Posts Tagged ‘Bank of America’
Wednesday, August 25th, 2010
Curiosity is growing about which Wall Street banks will be the first to get out of proprietary trading or the private equity business as they restructure to come into compliance with new financial regulatory reform legislation. The Volcker Rule - named for former Federal Reserve chairman Paul Volcker - limits banks from these practices and sets new levels on the size of private equity or hedge fund investments. In other words, the banks are not allowed to hold more than three percent of their Tier 1 capital - a measure of their financial strength — in private equity or hedge fund investments.
Bank of America is almost in compliance, though Goldman Sachs must act more aggressively and is reported to be weighing several options to comply with the increased regulation. The good news for the Wall Street banks is that they have several years in which they can reduce their holdings. “They have time to adjust,” said Mark Nuccio, partner at Boston-based Ropes & Gray. “I don’t think there’s any intention on behalf of the regulators to create economic dislocation at financial institutions.”
The new rules are driving certain banks to rethink their business, while others see the new law as a welcome excuse to distance themselves from unwanted hedge or private-equity funds. “If you were leaning toward a strategic change anyway then now is a good time to re-evaluate the business because you have a regulator saying you shouldn’t be in this business anyway,” said Thomas Whelan, chief executive of Greenwich Alternative Investments. This is particularly true for banks that quickly acquired hedge fund operations during the boom years. At that time, having a hedge fund was essential to the strategic mix. Since 2008, however, when hedge funds posted their worst-ever returns and clients tried to cash in assets, the math changed for many banks.
Tags: Bank of America, banking, derivatives, Federal Reserve, Goldman Sachs, hedge funds, Morgan Stanley, Paul Volcker, President Barack Obama, private-equity firms, Volcker Rule, Wall Street
Posted in Economics, Financing | No Comments »
Monday, July 19th, 2010
The Council on Tall Buildings and Urban Habitat (CTBUH) recently announced the finalists for its 2010 “Best Tall Building” awards. The annual awards recognize exceptional tall buildings from each of four geographical regions and are chosen for their design and technical innovations, sustainable attributes, and the enhancement they provide to their cities and the inhabitants.
The 55-story Bank of America Tower in New York was hailed for its commitment to sustainability, which has made human health and corporate responsibility a priority. Its exceptionally high indoor environmental quality results from hospital-grade, 95 percent filtered air; abundant natural daylight; an under-floor ventilation system; and views through floor-to-ceiling glass curtain wall.
This 51-story Pinnacle at Duxton includes 1,848 public housing units in central Singapore. It redefines urban high-density living by weaving continuous Sky Gardens on the 26th and 50th stories through the seven tower blocks. Multiple access points to the Sky Gardens also mean that they are an ideal evacuation strategy. Because they are connected, the seven tower blocks share three sets of water tanks and pumps and one building maintenance unit.
A key design element of the 23-story Broadcasting Place in Leeds, England, is the irregular elevations, tailored to optimize daylight and reduce solar penetration. An innovative analysis calculates the optimum quantity and distribution of glazing/shading at all points on the façade to ensure high levels of natural day lighting but without overheating.
The unprecedented height of Dubai’s 163-story Burj Khalifa required rethinking design techniques, building systems, and construction practices to create a practical and efficient tower. The building’s shape references regional architecture in the pointed ends of the “Y” which are reminiscent of Islamic archways. As the tapering tower rises, setbacks occur at the end bay of each wing in an upward spiraling pattern that decreases the tower’s mass as the height increases. These setbacks minimize wind forces.
The best tall building of 2010 will be announced at the CTBUH’s awards ceremony in October.
Tags: Bank of America, Broadcasting Place, Burj Khalifa, Dubai, Leeds, New York, Pinnacle, Singapore
Posted in Development, Office | No Comments »
Thursday, July 15th, 2010
Banks are starting to hire again as they return to structuring CMBS, a sign that the financial markets are gradually returning to normal. “I see lots of friends who used to be employed, and weren’t for a while, and are now being rehired by institutions,” said Jonathan Strain, debt capital markets director at JPMorgan Chase’s CMBS division.
This industry-wide hiring is evidence of the banking sector’s effort to recover from the depths of the Great Recession and rebuild the capability of providing liquidity to refinance commercial real estate owners who need to recapitalize their portfolios. Industry leaders believe that CMBS may never recover to its 2007 origination peak of $237 billion. So far this year, CMBS originations total just over $1 billion. According to one banker, the CMBS market may eke out $10 billion in 2010; that could ultimately grow to a total of $100 billion annually several years down the road.
According to Lisa Pendergast, managing director with Jeffries Group, Inc., “Supply will be far less than what we were accustomed to.” Pendergast also is president of the CRE Finance Council, the industry’s leading trade group.
Tags: Bank of America, banks, CMBS, CRE Financial Council, Great Recession, hiring, Jeffries Group, JP Morgan Chase, Wachovia, Wells Fargo
Posted in Economics, Financing | No Comments »
Wednesday, July 7th, 2010
Bank repossessions of homes rose 44 percent in May over the same month last year, reaching an all-time high and with increases occurring in every state as lenders stepped up the rate of seizures. Realty Trac, Inc., an Irvine, CA-based data company that tracks foreclosures, reports that bank repossessions totaled 93,777 in May, with filings — including default and auction notices — soaring to 322,920. In other words, one out of every 400 households in the United States has now received a filing.
According to Rick Sharga, Realty Trac’s senior vice president for marketing, “We’re nowhere near out of the woods. We’re likely to set a record for home seizures if June is anything like May. The second quarter won’t be the peak. I’m not even sure 2010 will be.” April previously held the record for the most seizures - 92,432 of them. Sharga believes that an additional 5,000,000 delinquent mortgages will end in foreclosure.
Approximately 25 percent of American homeowners are under water - they owe more than their homes are worth - notes Zillow.com. Bank sales of foreclosed houses comprised more than 20 percent of all transactions in March. Some of the largest lenders - primarily Wells Fargo & Company and Bank of America - are giving homeowners who owe more than 120 percent of what their houses are worth a helping hand by cutting the principal. “Marginal people, those types who were working as laborers, are most affected by foreclosures,” said Albert Kyle, a finance professor at the University of Maryland’s R. M. Smith School of Business. “A lot of foreclosures are occurring in modest homes.”
Tags: Bank of America, bank seizures, Business Week, foreclosures, housing market, realty Trac Inc, under water mortgage, Wells Fargo, zillow.com
Posted in Economics, Residential | No Comments »
Tuesday, June 29th, 2010
The $700 billion Troubled Asset Relief Program (TARP) is turning out to be a better bet than many thought at first. According to the Treasury Department, the amount of money repaid by banks and other recipients now exceeds TARP’s outstanding balance. In a monthly report to Congress on the program, TARP repayments total $194 billion; $190 billion is still outstanding. A large chunk of that came when Treasury sold 1.5 billion Citigroup shares it had acquired when bailing out the bank, netting $6.18 billion.
“TARP repayments have continued to exceed expectations, substantially reducing the projected cost of this program to taxpayers,” said Herbert M. Allison, the Department of the Treasury’s assistant secretary for financial stability. “This milestone is further evidence that TARP is achieving its intended objectives: stabilizing our financial system and laying the groundwork for economic recovery.”
Created during the darkest months of the financial meltdown in the fall of 2008, TARP originally was intended to purchase toxic subprime mortgage securities from banks. Henry M. Paulson, who was Treasury Secretary at the time, later altered TARP to channel money into banks to stabilize them and provide capital to encourage them to make loans at a time when the capital markets were frozen. TARP funds bailed out 707 American banks - including Citicorp and Bank of America — to the tune of $205 billion. Another $331 billion was used to bail out companies such as General Motors and Chrysler.
Banks are making a concerted effort to repay the money to avoid strict executive compensation limits. By May 31, 71 banks had repaid 100 percent - or $137 billion — of their TARP money. President Barack Obama hopes to recoup some TARP losses with his proposal to tax the 50 largest financial institutions. This would net approximately $9 billion annually over 10 years. Congress is considering the legislation, which faces stiff opposition from the big banks.
Tags: bailout, Bank of America, Chrysler, Citigroup, congress, Department of the Treasury, executive compensation, Federal Reserve, financial crisis, financial stability, General Motors, Henry Paulson, Herbert Allison, TARP
Posted in Economics, Financing | No Comments »
Tuesday, April 20th, 2010
Bank of America (BofA) is taking steps to write down mortgage principal owed by thousands of underwater homeowners in what has been termed “the mortgage industry’s boldest move yet” to resolve the nation’s foreclosure problem. Bank of America can well afford the initiative.
According to Betsy Graseck, a Morgan Stanley analyst, the ultimate cost of principal reductions is “immaterial” because the majority of the $10 billion pool of loans that are eligible for the write-downs are no longer carried on Bank of America’s balance sheet. BofA holds just $1.5 to $2 billion of eligible loans and has already reserved against expected losses on these mortgages. The loans are among the most exotic and risky subprime products that were available during the housing boom. One is the Option ARM, which originated with an extremely low interest rate and resets at a significantly higher level after a few years. The rest of the eligible loans - inherited by BofA through its 2007 acquisition of Countrywide Financial - are already securitized and investor owned.
Although the move is giving BofA valuable free publicity, it results from a settlement between the attorney generals of several states and the bank. Even though some investors complained it wasn’t fair for BofA to agree to the modifications since they were not assuming the majority of the losses, the AGs refused to give up. BofA is trying to placate the investors by assuring that the modification amounts will be reduced if house prices recover in the next few years. Additionally, the BofA program is being called a archetype for other lenders.
Tags: Bank of America, foreclosure, housing boom, Morgan Stanley, option ARM, underwater mortgages
Posted in Economics, Financing, Residential | No Comments »
Thursday, April 1st, 2010
The nation’s pay czar is widening his review of how much money hundreds of banks paid their top executives during 
the 2008 financial crisis. Kenneth R. Feinberg, officially the Special Master for Executive Compensation, is asking for details on compensation at 419 banks that were bailed out by the Treasury Department’s Troubled Asset Relief Program (TARP). Because Feinberg’s authority over compensation only started on February 17, 2009 - when President Barack Obama signed the $787 billion stimulus bill into law and gave Treasury the ability to shape compensation at bailed-out companies - he can do nothing about bonuses paid at the end of 2008.
The standards for deciding that compensation is excessive must be “contrary to the public interest.” Feinberg’s “look back letter” gives the firms 30 days to provide the information requested. The compensation review applies only to managers who earned upwards of $500,000 during the four-month period that is under assessment. Scott Talbott, senior vice president of the Financial Services Roundtable, said the big banks “will work with Mr. Feinberg to demonstrate that the industry has eliminated pay practices that encouraged excessive risk-taking.”
Last fall, Feinberg cut executive paychecks by approximately 50 percent for the seven biggest bailout recipients. Of those, Citigroup and Bank of America have since repaid the government. Feinberg was able to pressure AIG employees to return a percentage of their compensation. James Angel, a finance professor at Georgetown University’s McDonough School of Business, said, “On one hand, some of these banks were effectively forced to take TARP money. But you could also argue that the executives of surviving banks should not be compensated highly because it wasn’t really their particular skill, it was their luck that they were in an institution that survived when the government bailed out the financial system.”
Tags: AIG, Bank of America, Capitol Hill, Chrysler, Chrysler Financial, Citigroup, financial crisis, Financial Services Roundtable, General Motors, Georgetown University, GMAC, Goldman Sachs, Kenneth Feinberg, Morgan Stanley, pay czar, President Barack Obama, stiumulus bill, TARP, Treasury Department, Wall Street
Posted in Healthcare | No Comments »
Tuesday, March 2nd, 2010
Eleven American banks that received money from the Troubled Asset Relief Program (TARP) originated 13 percent more loans in December than they had the previous month. The Department of the Treasury released this information in its monthly survey of loans made by recipients of the $700 billion government bailout money.
According to the Treasury Department, total loan balances fell one percent during the same timeframe. This report does not include statistics from banks that repaid their TARP funds in June of 2009; future reports will not include data from banks that are exiting the TARP program.
A total of $178.1 billion in new loans was made during December, according to the Treasury. Bank of America led the pack in originating loans, with $64.6 billion, an 11 percent increase over November. Wells Fargo & Company occupied second place with a six percent increase, reporting $58.3 billion in new loans. Citigroup lent $16.3 billion, an 11 percent increase.
Tags: bailout money, Bank of America, banks, Citigroup, department of treasury, loans, TARP, Wells Fargo
Posted in Economics | No Comments »
Monday, February 22nd, 2010
An independent audit released by the bipartisan Congressional Oversight Panel (COP) has found the $700 billion Troubled Asset Relief Program (TARP) to be effective, so much so that the Department of the Treasury has extended it to October 3, 2010. Treasury Secretary Timothy Geithner plans to use the remaining funds to assist families facing foreclosure and give loans to small businesses.
The COP was unable to fully gauge TARP’s impact because of other forces such as the $787 billion American Recovery and Reinvestment Act, tax cuts and actions by the Federal Reserve and Federal Deposit Insurance Company. “Even so, there is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis,” according to the report. “Although the government’s response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence.”
That said, after 14 months of TARP, the panel admits that problems remain. Banks are still skittish about making loans, toxic mortgage-related assets are still sullying banks’ balance sheets and smaller banks are susceptible to difficulties in the commercial real estate sector. And, with 13 million additional home foreclosures expected over the next five years, “TARP’s foreclosure mitigation programs have not yet achieved the scope, scale and permanence necessary to address the crisis.”
Repayments from banks that received TARP dollars are expected to total $116 billion, including $45 billion that is being returned by Bank of America. The government is likely to receive as much as $175 billion in repayments from companies it rescued by the end of 2010.
Tags: AFL-CIO pension fund, American Recovery, bailouts, Bank of America, Congressional Oversight Panel, department of treasury, Federal Deposit Insurance Company, Federal Reserve, Harvard Law School, Main Street, President Obama, Securities and Exchange Commission, TARP, Timothy Geithner, Wall Street
Posted in Economics, Financing | No Comments »
Monday, February 1st, 2010
David Tepper’s shrewd bet that the nation would avoid a second Great Depression inspired him to buy bank shares at rock-bottom rates, a move that has earned his Appaloosa Management hedge fund an estimated $7 billion worth of profit during 2009. Last winter, Tepper invested heavily in Bank of America stocks selling for $3 a share, as well as Citigroup, Inc. preferred stock, then priced at a bargain-basement $1 per share.
Tepper, a philanthropist who funded the Tepper School of Business at Carnegie Mellon University, made a gamble that is paying off in a big way - surprising skeptics who insisted that he was making a costly error. “I felt like I was alone,” Tepper said. There were days when “no one was even bidding.” An improving market has seen Appaloosa Management earn a 120 percent return. As a result of those gains, Tepper now manages approximately $12 billion, making his company one of the world’s largest hedge funds.
In general, hedge funds had a bad year in 2008, when they experienced a 19 percent decline. Approximately 1,500 funds - 16 percent of the total - went out of business in 2008. The funds had a far better year in 2009. According to Hedge Fund Research, Inc., they are seeing a 19 percent return, the best annual gains in 10 years.
Alan Shealy, a long-time Tepper client, says “Investing with David is like flying, with hours of boredom followed by bouts of sheer terror. He’s the quintessential opportunist, investing in any asset class, but you have to have a cast-iron stomach.”
Tags: Bank of America, Citigroup, David Tepper, Goldman Sachs, Great Depression, hedge fund, recession
Posted in Economics, Financing | No Comments »