- Bank bailout with a twist. Regulators are seriously considering a plan to have healthy banks lend billions of dollars to the FDIC’s bank insurance fund, which is rapidly running out of cash amid a wave of bank failures. The plan appeals to banks, because it would forestall yet another across-the-board emergency assessment on them, which could erode $5-10B of their profits. And it appeals to FDIC head Sheila Bair, who bankers say “would take bamboo shoots under her nails” before turning to the Treasury to tap the FDIC’s $100B emergency credit line.
- BofA spurns Congress… Bank of America’s (BAC) chief marketing officer will meet with Rep. Edolphus Towns today after it defied his request to supply documents detailing BofA’s buyout of Merrill Lynch by a noon deadline Monday. According to a spokesman, the meeting will focus on how BofA “can meet their needs without violating attorney-client privilege.” In a statement Monday, Rep. Dennis Kucinich, who heads the domestic policy subcommittee, said there is “considerable evidence that BofA violated securities law” in neglecting to tell shareholders about mounting losses at Merrill Lynch. “The question remains whether BofA executives willfully chose to violate securities laws, or received advice from outside counsel” to do so.
- … as it looks to bid farewell. Bank of America (BAC) said it will pay the government $425M for unused federal guarantees against losses at Merrill, likely the first move of a wider effort to extricate itself from Washington’s grip. Sources say BofA is also trying to convince regulators it’s sound enough to repay billions in federal aid. Also on Monday, the bank named Charles O. Holliday Jr. to its 15-person board, part of a continuing effort to break with its troubled past. Analysts characterized it as a day of progress, despite the nagging troubles over Merrill.
- Google wins keyword challenge. A top EU adviser backed Google’s (GOOG) right to sell trademarked brand names as keyword searches. Luxury good maker LVMH and others have fought such advertising, which they say allows makers of cheap imitations to piggyback on their brand power by appearing on the same search page. A ruling against Google could have severely impacted its business in the EU. (read the CVRIA’s statement (.pdf))
- Cadbury softens opposition to Kraft bid. Cadbury (CBY) CEO Todd Stitzer struck a more conciliatory tone about Kraft’s (KFT) unsolicited $16.9B takeover bid, saying a combination makes “some strategic sense,” but noting shareholders would not agree unless the deal were sweetened. In an open letter to Kraft on Sept. 12, Stitzer called Kraft’s proposal “an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company.” Sources say Cadbury has asked the U.K. Panel on Takeovers and Mergers to issue an order demanding Kraft make a formal bid with committed financing.
- Asia rebounding rapidly. Asian economies slumped steeply when exports plunged, but most of the region is already recovering, the Asian Development Bank said in a report today. The group now sees China growth at 8.2% this year, 1.2 points above its previous outlook, and 8.9% next year. It also raised its India growth outlook to 6% from 5%, and developing Asian countries to 3.9% from 3.4%. “Developing Asia is proving to be more resilient to the global downturn than was initially thought.”
- AIG jumps on hopes of rescue restructure. Shares of AIG (AIG) gained 21% Monday after Rep. Edolphus Towns, leader of the House Oversight and Government Reform Committee, said he’s seriously considering a proposal from former AIG head Hank Greenberg to ease the terms of AIG’s bailout package. Greenberg suggests cutting the government’s stake in AIG from 80% to about 20%, and giving it more time to repay its debt while trimming interest rates. Meanwhile, in a report Monday, the U.S. Government Accountability Office said federal assistance has helped stabilize AIG’s financial condition, but that its ability to restructure its business and repay the government remains unclear.
- To out or not to out. Sources say Finra – in the midst of lobbying Congress to expand its power beyond brokerages to investment advisers – is debating whether to release an internal report of its examinations of Madoff and Stanford. Earlier this month, the SEC was embarrassed when its inspector general released a detailed report on missed opportunities to catch Madoff.
- Singapore’s GIC shrinks Citigroup stake. Government of Singapore Investment Corp. (GIC) pared its stake in Citigroup (C) to below 5% – from an estimated peak of 11.1% in February – through open-market sales, turning a profit of $1.6B. GIC said in a statement that a “stake below 5% reflects GIC’s goals and desire to be a portfolio investor, and that, “GIC will continue its investment in Citigroup as we are confident of its long-term prospects.”
- Deutsche Bank plot thickens. Then-Deutsche Bank (DB) chairman Clemens Börsig had detailed knowledge of the bank’s 2006 effort to spy on a litigious shareholder, according to a confidential report, which seems inconsistent with the bank’s July 28 statement that “questionable methods used were not authorized by members of the supervisory board.”
- Squeezing more out of life. Life insurers, hit hard by soured real-estate investments, are trying to recoup their losses by boosting prices on life insurance while selling less of it, and by charging higher premiums for risk factors like obesity and hypertension. The moves, along with a more frugal consumer, contributed to a 23% drop in sales in H1, the largest drop in nearly 70 years.
- Leading Indicators rise for fifth month. Conference Board’s Leading Indicators rose 0.6% in August, just short of the Street consensus of 0.7%, the fifth straight positive month. July’s index was revised to +0.9% from +0.6%. “These numbers are consistent with the view that after a very severe downturn, a recovery is very near,” Conference Board said in a statement. “But, the intensity and pattern of that recovery is more uncertain.”
Earnings: Before Open
- FactSet Research Systems (FDS): FQ4 EPS of $0.74 in-line. Revenue of $155M (+1.1%) vs. $154M. (PR)
- Lowe’s (LOW): Sees full-year EPS of $1.13-1.21 vs. consensus of $1.20, and 2010 EPS of $1.24-1.34 vs. $1.34. Sees full-year sales down 3%, and same-store sales down 7-9%. (PR)
China was hit with a wave of selling, but markets elsewhere in Asia were up. Europe bourses are broadly higher at midday, and futures are firmly in the green.
- Asia: Hang Seng +1.06% to 21,701. BSE +0.87% to 16,886. Shanghai -2.34% to 2,898. Nikkei closed.
- Europe at midday: London +0.9%. Paris +0.9%. Frankfurt +1.3%.
- Futures: Dow +0.7% to 9782. S&P +0.7% to 1068. Nasdaq +0.7%.
Crude +1.5% to $71. Gold +1.3% at $1,018. Treasurys are flat.
Euro +0.9% vs. dollar. Yen +0.6%. Pound +0.8%.
Tuesday’s Economic Calendar
- 7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
10:00 FHFA Housing Price Index
10:00 Richmond Fed Mfg.
10:00 $75B, 28-Day TAF Auction
10:30 Analytic Chapters of IMF’s World Economic Outlook
12:00 PM FOMC begins two-day meeting
1:00 PM $43B 2-Year Note Auction
5:00 PM ABC Consumer Confidence Index
5:00 PM Richmond Fed hosts panel on Moving Forward in the New Economy