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Industry Related News

What's In the News Today - August 29, 2008

CAPIITAL MARKETS - www.ems.euromoneyplc.com

Freddie, Fannie Drop Dims Prospects
The cost to Freddie Mac and Fannie Mae of raising capital is getting
increasingly more prohibitive, making it likely that the government will have
to inject cash into the largest U.S. mortgage-finance companies.

Credit Suisse Buys AMF For $384M
Credit Suisse Group AG has acquired New York-based Asset Management
Finance Corp. in a $384 million deal.

JPMorgan, IFC Launch Asia Trade Finance
Source: Trade Finance
JPMorgan and IFC, a member of the World Bank Group, have jointly
launched an innovative trade finance structure in Asia and the Pacific to
help facilitate and boost trade activities in the region.

Continental Minerals Mandates
Source: Project Finance
Continental Minerals has appointed Standard Bank and Industrial and
Commercial Bank of China as lead arrangers of the debt for the
Xietongmen copper-gold project in Tibet.

PetroChina To Buy Out JV
PetroChina Co. has agreed to buy the 50% stake in a joint venture held by
parent company China National Petroleum Corp., for $11.8 billion.

Reed Took Re-Bids For Magazines
Bidders for Anglo-Dutch publisher Reed Elsevier's trade magazine unit
were allowed to re-bid last week, and bids came in slightly lower than the
first round.

FHLB To Sell $3B Debt
The Federal Home Loan Bank System will sell $3 billion in new three-year
global notes to be priced later this week.

Abu Dhabi Bank Sues MS Over SIV
Abu Dhabi Commercial Bank is suing Morgan Stanley & Co., Bank of New
York Mellon Corp. and three securities ratings services for allegedly rating
too highly a structured investment vehicle that collapsed last year.

Broadcom Buys AMD Digital TV Unit
Chipmaker Broadcom Corp. will acquire a unit of Advanced Micro Devices
Inc. for $192.8 million.

Focus Ramps Up Acquisitions
Source: Private Asset Management
Focus Financial Partners, a Manhattan-based investor in wealth
management firms, has acquired three firms in a drive to bring in new
business.

RISK MANAGEMENT- www.garp.com

Industry Risk - Emerging Markets Emerge
Securities and Exchange Commission Chairman Christopher Cox, the
Australian Minister for Superannuation and Corporate Law — Senator Nick
Sherry, and Australian Securities and Investments Commission (ASIC)
Chairman Tony D'Aloisio today entered into a mutual recognition
arrangement between the SEC, the Australian government, and ASIC. The
mutual recognition arrangement provides a framework for the SEC, the
Australian government, and ASIC to consider regulatory exemptions that
would permit U.S. and eligible Australian stock exchanges and broker-
dealers to operate in both jurisdictions, without the need for these entities
(in certain aspects) to be separately regulated in both countries.
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Operational Risk - Financial Institutions Up in Arms over New Red Flag
Regulations
While the clock ticks toward the Nov. 1 deadline, 50 percent of U.S. banking
institutions are not ready to meet key provisions in the Federal Reserve’s
Red Flag rules, according to an Information Security Media Group survey.
Over the next two months, financial institutions will be scrambling to reach
total compliance or face potential sanctions and monetary penalties.

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Industry Risk - Fitch Introduces Projected Loss Analysis for Monitoring
Structured Finance CDOs
Fitch Ratings presents its asset-level projected loss analysis (PLA) to
quantify loss expectations on structured finance (SF) CDOs. This new
analysis builds off Fitch's RMBS mortgage loss assumptions to estimate
the impact to SF CDOs. Fitch's PLA analysis complements its criteria used
for the review of existing SF CDO transactions with portfolio concentrations
of subprime and Alt-A RMBS issued between 2005 and 2007.

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Industry Risk - Organizations Looking For Ways to Identify Gaps in
Productivity and Efficiency
Whether battling recessionary trends or capitalizing on global opportunities,
leading companies must leverage the strength of a world class supply
chain. Two characteristics that distinguish supply chain leaders are their
ability to measure how they’re doing across functional, enterprise, and
geographic boundaries and a strong willingness to close any performance
gaps.

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Operational Risk - Quality of Property Catastrophe Data Impacts
Reinsurance Pricing
When it comes to their ability to underwrite property catastrophe exposure,
the biggest concern among reinsurers is quality of cedant data, according
to Ernst & Young LLP’s 2008 Catastrophe Exposure Data Quality Survey. In
fact, the study found data quality can directly impact reinsurance pricing and
capacity extension.

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Energy Risk - Nuclear Power Is Vital to America’s Future
The Nuclear Energy Institute has developed a two-page fact sheet to assist
reporters covering energy issues at the Democrat National Convention in
Denver. It provides information explaining why commercial nuclear power is
a vital part of the American energy portfolio needed to meet rapidly growing
electricity demand in clean and reliable fashion.

Market Risk - Dow Jones Indexes and Chicago Climate Exchange Launch
Global Emissions Index Series
Dow Jones Indexes and the Chicago Climate Exchange (CCX) yesterday
announced the launch of the Dow Jones/CCX European Carbon Index and
Dow Jones/CCX Certified Emissions Reductions (CER) Index, which serve
as benchmarks for participants seeking exposure to the European Union
Emissions Trading Scheme and Kyoto Protocol Clean Development
Mechanism (CDM), respectively. The two new indexes are the first in a
series of global emissions indexes to be launched jointly by Dow Jones
Indexes and CCX.
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Operational Risk - New Basel Committee Document Published
In April 2005, the Basel Committee on Banking Supervision released a
document entitled Compliance and the compliance function in banks,
which set out high-level principles on the management of compliance risks
in banks. As a follow-up to the release of the paper, the Committee asked
its Accounting Task Force to assess the degree to which the compliance
principles have been implemented, as well as to review recent compliance-
related incidents and challenges facing the industry. The Committee is now
publishing a summary of that assessment based on a survey in which 21
jurisdictions participated.
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Industry Risk - U.S. Financial Institutions Will Spend over $1 Billion on
Online Bill Payment Solutions by 2010
Online bill payment has grown to become an integral part of financial
services institutions’ Internet banking offerings. New research from
TowerGroup finds that expediting payments by speeding the posting time of
bill payment transactions can create a new revenue stream for financial
institutions – via instituting an online bill payment user per transaction fee
to guarantee same-day posting.
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Operational Risk - Recent Security Study Reveals Most Organizations
Lack Controls to Stop Interior Network Threats
Mirage Networks® yesterday announced results from a new study that
revealed nearly half of the IT professionals who responded had endpoints
connecting to their corporate networks without their knowledge. Yet
compared to other security issues, 86 percent of respondents said
controlling network access ranked as a high priority.
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Market Risk - Survey Results Measure Consumer Reaction to Economic
Instability
Money Management International (MMI) announced yesterday the results of
a survey designed to measure consumer sentiment towards current
economic instability.
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Market Risk - Consumer Confidence Improves Slightly in August
The Consumer Confidence Index improved slightly in August, The
Conference Board announced yesterday. The August index stands at 56.9,
up from 51.9 the previous month. July marked the first time in 2008 the
index increased.
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Credit Risk - Finance Company Real Estate Receivables Down 57 Percent
in June
Finance companies held $2.04 trillion in outstanding receivables during
June, down nearly one percent from $2.06 trillion in May, according to the
Federal Reserve’s monthly G.20 report released yesterday.

What's In the News Today - August 29, 2008

MORTGAGE MARKETS - www.mortgagebankers.org

Home Prices Still Falling, But the Pace Is Slowing
New York Times (08/27/08) P. C1; Grynbaum, Michael M.
The Commerce Department reports a 2.4-percent jump in new-home sales
to an annual pace of 515,000 in July from the prior month, following a report
from the National Association of Realtors indicating a 3.1-percent jump in
existing-home sales during the same period. Year over year, however,
new-home sales were down 35.3 percent, and the median new-home price
slipped 6.3 percent to $230,700. The S&P/Case-Shiller home price index
posted a 15.9-percent decline during the 12 months ended in June, and
analysts believe additional decreases are necessary before the housing
market can rebound. "The biggest declines, they're all behind us now," says
Global Insight chief domestic economist Nigel Gault. "But that doesn't mean
we're in any sense ready to move up. Or that we're ready for sales to
accelerate. Or for prices to flatten out."

Fannie, Freddie Mortgage Profit Reaches 10-Year High
Bloomberg (08/27/08); Shenn, Jody
Citigroup Inc. reports a yield of approximately 40 basis points on
current-coupon mortgage bonds bought by Fannie Mae and Freddie Mac,
surpassing the amount they pay to borrow by unloading benchmark bonds.
Net interest income recorded by Fannie Mae surged to $2.1 billion in the
second quarter from $1.7 billion in the first quarter, according to Credit
Suisse Group, with investment profits rising to 100 basis points from 82
basis points. Meanwhile, Freddie Mac posted a 92-percent jump in net
interest income to $1.5 billion, with investment profits increasing to 80 basis
points from 48 basis points. According to Loomis Sayles & Co. Vice
Chairman Dan Fuss, "They, at the increment, are very, very profitable. If they
can continue to do anything close to business as usual, they are immensely
profitable."

Reports Suggest a Way Out for Fannie and Freddie Holders
Wall Street Journal (08/27/08) P. C3; Hagerty, James R.
New reports from analysts at Citigroup and Goldman Sachs Group suggest
that purchasing mortgage securities from Fannie Mae and Freddie Mac
would be one way for the government to prop up the mortgage finance giants
without hurting shareholders. Goldman says another option is to reduce the
minimum capital requirements of the companies, while Citigroup adds that
credit-loss estimates indicate they would have enough capital to get through
2008. Meanwhile, Standard & Poor's Ratings Service lowered its ratings on
the preferred stock of Fannie Mae and Freddie Mac to BBB-minus from
A-minus. S&P says there is "increasing uncertainty" over whether
government support "will extend to these securities."

FHA Raises Its Premiums to Insure Repayment of Mortgages
Wall Street Journal (08/27/08) P. A11; Hagerty, James R.
Effective Oct. 1, upfront charges imposed on most FHA borrowers will climb
to 1.75 percent of the mortgage amount from 1.5 percent prior to
implementation of the agency's new risk-based pricing system that bases
fees on credit scores, down-payment amounts and equity levels. The FHA is
holding annual premiums steady, however, at 0.50 percent to 0.55 percent.
With investors increasingly avoiding mortgages not backed by the FHA,
Fannie Mae or Freddie Mac and the government-sponsored enterprises
becoming more selective about which loans to buy or guarantee, Inside
Mortgage Finance reports a jump in FHA-insured mortgages to 23 percent of
all home loans last month from 1.8 percent two years ago; the publication
predicts that the figure could hit 30 percent by the end of 2008. While the FHA
reports $19 billion in reserves, rising defaults have generated concerns that
the agency might need money from the government to cover losses.

Key Rate May Rise, Fed Report Suggests
Washington Post (08/27/08) P. D2; Aversa, Jeannine
Federal Reserve policymakers decided to hold their key interest rate steady
at 2 percent for their August meeting, although most did not consider it too
low, according to documents that also suggest the next action will be to raise
rates. Released on Aug. 26, the documents reveal that "members generally
anticipated that the next policy move would likely be a tightening" and indicate
that economic growth and inflation would determine the timetable for any
hikes. The Fed is unlikely to raise rates to reign in inflation until next year,
according to most economists. Fed Chairman Ben Bernanke has suggested
that the central bank will hold rates at 2 percent for the September meeting
and for the rest of this year.

OTS Issues Home Equity Guidelines
American Banker (08/27/08) P. 10; Hopkins, Cheyenne
On Aug. 26, the Office of Thrift Supervision released guidelines for thrifts to
follow when freezing or shrinking home equity lines of credit. Under the
Truth-in-Lending Act, fraud or material misrepresentation, the inability of
borrowers to comply with repayment terms or actions that have a negative
impact on the property are all valid reasons for lenders to suspend home
equity loans. Additionally, the guidance says home equity loans can be
frozen or terminated if the property value drops under the appraised value,
material changes in income prevent borrowers from making payments or
material default occurs. Foresight Analytics LLC reports a 345-percent surge
in home equity nonaccruals at the nation's 50 biggest thrifts during the
second quarter.

Small Banks, Tight Credit
Washington Post (08/27/08) P. D1; Appelbaum, Binyamin; Cho, David
New data from the FDIC shows that the delinquency rate on construction and
development loans topped 8.1 percent as of the end of June--the highest
rate for any category of bank loans. The missed payments are forcing many
banks to tighten lending standards, some to hoard money against possible
losses and others to curtail lending to new customers altogether in an effort
to conserve available funds for existing customers. Small banks are among
those suffering most, as many flocked to construction and development
lending during the boom because it was one of the few areas where they
could compete with bigger banks by nurturing relationships with developers
and shouldering risk. The profit margins of small banks that focused on
such lending shrank below the margins for other small banks in the first
three months of this year for the first time since the boom started, and many
are now struggling with defaults on loans to home builders.

S&P Downgrades Units of Three Mortgage Insurers
Wall Street Journal (08/27/08) P. C3; Pollock, Lauren
Reflecting its concerns about the profitability of insured mortgages originated
in 2008, Standard & Poor's Ratings Services has downgraded its credit
ratings on the units of three mortgage insurers: Old Republic International
Corp., PMI Group Inc. and Radian Group Inc. S&P's projected claims for
mortgages originated the previous two years indicate that the volatility of
mortgage insurers' operating results is much greater than the ratings firm
assumed before the woes in the mortgage and housing markets took hold.
This uncertainty suggests that an underwriting loss is possible. This past
spring, S&P slashed all three companies' ratings, as well as that of MGIC
Investment Corp.

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