House Democrats can revise the bill. Using the so-called budget-reconciliation process would enable Senate Democrats to approve legislation with a simple 51- vote majority instead of the 60-vote threshold leaders need to override Republican efforts to block the legislation. “We must pass health-care reform,” Pelosi told reporters. Under the plan being considered by lawmakers, the House would pass legislation the Senate approved on Dec. 24, so it wouldn’t have to go back to the Senate for another vote. The two chambers would also pass a separate reconciliation measure containing changes to the bill that could be approved by a majority, as long as the revisions relate to spending and taxes. House and Senate Democrats have been at an impasse over the legislation, differing on issues from federal funding for abortion to how to pay for the most-sweeping changes to the nation’s medical system in four decades. President Barack Obama’s appeal last night to pass the legislation in his State of the Union address “was a very powerful statement that will be helpful to us,” said Pelosi, a California Democrat. Congress could pass other items overhauling health care “on the side” as additional pieces of legislation “which may not fit into a bigger plan,” Pelosi said. “That does not mean it’s a substitute for doing a comprehensive” measure, she said. “We will move on any front we can,” she said. Asked whether budget reconciliation is the most viable way for Congress to “tweak” the Senate legislation, Pelosi said: “We are not talking about minor tweaks.” “We’re going to move forward on health care,” Senate Majority Leader Harry Reid told reporters. “The question is at this stage, procedurally, how do we get where we need to go?”
- Treasury Secretary Timothy F. Geithner was “simply not doing his job” in his last weeks as president of the Federal Reserve Bank of New York, Representative Darrell Issa said today. By withdrawing from day-to-day matters at the New York Fed in late November of 2008 without formalizing the arrangement in a signed document, Geithner left it unclear who was in charge, Issa said in a Bloomberg Radio interview. “We are saddened by that,” said Issa, a California Republican. “If there had been a notice of recusal, people would have looked to the vice president of the Fed and would have looked to him every day.” Geithner helped oversee the September 2008 bailout of American International Group Inc. and authorized the payment of billions of dollars to the insurer’s trading partners. Lawmakers are investigating the New York Fed’s attempts to limit disclosure about the payments, and Geithner told a House panel yesterday that he knew nothing about those efforts because he withdrew after his Nov. 24, 2008, nomination to Treasury. “In retrospect, I wish I’d known, frankly,” Geithner said yesterday. “But after Nov. 24, I appropriately removed myself from decisions about a whole range of policy issues and the Fed was dealing with that.” He took the Treasury post in January of last year. Issa, the ranking Republican on the House Oversight and Government Reform Committee, has called the rescue of AIG, which swelled to $182.3 billion, a “backdoor bailout” of financial firms because banks were fully reimbursed for contracts they had with the insurer backing mortgage-linked investments. The hearing yesterday was called after Issa released e- mails earlier this month that indicated the New York Fed asked AIG to keep data from the public about the bank payments. As AIG headed toward reporting the biggest loss in U.S. corporate history, financial firms including Goldman Sachs Group Inc. and France’s Societe Generale SA were made whole on $62.1 billion in declining real-estate linked assets.
- The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all. Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials. We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny. The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail. The hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve. This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank. As Representative Marcy Kaptur told Geithner at the hearing: “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.” And yet the New York Fed played an integral role in the government’s bailout of banks, often receiving surprisingly free rein to act as it saw fit. Consider AIG. Let’s take Geithner at his word that a failure to resolve the insurer’s default swaps would have led to financial Armageddon. Given the stakes, you might think Geithner would have coordinated actions with then-Treasury Secretary Henry Paulson. Yet Paulson testified that he wasn’t in the loop. “I had no involvement at all, in the payment to the counterparties, no involvement whatsoever,” Paulson said. Fed Chairman Bernanke also wasn’t involved. In a written response to questions from Representative Darrell Issa, Bernanke said he “was not directly involved in the negotiations” with AIG’s counterparty banks. You have to wonder then who really was in charge of our nation’s financial future if AIG posed as grave a threat as Geithner claimed. Questions about the New York Fed’s accountability grew after Geithner on Nov. 24, 2008, was named by then-President- elect Barack Obama to be Treasury Secretary. Geither said he recused himself from the bank’s day-to-day activities, even though he never actually signed a formal letter of recusal. That left issues related to disclosures about the deal in the hands of the bank’s lawyers and staff, rather than a top executive. Those staffers didn’t want details of the swaps purchase to become public. That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself. Later, when it became clear information would be disclosed, New York Fed legal group staffer James Bergin e-mailed colleagues saying: “I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals -- too many counterparties, too many lawyers and advisors, too many people from AIG -- to keep a determined Congress from the information.” Think of the enormity of that statement. A staffer at a body with little public accountability and that exists to serve bankers is lamenting the inability to keep Congress in the dark. When unelected and unaccountable agencies pick banking winners while trying to end-run Congress, even as taxpayers are forced to lend, spend and guarantee about $8 trillion to prop up the financial system, our collective blood should boil. (very good article)
- Emerging market equity funds posted the first net outflows in 12 weeks on concern that China will take further steps to curb inflation and the global economic recovery will slow, according to EPFR Global. Funds investing in developing-nation equities lost $608.5 million overall in the week ended Jan. 27, EPFR Managing Director Brad Durham said.
- The U.S. “takes seriously” a report that North Korea has detained a second American in the past month, a State Department spokesman said. North Korea is questioning a U.S. citizen who it said was caught trespassing over its border with China on Jan. 25, the official Korea Central News Agency said yesterday. The communist country last month said it detained an American, identified by U.S. officials as Robert Park, for illegally entering from China. “We’re operating on the assumption that it’s entirely possible that we have a second American citizen detained in North Korea in addition to Robert Park,” State Department spokesman Philip J. Crowley told reporters yesterday in Washington. “It’s obviously something we take seriously.”
- President Barack Obama will propose tripling loan guarantees for nuclear-power plants to more than $54 billion in his budget Feb. 1, according to two people familiar with the Energy Department plan. The loan guarantee is part of an effort to bolster nuclear- power production after Obama called for doing so in his State of the Union address yesterday. Tomorrow, the Energy Department plans to announce formation of a panel to find a solution to storing the waste generated by nuclear plants.
Wall Street Journal:
- Haiti Aid Efforts Go Awry in the 'Convoy to Nowhere'.
CNNMoney.com:
- Oil bigs to Obama: Get real. The CEO of Saudi Aramco, the national oil company of Saudi Arabia, lashed out at the Obama administration Thursday, lamenting the oversupply of “rhetoric” from major oil-consuming nations regarding energy independence. Without naming the U.S. president directly, Khalid Al Falih couldn’t have been clearer who he was referring to. He called pervasive talk from nations that want to wean themselves from an addiction to foreign oil, a common trope in U.S. environmental circles, “unachievable and misleading to the public.” Al Falih anchored an extraordinary collection of representatives of major oil producers at a morning session at the World Economic Forum in Davos, Switzerland. Chaired by consultant and prizewinning author Daniel Yergin, the panel provided a heavy dose of reality into a debate often dominated in Western media and policy circles by a hopeful yearning for alternative energy. Some highlights:
Business Insider:
- CHART OF THE DAY: Google(GOOG) Revenues Reach $1.34 Million Per Employee.
Business Week:
- U.S. Recovery Depends on Jobs at Small Businesses. The latest job-market news is bleak. The U.S. unemployment rate in December stood at 9.7 percent, close to the highest level since April 1983. There are 15.3 million people out of work, with job seekers outnumbering job openings by more than 6-to-1. This labor-market horror story plays out on a daily basis in households across the U.S., with thousands of people joining the ranks of the unemployed and the number of new hires hitting historic lows. What can be done to turn the tide and get U.S. employers to create jobs and start hiring again? The answer lies in this country’s strongest job-creation engine: small business.
Politico:
- In the end, Thursday’s vote on Federal Reserve Chairman Ben Bernanke’s nomination to a second term proved a bit anticlimactic given the drama of the previous week. But while the Senate handily approved his nomination, 70-30, Bernanke still drew a record-breaking level of opposition, four years after he skated through the Senate. And the Obama administration can’t feel entirely relieved that its nominee survived the rocky debate, since the distress and anger that fueled such a surge in anti-Bernanke feeling are unlikely to dissipate anytime soon. Bernanke’s opponents Thursday were disappointed with the final tally but still claimed a victory of sorts in getting the administration’s attention.
Rasmussen Reports:
Real Clear Politics:
- Faux Contrition. Obama Blames the Public.
NYDailyNews.com:
- The White House ordered the Justice Department on Thursday night to consider other places to try the 9/11 terror suspects after a wave of opposition to holding the trial in lower Manhattan. The dramatic turnabout came hours after Mayor Bloomberg said he would "prefer that they did it elsewhere" and then spoke to Attorney General Eric Holder.
Washington Post:
- The United States pledged Thursday to cut its greenhouse gas emissions by 17 percent by 2020 from 2005 levels under an international climate agreement, though it made its commitment contingent on passing legislation at home. The Obama administration submitted its much-anticipated reduction target to the United Nations Framework Convention on Climate Change Secretariat under the Copenhagen Accord, a non-binding deal brokered by the United States last month at the U.N.-sponsored climate talks. Under the deal President Obama helped secure in Copenhagen, major emitters of greenhouse gases are expected to "inscribe" their reduction targets by Jan. 31. The commitment states that the United States will cut its emissions "in the range of 17 percent, in conformity with anticipated U.S. energy and climate legislation, recognizing that the final target will be reported to the Secretariat in light of enacted legislation." It remains unclear if Congress will pass a comprehensive climate bill this year.
Morningstar:
SeekingAlpha:
- The law of supply and demand is killing the secondary hedge fund market. Prices paid for hedge funds on the secondary market fell to an all-time low in December, with sellers getting less than 80 cents on the dollar, according to Hedgebay Trading Corp., the largest secondary hedge fund market provider. The firm said that investors seeking to dump illiquid assets were responsible for the decline; in November, buyers were paying more than 86% of net asset value on the secondary market.
AP:
- FACT CHECK: Obama and a toothless commission.
OpenSecrets.org:
- JP Morgan Chase & Co(JPM) is one of the nation’s leading financial services firms, offering commercial and consumer banking and credit services, securities brokerage and financial consulting. Like the rest of the finance sector, the company hit hard financial times in 2008 and received billions of dollars in taxpayer money to re-gain its footing. Through its subsidiary Chase Bank, the company has traditionally been one of the top consumer credit card issuers in the country. As expected, the firm has lobbied heavily on legislation that would affect the nation’s financial industry, including bankruptcy reform and banking deregulation. In 2002, federal investigators launched a probe into the firm’s relationship with former energy giant Enron. Prior to the energy firm’s collapse, JP Morgan Chase had been one of the company’s largest financial backers.
Reuters:
- The narrowest measure of Japan's consumer inflation fell at the fastest pace on record in December, opening the door for more government pressure on the Bank of Japan to fight deflation and support the economy. Finance Minister Naoto Kan will likely call for the BOJ and the government to work together when he addresses parliament later on Friday. Prime Minister Yukio Hatoyama is also due to deliver a policy speech. The so-called "core-core" consumer price index, which strips out the effect of volatile food and energy costs, fell 1.2 percent last month from a year earlier after a 1.0 percent drop in November, data showed. It was the biggest since drop since the series began in 1970 and will likely worry policymakers who fear a return to recession ahead of elections in the summer.
Financial Times:
- A team from Goldman Sachs(GS) was in Athens on Thursday shepherding representatives of Paulson, the US hedge fund, around meetings with local bankers, economists and analysts. The client visit, the second to Athens this month arranged by the US investment bank, highlights a deepening involvement with Greece’s socialist government as it desperately tries to shore up the public finances and avoid default – and comes after the Financial Times reported this week that the bank was mooting a controversial debt deal with China. Goldman has not been given an official mandate by the government, but it is playing a large role in the rescue effort. Last year it took George Papaconstantinou, the finance minister, on his first roadshow to London and Frankfurt, along with Deutsche Bank. Earlier this week the bank was one of the joint-lead managers on Greece’s sale of an €8bn (£7bn, $11bn) government bond. In the past, Greek governments made a point of sharing out advisory work among investment banks, mainly for privatization projects. Morgan Stanley, Credit Suisse, Deutsche Bank and UBS won mandates as well as Goldman and JPMorgan. That has changed since the new government took over. “Goldman pretty much has taken a leading role on advising Greece at the moment,” said a Greek economic consultant. “Their competitive advantage is that they are smart guys and come up with good ideas. That certainly helps in a crisis like now,” the consultant said. These officials told the FT that, through several meetings between very senior Goldman staff and top Greek politicians, including George Papandreou, the prime minister, Goldman promoted a Greek bond sale to Beijing. The bank also suggested the sale of equity in National Bank of Greece to Chinese financial institutions, the three people said. According to separate officials in China, the institutions were Bank of China, the country’s third largest commercial lender by assets, and China Investment Corp, China’s sovereign wealth fund. Mr Papaconstantinou confirmed earlier this week to the FT that he would in the next few weeks go on an investors’ roadshow to Beijing, Shanghai and Hong Kong in order to generate interest in Greek government bonds. It is expected that as with the previous European trip, Goldman would be taking a leading role in organizing this roadshow, according to investment circles in Greece. Goldman’s main source of income in Greece is from the Hellenic republic’s borrowing operation, to which it has access as one of 15 Greek and foreign banks that act as market-makers. “They’re very active in the bond swaps market, which is extremely lucrative,” said the fund manager. It also regularly advises NBG, the country’s biggest commercial lender.
- JPMorgan Chase(JPM) is launching a global business aimed at selling loans and commercial banking services to multinational corporations, pitting the US bank against Citigroup and HSBC. The creation of a global corporate banking unit, which has not been announced, will see JPMorgan invest substantial resources and hire hundreds of bankers in an effort to win a bigger slice of international business. People close to the situation said that the new business, which will sell products ranging from loans and commodities trading to cash management services, would initially focus on economies such as China, India and Brazil. The move by JPMorgan is emblematic of the changes in global banking following the turmoil and could open up a market that has traditionally been dominated by Citi and HSBC. JPMorgan executives said that the launch was aimed at reducing reliance on the slow- growing US economy and taking advantage of a weakened Citi. “We are doing this now for a couple of reasons . . . to balance our growth and increase the portion of our revenues that comes from outside the US and from emerging markets in particular; and because, after the crisis, a number of our competitors are challenged.”
Telegraph:
South China Morning Post:
- China's plans to build railway networks throughout the country may face financing problems because of the government's efforts to tighten lending, citing a professor at the Economic and Planning Research Institute of the Ministry of Railways. Rail lines to the western parts of the country may find it too hard to obtain bank loans, Weng Zhensong said. Rail projects, part of China's four trillion yuan stimulus package, may be targeted as the government tries to limit lending, which has been blamed for creating asset bubbles, the report said.
Shanghai Securities News:
- China is expected to raise the deposit reserve requirement ratio after the Lunar New Year holidays to curb surging liquidity.
Evening Recommendations
Citigroup:
- Reiterated Buy on (IRM), target $45.
- Reiterated Buy on (M), added to Top Picks Live list, target $30.
- Reiterated Buy on (MMM), target $92.
- Reiterated Sell on (CP), target $44.
- Reiterated Buy on (AVT), target $33.
- Reiterated Buy on (MXIM), target $26.
- Reiterated Sell on (COLM), target $36.
- Reiterated Buy on (FORM), target $30.
- Reiterated Buy on (LMT), target $86.
Thomas Weisel:
- Raised (CAH) to Overweight, target $43.
Night Trading
Asian indices are -1.75% to -.50% on avg.
S&P 500 futures -.30%.
NASDAQ 100 futures -.18%.
Morning Preview
BNO Breaking Global News of Note
Yahoo Most Popular Biz Stories
MarketWatch Pre-market Commentary
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Stock Quote/Chart
WSJ Intl Markets Performance
Commodity Futures
IBD New America
Economic Preview/Calendar
Earnings Calendar
Who’s Speaking?
Upgrades/Downgrades
Politico Headlines
Rasmussen Reports Polling
Earnings of Note
Company/Estimate
- (CVX)/1.69
- (HON)/.90
- (ACI)/.16
- (MAT)/.68
- (IDXX)/.45
- (AVY)/.67
- (FO)/.51
- (PCU)/.32
Economic Releases
8:30 am EST
- Advance 4Q GDP is estimated to rise +4.7% versus a +2.2% gain in 3Q.
- Advance 4Q Personal Consumption is estimated to rise +1.8% versus a +2.8% gain in 3Q.
- Advance 4Q GDP Price Index is estimated to rise +1.3% versus a +.4% gain in 3Q.
- Advance 4Q Core PCE is estimated to rise +1.3% versus a +1.2% increase in 3Q.
- The 4Q Employment Cost Index is estimated to rise +.4% versus a +.4% gain in 3Q.
9:45 am EST
- Chicago Purchasing Manager for January is estimated to fall to 57.2 versus a 58.7 reading in December.
9:55 am EST
- Final Univ. of Mich. Confidence is estimated to rise to 73.0 versus a prior estimate of 72.8.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Kohn speaking, NAPM-Milwaukee, Bloomberg FCI Monthly and the (DMND) analyst meeting could also impact trading today.
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