Cards, Payments and Banks

Small banks asking for bailout...

2009-08-08T09:39:00.000-07:00

Last week, Midwest Banc Holdings (MBHI), a community bank based just outside of Chicago, outlined an extensive capital raising initiative after suffering its second consecutive quarterly loss. The bank said it had applied for as much as $138 million under Treasury's Capital Assistance Program, or CAP, an extension of the original TARP. The bank received $84.7 million in TARP funds last December.

Citizens Republic Bancorp (CRBC), a Flint, Mich.-based bank that has suffered along with the local automotive industry, revealed in late June that it too was considering tapping up to $290 million from CAP, part of which would be used to redeem a portion of the Treasury's original $300 million investment made last December.

Experts say it seems certain that more small banks will follow the lead of Midwest and Citizens Republic.
By David Ellis, CNNMoney.com staff writer
Last Updated: August 6, 2009: 3:40 PM ET

http://money.cnn.com/2009/08/06/news/companies/tarp_banks/index.htm?section=money_topstories

Same old banks, new tricks -- risky!

2009-08-06T12:53:00.000-07:00

Old Banks, New Lending Tricks - BusinessWeek
By Ben Levisohn
That didn't take long. The economy hasn't yet recovered from the implosion of risky investments that led to the worst recession in decades—and already some of the world's biggest banks are peddling a new generation of dicey products to corporations, consumers, and investors.
In recent months such big banks as Bank of America, Citigroup, and JPMorgan Chase have rolled out newfangled corporate credit lines tied to complicated and volatile derivatives. Others, including Wells Fargo and Fifth Third, are offering payday-loan programs aimed at cash-strapped consumers. Still others are marketing new, potentially risky "structured notes" to small investors.
There's no indication that the loans and instruments are doomed to fail. If the economy keeps moving toward recovery, as many measures suggest, then the new products might well work out for buyers and sellers alike.
But it's another scenario that worries regulators, lawmakers, and consumer advocates: that banks once again are making dangerous loans to borrowers who can't repay them and selling toxic investments to investors who don't understand the risks—all of which could cause blowups in the banking sector and weigh on the economy.
CDS-Linked Corporate Credit Lines
Some of Wall Street's latest innovations give reason for pause. Consider a trend in business loans. Lenders typically tie corporate credit lines to short-term interest rates. But now Citi, JPMorgan Chase, and BofA, among others, are linking credit lines both to short-term rates and credit default swaps (CDSs), the volatile and complicated derivatives that are supposed to act as "insurance" by paying off the owners if a company defaults on its debt. JPMorgan, BofA, and Citi declined to comment.
In these new arrangements, when the price of the CDS rises—generally a sign the market thinks the company's health is deteriorating—the cost of the loan increases, too. The result: The weaker the company, the higher the interest rates it must pay, which hurts the company further
The lenders stress that the new products give them extra protection against default. But for companies, the opposite may be true. Managers now must deal with two layers of volatility—both short-term interest rates and credit default swaps, whose prices can spike for reasons outside their control.
Making matters more difficult for corporate borrowers: high fees. Banks are raising their rates for credit lines across the board—but the new CDS-based credit lines cost far more than the old lines. FedEx could end up paying $1.9 million to $3.6 million a month if it decides to tap a new line from JPMorgan and Bank of America. On its previous line with JPMorgan, FedEx would have paid about $540,000.
Yet many companies have little alternative. With corporate credit remaining tight, banks increasingly are steering borrowers to the CDS-linked loans. All told, lenders have handed out nearly $40 billion worth this year—roughly 70% of the total in credit lines extended to borrowers in fairly good standing. That's up from around 14% in 2008. FedEx, United Parcel Service, Hewlett-Packard and Toyota Motor Credit have all taken the plunge. "It wasn't our idea," says a UPS spokesman. "The banks pulled back from offering set rates."

Treasury finally getting tough on banks (AmEx)

2009-07-29T18:07:00.000-07:00

American Express (AXP, Fortune 500), the New York-based credit card giant, said Wednesday it paid the Treasury Department $340 million to repurchase the warrants the bank issued in January after borrowing $3.4 billion under the Troubled Asset Relief Program. AmEx was among 10 banks that repaid their TARP loans last month.

Just a drop in the ocean, boys.

http://tinyurl.com/knaftk

Regional Banks next?

2009-07-27T02:03:00.000-07:00

"The problems facing commercial real estate are severe and will likely take many years to resolve," Deutsche Bank analyst Richard Parkus told the Joint Economic Committee of Congress this month. He said the biggest losses are likely to come from banks' $550 billion of construction loans, such as loans to homebuilders.

Fortune Mag.

http://tinyurl.com/morj9w

Mr. Bernanke is pissed off...he should be.

2009-07-27T01:50:00.000-07:00

Mr. Bernanke responded that "nothing made me more frustrated, more angry, than having to intervene" when firms were "taking wild bets that had forced these companies close to bankruptcy."

WS Journal
http://tinyurl.com/nc3v8o

TD Ameritrade pays, Schwab stalls...

2009-07-20T13:02:00.000-07:00

Good primer on Auction Rate Securities (ARS)
http://en.wikipedia.org/wiki/Auction_rate_security

http://money.cnn.com/2009/07/20/news/companies/Schwab_TD_securities_investigation/index.htm?section=money_topstories

Also, "$330 billion that was thought to be liquid is not..." Yikes!

As Good as Cash, Until It’s Not - New York Times

By GRETCHEN MORGENSON
Published: March 9, 2008

INVESTORS across the nation are finding themselves in Wall Street’s version of the Hotel California: they have checked into an investment they can never leave.

The investments, which Wall Street peddled as a cash equivalent, are known as auction-rate notes. They’re debt instruments carrying rates that reset regularly, usually every week, after auctions overseen by the brokerage firms that originally sold them. They have long-term maturities or, in fact, no maturity dates at all.

But because the notes routinely traded hands at auctions, Wall Street convinced investors that they were just as good as cold, hard cash.

Lo and behold, the $330 billion market for auction-rate notes ground to a halt in mid-February when bids for the securities disappeared. Investors who thought they could sell their holdings easily are now stuck with them. It turns out that the only thing that’s really just as good as cash is, well, cash.

While investors pray for a resurrection in the auction market, they are receiving a fixed interest rate outlined in offering documents. Historically, these securities have paid approximately one percentage point more than money market funds. Many purchasers of these notes are relatively small individual investors; several years ago, banks dropped the minimum investment in them to $25,000 from $250,000.

Municipalities and other tax-exempt institutions have issued most of the current crop of auction-rate notes. But closed-end mutual funds issued $65 billion worth. Such borrowings provide leverage to the funds, letting them generate slightly higher yields for their common stockholders.

Closed-end funds that issue auction-rate notes typically sell them in amounts worth one-third the value of their underlying assets. For example, the John Hancock Tax-Advantaged Dividend Income fund, with $1.17 billion in assets, has issued $380 million in auction-rate notes.

Owners of notes issued by closed-end funds are faring far worse than investors stuck with municipal issues. That’s because the interest rates paid on municipal notes when auctions fail are capped at as much as 12 percent, much higher than the caps on closed-end fund notes, which are currently around 3.25 percent.

In other words, holders of closed-end fund notes receive little to no premium for being stranded. Even airlines try to give you a free meal or an upgrade when they leave you at the gate. Investors are likely to remain in this vise because closed-end fund issuers have no incentive to redeem their notes since the interest rates resulting from the failed auctions are so low.

Some customers who have tried to get their brokers to cash them out say the firms have responded by offering to let them borrow against the value of these securities. At a cost, of course: the typical margin rate for borrowers is at least 7 percent at most shops. Other holders are selling the notes at a deep discount to speculators willing to buy distressed securities.

Wall Street made generous fees issuing these securities and running the auctions — as long as there were bidders. After the bidders vanished, some firms stepped in and bid for the securities for a while, giving investors a way out.

No more. What’s the sense stretching your already-thin balance sheet just to keep a market open for your customers?

In interviews, investors who own these securities say they weren’t warned that they might not be able to sell them if an auction failed. They say they were told that the instruments were as safe and liquid as — yes, you guessed it — cash.

Stephen N. Joffe, a client of UBS Financial Services, is suing the firm because it put all $1.35 million of his charitable foundation’s cash into auction-rate securities issued by Eaton Vance Limited Duration funds. This, even though he said he explicitly told the broker to take no risk and that he would need constant access to the funds.

Dr. Joffe, 65, is a former professor of surgery who founded LCA-Vision Inc., a company that operates laser vision-correction centers. “I never asked my broker to get me a better rate,” he said. “I felt the responsibility to maintain this account as a risk-free account. I believed this was in the equivalent of an overnight money market account.”

Now, the Joffe Foundation can no longer fund programs that help prevent AIDS in Africa, provide indigent people with laser vision correction and correct the cleft palates of African children.

Are we surprised? Not...

2009-07-19T23:28:00.000-07:00

Big Arbitration Firm (is forced to..) Pulls Out of Credit Card Business
Posted by: Dan Beucke on July 19
By Robert Berner
http://tinyurl.com/n8bd2w

...
The settlement with the National Arbitration Forum comes after the Minnesota AG sued the firm on July 14 for consumer fraud, deceptive trade practices, and false advertising. The civil suit, filed in state district court in Minneapolis, alleged conflicting ties between the NAF and debt-collection law firms that represented major credit-card companies. The suit also alleged that New York hedge fund Accretive LLC owned stakes in such collection law firms and the NAF, sending arbitration business between the two.

Under the terms of the consent decree, dated July 17 and signed by the AG and NAF officials, the arbitration firm by the end of this week will stop accepting new consumer arbitrations of any sort. These include arbitrations over disputed credit-card debt as well as new lines of business the NAF has moved into, such as arbitrating consumer debts in healthcare, telecommunications, utilities, mortgages, and consumer leases. The only business NAF can now be involved with is in arbitrating Internet domain disputes, a business it has long been in.

The settlement throws in turmoil an increasingly favored venue for credit-card companies to collect disputed debts from card holders. Since the beginning of the decade, most card companies have included mandatory arbitration clauses in credit-card contracts, forcing consumers to arbitrate rather than use the courts.

The Minnesota suit said that Bank of America, JP Morgan Chase, Citigroup, Discover Card, and American Express use NAF, which is based in St. Louis Park, Minn.

More bad news for GE Capital

2009-07-19T23:15:00.000-07:00

GE Capital continues to struggle with consumer credit deterioration, with finance revenue down a worse-than-expected 29% while loan-loss provisions are up. GE executives stressed that GE Capital is "safe and secure," but as unemployment continues to rise, this outlook could change.

http://tinyurl.com/mgvm2s

Will it be enough? CIT secures short term loan...

2009-07-19T23:09:00.000-07:00

CIT Is Said to Obtain Urgent Loan to Prevent Bankruptcy - NYTimes.com

Directors of the CIT Group, one of the nation’s leading lenders to small and midsize businesses, approved a deal Sunday evening with some of the bank’s major bondholders to help it avert a bankruptcy filing through a $3 billion emergency loan, according to people briefed on the matter.

The deal will buy CIT some time to restructure its business model and reduce its voluminous debt load, after the company failed to win crucial concessions from Washington regulators. The company had planned to file for bankruptcy protection as soon as Monday afternoon if it could not attract enough capital from private investors, including big bondholders and its banks.

Under the terms of the deal, CIT would receive $3 billion from some of its main bondholders, though at an initial rate of about 10.5 percent. The money, arranged by Barclays Capital, is meant to give the company several weeks to set up an exchange of bondholders’ debt for equity, alleviating some of the pressure from billions of dollars in obligations.

CIT’s board approved the deal around 10:30 p.m. Sunday, these people said.

For more than a week, CIT, which is 101 years old, posed a difficult question for regulators: Should they step in to save yet another foundered financial institution?

Regulators felt some political pressure to intervene, because of CIT’s big presence in lending to small businesses across the country and because the government had already invested $2.33 billion in the company.

But officials eventually concluded that CIT, unlike the banks that were bailed out last year, posed no risk to the global financial system, leaving its fate in the hands of the private market.

The plan was formed after days of round-the-clock negotiations between CIT and its financial and legal advisers, and a group of large bondholders represented by the investment bank Houlihan Lokey Howard & Zukin and the law firm Paul, Weiss, Rifkind, Wharton & Garrison. The two firms previously represented the biggest group of large bondholders in General Motors.

Jeffrey M. Peek, CIT’s chief executive and the architect of the lender’s ill-timed aggressive push into subprime mortgages and student loans, was active in the financing talks, according to people briefed on the matter. Mr. Peek, a longtime banker who lost a race to become Merrill Lynch’s chief executive, called upon many of his acquaintances on Wall Street to provide some form of aid.

Even as CIT negotiated with its bondholders, it also had teams from the investment bank Evercore Partners and the law firm Skadden, Arps, Slate, Meagher & Flom prepare for a potential Chapter 11 filing. Several advisers, including JPMorgan Chase and Morgan Stanley, had begun preliminary discussions about raising $2 billion to $3 billion in debtor-in-possession financing, money needed to get a company through bankruptcy.

It remains unclear whether CIT’s long-sought lifeline will be enough to give it the room to make crucial changes to its business at a time when it is unable to obtain financing from the capital markets. While it maintains a bank subsidiary in Utah, the company has traditionally relied on money that it borrows in the capital markets to make loans to its customers.

Once the credit markets froze and investors became leery of CIT’s loan portfolio, the company was in peril.

Were CIT to fail, the company — with $75 billion in assets — would become the largest casualty in the finance sector since Lehman Brothers collapsed last fall. Since then, federal regulators have been pumping billions of dollars into numerous banks across the country to prop them up and create some stability in the financial system.

A failure of CIT could have sent ripple effects through the nation’s small and midsize businesses. While most of its portfolio consisted of term loans, the company dominated the market for factoring, a type of lending common within the manufacturing and retail sectors.

Many analysts and federal regulators have questioned why CIT did not try to change its risky business model sooner. Last December, amid the market turmoil, the Bush administration rushed through the company’s application to become a bank holding company and gave it $2.33 billion through the Troubled Asset Relief Program.

Yet the company made no move to build a sturdier business model. Instead, it applied for access to a program through the Federal Deposit Insurance Corporation that has allowed Goldman Sachs and other banks to issue their debt cheaply with the backing of the agency.

Sheila C. Bair, the chairwoman of the F.D.I.C., does not view the program as a bailout solution for banks and financial institutions, a government official briefed on the situation said.

When that door closed last week, CIT executives still held out hope that they would receive approval from regulators to transfer $10 billion in assets to the company’s Utah bank, a move that would have given it access to loans from the Federal Reserve. But regulators demanded that such a move be accompanied by CIT’s raising a significant amount of private capital, which at the time seemed nearly impossible.

A third front of the debate was whether, after throwing large sums of money to some of the nation’s largest banks, the Obama administration was doing enough to brace up institutions that lend money to smaller businesses. Many of those large banks, including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America, reported either record or substantially improved results last week.

Julie Creswell contributed reporting.
Follow us on Twitter »
Readability version 0.4

More on the new king of the banks...

2009-07-19T22:58:00.000-07:00

http://tinyurl.com/nmydvv

Haraz N. Ghanbari/Associated Press

Jamie Dimon, the head of JPMorgan Chase, will hold a meeting of his board here in the nation’s capital for the first time on Monday, with a special guest expected: the White House chief of staff, Rahm Emanuel.

Mr. Emanuel’s appearance would underscore the pull of Mr. Dimon, who amid the disgrace of his industry has emerged as President Obama’s favorite banker, and in turn, the envy of his Wall Street rivals. It also reflects a good return on what Mr. Dimon has labeled his company’s “seventh line of business” — government relations.

From the JPMorgan Web site:
J.P. Morgan clients include the world's most prominent corporations, governments, wealthy individuals and institutional investors. These businesses use the J.P. Morgan brand:

* Investment Bank
* Asset Management
* Treasury Services
* Worldwide Securities Services
* Private Banking
* Private Client Services
* One Equity Partners

The U.S. consumer and commercial banking businesses serve customers under the Chase brand.

The consumer businesses include:
* Branch, ATM, telephone and online banking
* Credit card
* Small business
* Home finance and home equity loans
* Auto finance
* Education finance
* Insurance

The commercial banking businesses include:
* Middle Market
* Corporate
* Commercial Real Estate
* Business Credit
* Equipment Finance

The U.S. consumer and commercial banking businesses also serve customers under the WaMu brand.

The consumer businesses include:
* Branch, ATM, telephone and online banking
* Credit card
* Business banking
* Home finance and home equity loans

The commercial banking businesses include:
* Commercial Real Estate

CIT gets defibrillation?

2009-07-17T15:02:00.000-07:00

USA, USA, USA (everyone chant!) = you will be backstopping this deal for years to come.

http://www.businessinsider.com/cit-soars-on-talks-with-jpmorgan-goldman-2009-7

Death, Taxes and Goldman Sachs

2009-07-17T14:46:00.000-07:00

"we're so happy we can hardly count..."
R. Walters

For more in depth analysis of Goldman Sachs' slimy business practices:

1. Paul K. in NYTimes oped: http://www.nytimes.com/2009/07/17/opinion/17krugman.html?em

2. Matt Taibbi's "Vampire Squid" take on Goldman Sachs in the latest Rolling Stone: http://bit.ly/hwCbZ

3. CBC's 30 minute interview with Pulitzer-Prize-winning investigative reporter David Cay Johnston on Goldman Sachs & Gov't. Here's the MP3: http://bit.ly/ZzLFm

4. Matt Tabbi here: http://trueslant.com/matttaibbi/2009/07/16/on-goldmans-giganto-profits/

5. Elliot Spitzer chimes in here: http://www.zerohedge.com/article/eliot-spitzer-matt-taibbi-and-goldman-sachs

CIT: Small enough to fail...says Dimon

2009-07-16T16:14:00.000-07:00

http://tinyurl.com/kpjlmu

“We have exposure to CIT, secured and unsecured, but I’m telling you, the primary and direct effect on the P & L would be not material to us,” Jamie Dimon, CEO of JP Morgan/Chase, said on the call, in response to a question how a CIT failure might affect the company.

CC charge-offs at Chase/WaMu +10%...In other words...

2009-07-16T16:06:00.000-07:00

We will have to find new revenue streams...Squeeze the merchant!

Retail banking reported net income of $970 million, up from $674 million in the period a year earlier, while losses in the consumer lending businesses ballooned to $955 million, from a net loss of $171 million a year earlier, amid mounting unemployment. Card services, meanwhile, posted a $672 million loss, compared with a year-earlier profit of $250 million, as more cardholders default and revenue falls with the introduction of new rules designed to protect consumers.

The bank said in a presentation on its Web site that losses at Chase’s card services unit could reach 10 percent this year, while losses on Washington Mutual’s card portfolio would near 24 percent by the end of 2009.

Mr. Dimon said on a conference call with journalists that the credit card business was unlikely to be profitable in 2009 or 2010.

from the NYTimes article: http://tinyurl.com/narlxo

Final stake in the heart of Sandy Weill

2009-07-16T15:57:00.000-07:00

The coronation of Jamie Dimon:

JPMorgan is emerging with renewed confidence, taking advantage of the financial crisis to vault ahead of longtime rivals in investment banking and grab market share in mortgages and retail banking. Jamie Dimon, the chief executive, has cemented his status as one of America’s most powerful and outspoken bankers.

from the NT Times article today: http://tinyurl.com/narlxo

The Fall of the House of Weill

2009-04-11T21:49:00.000-07:00

Citigroup on a list of FDIC "Failures and Assistance" - Apr. 10, 2009

NEW YORK (Fortune) -- This week is Masters golf time, a fact that takes me back precisely 11 years ago to an afternoon when I walked the grounds of the Augusta National course with Sandy Weill as he basked in the glory of the just-announced Citigroup (C, Fortune 500) merger deal between his company, Travelers Group, and Citicorp.

Weill, an Augusta member, was there for the golf and various events orchestrated by Travelers (then a Masters sponsor). Getting my first on-the-ground exposure to the famous tournament, I savored the golf as well. But my real purpose for being there was to report a major FORTUNE article that we published 10 days later, A Helluva Candy Store. In it, I described Weill as having happily experienced "the most electric week in his life."

Well, as the world knows, that electricity got grounded. No banking company is today more worrisome, to more regulators, than Citigroup.

Still, Citi -- too big and interconnected to fail and pumped up by government money -- survives. So I was therefore especially startled when a FORTUNE subscriber pointed out to me that Citi is conspicuous on a list of "Failures and Assistance Transactions" that is posted, quite obscurely, on a Federal Deposit Insurance Corp. website. The data goes back to the panic year of 1934, the first year of the FDIC's operation.

In the more recent panic year of 2008, the FDIC handled 25 true failures. They ranged from tiny Hume Bank, of Hume, Mo., with its $14 million in deposits, to the very large Washington Mutual Bank, with $188 billion. (Wamu, of course, was taken over by JPMorgan Chase).

But in the midst of these failures are five items of "assistance," listed together. They are all Citigroup banks: Department Stores National Bank (deposits: $301 million); Banamex USA ($876 million); Citicorp Trust Bank FSB ($7.2 billion); Citibank (South Dakota) N.A. ($42 billion); and one of the largest holders of deposits in the nation, Citibank National Association ($230 billion).

How did Citigroup's banks get on this list? Because on Nov. 23, the U.S. government, by way of the Treasury and the FDIC -- and the Federal Reserve, as an ultimate backstop -- stepped in to guarantee up to $306 billion of Citi's assets. The FDIC's maximum exposure, which qualifies as its "assistance," is $10 billion.

Technically, the FDIC aid amounted to what it calls "open-bank assistance," and an absolute rarity this is. Before Citi rudely inserted itself into this picture, the last instance of such assistance was in 1992, when a small bank in Princeton, Texas, was propped up by the FDIC because it was judged vital to its community.

But neither competitors nor Congress liked open-bank assistance, wondering why the institutions getting it shouldn't just be allowed to fail. So a 1991 banking law called FDICIA, and a subsequent amendment to a related law, essentially barred the FDIC from granting such assistance -- except in instances of systemic risk.

And even then, the procedures set up by the law for determining that systemic risk truly existed were extraordinary. The law says that before assistance can be granted two-thirds of the boards of the FDIC and the Federal Reserve must first recommend the step and that the Secretary of the Treasury, before making a final determination, must confer with the President.

So did Treasury Secretary Henry Paulson make a trip to the Oval Office last November, or even make a phone call, to consult with President Bush and say that FDIC assistance -- and much more -- must be granted Citi? Or did the exigencies of the financial crisis sweep aside procedure?

We may know a precise answer to those questions when Hank Paulson completes the book that he is known to be feverishly writing. For now, what we know is that the second-largest banking company in the nation, Citigroup -- founded 11 years by an exuberant Weill -- will forever have its banks tabulated on the FDIC's list of "Failures and Assistance." To top of page

A Helluva Candy Store

Exopsure...

2009-03-23T22:11:00.001-07:00

Thanks to SeekingAlpha.com

After six hours and some 200 slides, analysts emerged slightly dizzy from GE Capital’s ”deep dive” into its finances, but still doubting the finance arm of General Electric (NYSE: GE) could deliver even on its worst-case scenario.

Headlines out of the analyst conference focused on how the company backed off its December projection of $5 billion in profits in 2009, with Nicole Parent of Credit Suisse Group commenting that it was still unclear whether GE could “earn its way through elevated losses” on its portfolio.

In a new report released this morning, CreditSights took issue with GE Capital’s use of tangible common equity to tangible asset ratio.

In our view, GECC cherry picked the capital ratio where it looked best, but senior creditors should account for all junior levels in the capital structure when assessing loss absorption cushion.

CreditSights deemed GE Capital’s stress-tested Tier 1 capital ratio of 7.10 percent “inadequate” and said it should stand at more than 10 percent to weather the current deep economic recession.

Two weeks ago, GE saw its long-term ratings cut to “AA+” by Standard & Poor’s. The company slashed its dividend to shareholders for the first time in 71 years.

epeon
The problem with financials is that every decade or so they take a huge bath. This is one of the reasons why financials should not be considered "blue chips" in my opinion. GE is a financial company grafted onto an industrial concern.

GE's industrial business is a good one. However, it too will be affected by the global downturn. However, many of GE's products are the best in the world. GE power generation turbines and jet engines are the best. Note, I did not say among the best. They are the best and they get a well deserved premium price for them. Unfortunately, the same cannot be said for their financials. And, unfortunately, the financial people are running the company.

Replace "...credit-based national currencies"

2009-03-23T07:47:00.000-07:00

China wants dollar replaced as reserve currency

By Jamil Anderlini in Beijing

Published: March 23 2009 12:16 | Last updated: March 23 2009 14:22

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

The goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies,” Zhou Xiaochuan, governor of the People’s Bank of China, said in an essay posted in Chinese and English on the central bank’s website.

Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.

“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.

Analysts said the proposal was a clear indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

For now, China has little choice but to hold the bulk of its $2,000bn of foreign exchange reserves in US dollars and this is unlikely to change in the near future.

To replace the current system, Mr Zhou suggested expanding the role of Special Drawing Rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that system collapsed in the 1970s.

Today, the value of SDRs is based on a basket of four currencies – US$, Yen, Euro and Pound Sterling – and they are used largely as a unit of account by the IMF and some other international organizations.

“The US dollar is still the most important currency for settling international trade, pricing and payment in the current international monetary system,” Hu Xiaolian, director of the State Administration of Foreign Exchange, which manages the country’s foreign exchange reserves, said at a press conference earlier in the day. “Investing in US Treasury bonds is an important element in China's forex reserve investment and we will continue this practice.”

China’s proposal would expand the basket of currencies forming the basis of SDR valuation to all major economies and set up a settlement system between SDRs and other currencies so they could be widely used in international trade and financial transactions.

Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies.

Mr Zhou said the proposal would require “extraordinary political vision and courage” and explicitly acknowledged a debt to the theories of John Maynard Keynes, who made a similar suggestion in the 1940s.

More recently, US economist and Nobel prize winner Joseph Stiglitz, who is visiting China this week, has suggested expanding the role of SDRs to lay the foundation for the creation of a world currency.

In the short term, China expects the IMF to “at least recognize and face up to the risks resulting from the existing system, conduct regular monitoring and assessment and issue timely early warnings,” Mr Zhou’s essay said.

Copyright The Financial Times Limited 2009

Apple and the "M" word

2009-03-22T21:51:00.000-07:00

March 19, 2009 | written by Bruce Cundiff

The Chicken and the Egg of Micropayments

For about the past 10 years I have been hearing about the onslaught of micropayments (purchases anywhere from several cents to $10 or so…depending on how you look at it) and THE NEXT BIG CATALYST for driving them, ranging from the right kind of digital content (news articles, ring tones, games, etc. ad nauseum). What is going to be the real reason for a “tipping point” to “monetize” the internet? Buzzwords aside…Apple’s announcement earlier this week caught my eye.

Apple has now made it possible to purchase things “In App” meaning your iTunes account can be charged for online subscriptions, add on game modules, books, services, photos, ringtones, etc., using the iPhone/iPod Touch [h/t to Jay Galvin http://www.digiassist.com/main/ for pointing us in that direction…].

The catalysts (the chicken and egg) for successful micropayments are twofold:
1. Compelling content—you gotta have something that people are willing to pay for…
2. A viable micropayments solution—has to be cost effective for the content vendor, and relatively easy for the consumer to use

The problem is creating and fostering both the chicken and the egg at the same time—building the consumer desire to purchase specific content, and having a ready-made way for them to easily do so.

We’ve never really gotten there on a wide scale for an abundance of content. Examples of past solutions (which have had varying degrees of failure…) include, transaction aggregation, adding the content purchases to an existing bill (wireless, ISP, other), dedicated stored value accounts, etc.

The one success story has been iTunes. But one of the reasons for its success are that the content “provider” (distributor, really) didn’t care a whole lot about the cost of the solution. iTunes is a mercantile solution that exists for the good of selling devices, iPods and iPhones. The content sales are secondary. iTunes is part chicken, part egg. It’s a vehicle for (compelling) content delivery that is easy to use (or at least easy enough for millions to get over the usage hurdle). But it’s still a point solution, not a widespread micropayments revolution.

So…looking forward…are we entering a realm where the content sales (and their profitability) are primary? And following that, is this the potential, long awaited, broader success of micropayments? I think this announcement might pave the way for that.

Let’s break it down:
1. We already have the captured user base using the solution, and now the content expands beyond music.
2. That may in turn serve as a catalyst for consumer familiarity and content download to non-iPhone/iPod devices (Android platform handsets, Blackberries (Blackberrys?), etc.
3. The replication of the “App Store” for other handsets and content groups is already underway.

Way to early to tell if this is for real (this time…), but it could be a game-changer.

Speaking of games—Go Tar Heels!

Part II : GE Capital

2009-03-19T22:03:00.000-07:00

GE Capital Review Gives Investors ‘More Sober’ Profit Outlook
By Edmond Lococo and Rachel Layne

March 20 (Bloomberg) -- General Electric Co.’s six-hour review of its finance arm provided what investors called a “more sober” assessment of its earnings power during a global recession and credit crunch.

GE backed its $5 billion target for GE Capital while saying earnings would be closer to $2.5 billion if this month’s economic conditions prevail for the full year. GE Capital would at least break even and wouldn’t need more outside funding even under the most dire of three scenarios tested, executives told shareholders in New York yesterday.

“It’s more sober, which many investors were looking for,” Peter Klein, senior portfolio manager at Cleveland-based Fifth Third Asset Management, said in an interview. “The earnings power of this division will be challenged. The market has to get its arms around what you pay for that.”

Chief Financial Officer Keith Sherin and Michael Neal, GE Capital’s chief executive officer, led investors through the most detailed review yet in an attempt to restore confidence. GE shares dropped 72 percent in a year on concern about the unit’s funding, reserves and potential writedowns and losses in the deepest economic crisis since the Great Depression.

GE Capital said it still has a net income target of $5 billion year if the U.S. economy shrinks 1.8 percent. Earnings would be $2 billion to $2.5 billion under a Federal Reserve “base case” scenario used to test banks or zero under an “adverse” case that assumes a 3.3 percent drop in U.S. gross domestic product and unemployment peaking above 10 percent.

“The world has gotten worse -- you know that, I know that,” Neal told the investors. “We think as we go through it that the economy operating in March is closer to the Fed base case.”

The finance arm includes credit cards, real estate, plane leasing and corporate lending.

Market Reaction

The shares fell 19 cents, or 1.8 percent, to $10.13 yesterday in New York Stock Exchange composite trading. GE shares dropped about 60 percent since September through yesterday as investors burned by bank failures punished even finance companies tied to profitable industrial businesses.

The global credit crunch already cost GE its top AAA credit rating from Standard & Poor’s and prompted the Fairfield, Connecticut-based company to cut its dividend for the first time since 1938.

Those setbacks, after Chief Executive Officer Jeffrey Immelt said in December he was committed to keeping both, made Jim Bitter, a Wilmington, Delaware-based analyst at Wilmington Trust Co., more skeptical of yesterday’s presentation. The firm owned more than 8 million GE shares at the end of December.

“Unfortunately we keep finding out after the fact that there are things we weren’t told by GE or their assumptions were on the optimistic side,” Bitter said.

GE Forecasts

Immelt, 53, stopped providing per-share earnings forecasts this year after twice missing his predictions in 2008.

“You say this is the operating plan; you don’t stick with that” as conditions worsen, CFO Sherin said. “We’re trying to operate as effectively as we can in the environment we see today.”

GE Capital, the world’s largest non-bank finance company with consolidated assets of $637 billion, accounted for $8.6 billion of the parent’s $18.1 billion profit from continuing operations last year. Immelt has said he wants the division to contribute about 30 percent of annual profit.

Standard & Poor’s lowered GE and GE Capital’s top-tier rating one level to AA+ last week with a “stable” outlook. GE Capital may post little or no profit or possibly a “modest net loss” this year and next, the service said in its report.

Ratings Services

S&P likely already incorporated GE’s worst-case scenario in its ratings, said Joel Levington, director of corporate credit for Hyperion Brookfield Asset Management Inc. in New York. That suggests “S&P should have a pretty stable ‘stable’ outlook, which should give bondholders incremental comfort,” he said.

Moody’s Investors Service, which said in January it was reviewing GE for a potential downgrade, has yet to complete its assessment.

GE Capital has adequate funding and isn’t likely to need for additional outside capital, Sherin and Neal said. In October, GE sold $3 billion in preferred shares to billionaire Warren Buffett’s Berkshire Hathaway Inc. and $12 billion in common shares to bolster the balance sheet.

GE Capital said it has total funding sources of about $92 billion this year and $60 billion to $80 billion for 2010 as it shrinks the portfolio.

Debt issuance and reduction of commercial paper balances will leave the company with $38 billion in cash this year and $31 billion to $41 billion in cash in 2010, giving the division resources for unexpected events, GE Treasurer Kathryn Cassidy told investors.

To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net; Rachel Layne in Boston at rlayne@bloomberg.net.
Last Updated: March 20, 2009 00:01 EDT

Part I : GE Real Estate

2009-03-19T21:59:00.000-07:00

GE Real Estate Says Loss in Stress Test May Reach $3.6 Billion

By Bob Ivry

March 19 (Bloomberg) -- GE Real Estate’s commercial property losses could run as high as $3.6 billion in a worst-case scenario for the U.S. economy, according to Jayne Day, the unit’s chief risk officer.

The loss estimates on the unit’s $85 billion in assets were generated under a so-called Federal Reserve “stress test” scenario, Day said in an investor presentation in New York. The loss in lending on property could reach $1 billion in a worst case, while equity losses could total $2.6 billion, she said. General Electric Co.’s property unit has had $400 million in lending losses and written down $400 million in equity in 2008.

“GE does not have to sell assets in these situations,” Peter Sorrentino, who helps manage $15 billion at Huntington Asset Advisors in Cincinnati, said on Bloomberg TV. “A lot of the property that they’re invested in, they basically control, so they can ride it out. As long as they’ve got the cash flow to cover vacancies, they can ride this out, they’re not a forced seller.”

GE, based in Fairfield, Connecticut, has lost about 70 percent of its market value in the last year on concern that its financial unit, GE Capital, which generated 48 percent of its profit last year, may encounter losses similar to those of commercial banks. GE Chief Financial Officer Keith Sherin called the “deep dive” informational meeting at Rockefeller Center to quell investors’ concerns.

No Leveraged Loans

GE Real Estate said its original outlook for 2009 called for a loss of $700 million.

Sherin estimated that GE Capital, the parent of GE Real Estate, would net $5 billion this year. With the Fed’s worst- case scenario applied to the entire division, GE Capital’s earnings would be zero.

GE’s losses may appear “so much smaller” than leveraged firms like real estate investment trusts because of the way losses must be magnified when they are based on leveraged loans, GE Real Estate Chief Executive Officer Ronald Pressman said in the presentation. Because GE doesn’t buy with leveraged loans, it incurs losses based on the depreciation-based model rather than a leveraged-loss model.

“We have significant layers of protection in how we’ve underwritten this debt book,” Pressman said. “We do believe we have been diligent and conservative in applying sound real estate practices.”

Commercial property values have fallen 21 percent since their 2007 peak, according to the Moody’s/REAL Commercial Property Price Indices.

Construction Loans

GE Real Estate avoids land loans, single-family residential developments, malls, second mortgages, trophy buildings and locations where property rights are not respected, Day said.

“We run our operations differently from other companies in what we do and what we don’t do,” Pressman said at the presentation.

The division also avoids construction loans, Pressman said. About 1.5 percent of its commercial real estate portfolio consists of such loans, compared with 32 percent of banks’ commercial real estate portfolios, he said. GE’s construction borrowers have fallen behind on payments at a rate of 3.8 percent compared with 11.4 percent at commercial banks, he said.

“Most of our small construction and development portfolio was acquired in opportunistic deals at a discount in 2008,” Pressman said.

‘Green Light’

The equity portfolio includes $5.5 billion of property purchased before 2006; $10.1 billion in 2006; $14.8 billion in 2007 and $2.6 billion in 2008, according to Pressman. The primary driver of the loss is about $3.38 billion from 2007 properties, GE said.

Twice a year the company assesses its commercial real estate debt in 54 U.S. cities and 32 European markets, Day said. The only market with a “green light” for growth is Washington, Day said.

“We think were looking into this market very realistically not sugarcoating it in any way,” Pressman said. “We think our portfolio is solid.”

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.
Last Updated: March 19, 2009 14:47 EDT

2008 issuer market share

2009-03-17T21:20:00.000-07:00

BTW: Top 10 issuers own +80% of the market.

CREDIT CARD ISSUER STATISTICS
Market share

Top 10 issuers of general purpose credit cards for 2008 based on outstandings
1. Chase - $183.32 billion
2. Bank of America - $166.32 billion
3. Citi - $106.74 billion
4. American Express - $88.02 billion
5. Capital One - $60.08 billion
6. Discover - $49.69 billion
7. Wells Fargo - $36.36 billion
8. HSBC - $29.36 billion*
9. US Bank - $18.53 billion
10. USAA - $16.61 billion*

Source: www.creditcards.com

Potential issuer losses to exceed $70 billion for 2009

2009-03-17T20:59:00.000-07:00

From: www.thepaypers.com

http://www.thepaypers.com/news/article.aspx?cid=737537

The continued deterioration in credit card trends is expected to continue, with credit card charge-offs climbing to reach 9 - 10 percent in 2009, compared to 6 - 7 percent at the end of 2008. This could lead to potential losses worth between USD 70 billion and USD 75 billion for credit card issuers in 2009.

PayPal: $5 billion and 14% of internet transactions by 2011

2009-03-17T20:53:00.000-07:00

from: www.thepaypers.com

PayPal business to almost double by 2011, eBay predicts
Monday 16 March 2009 | 02:54 PM CET

eBay expects to see its payments platform PayPay double its revenue by 2011, as part of the company's financial targets.

The announcement was made during a meeting with PayPal investors. Thus, PayPal is expected to reach between USD 4 billion and USD 5 billion in revenue in 2011, growing from USD 2.4 billion in 2008. Such an increase is expected to be attributable to PayPal's constant penetration on eBay, significant increase off eBay via its merchant services business as well as expansion into mobile and non-retail payments sectors, businesswire.com reports. Some of PayPal’s growth is to be generated by partnerships with mobile-phone companies. PayPal is expected to handle almost 14 percent of online payments globally by 2011, up from less than 10 percent of internet payments it currently manages.

For 2011, eBay expects to reach revenues of USD 10-12 billion, as compared to USD 8.5 billion in 2008, as a result of Skype and PayPal platforms growth, as well as other e-commerce formats. The eBay marketplaces unit is expected to achieve revenues of USD 5-7 billion in 2011, with a focus on more fixed price sales, a smaller online auction business, and more significant growth in other e-commerce formats including classifieds and advertising.

I stand corrected...

2009-03-16T23:39:00.000-07:00

"Only in certain circumstances is Google less expensive> Google will still reward for using AdWords."

Google Checkout Adjusts Pricing Upward - Matching PayPal — Payments Views from Glenbrook Partners
Scott Loftesness

Yesterday, Google Checkout announced that it was changing its fee structure beginning May 5 - eliminating the previous credit that Google AdWords customers got that reduced their Google Checkout fees.

Instead, the new Google Checkout fee structure essentially parallels that of PayPal’s - a long-standing fee structure that the online payments leader has had in place for many years.

Below are the two fee tables:

Google Checkout continues to only support funding via the four major payment card brands for US sellers: Visa, MasterCard, American Express and Discover. Unlike PayPal, Google Checkout continues not supporting funding directly (via ACH) from checking accounts.

Both Google Checkout and PayPal have a 1% surcharge to US sellers on all cross-border transactions.

What about Amazon Checkout (or Amazon SimplePay)? You guessed it - the fee structure is essentially the same - starting at 2.9% + $0.30 per transaction in the lowest tier and going down to 1.9% + $0.30 per transaction for monthly sales over $100,000. Sound familiar? Amazon allows buyers to pay using Visa, MasterCard, Discover, American Express, JCB, or Diner’s Club credit cards.

Amazon does have a subtle difference - those fees apply to transactions of $10.00 or more. For transactions of less than $10.00, Amazon’s fees are 5.0% + $0.05 for all transactions - with no tiering based on monthly sales.

So, that’s where things stand today. With Google’s just announced changes, all of the three major online payment players have priced their services essentially the same - for US sellers. However, there are more differences “under the covers” between these services than just the pricing would seem to indicate.

What are your thoughts? Share them in the comments below!
Reload Page » Readability version 0.3

Paymo gets traction

2009-03-16T23:22:00.000-07:00

Paymo Adds Top U.S. Mobile Carriers to Growing Mobile Payments Platform, Expands to 45 Markets & 1 Billion Consumers | AllPayNews

AT&T, T-Mobile, Virgin Mobile Subscribers Now Have Ability to Charge Online Purchases Directly to their Mobile Bill via Paymo, extending Paymo to 45 Markets Around the World

SAN FRANCISCO, March 10 (AllPayNews.com) -- Paymo, the trusted mobile payments network that allows consumers anywhere in the world to buy online and pay with their mobile phone, today announced it has launched its service in the USA and 5 additional markets, bringing the total of covered markets to 45.

From today over 1 billion consumers, including those using AT&T, T-Mobile and Virgin Mobile in the USA, will be able to make online purchases using their phone rather than a credit card or a bank account.

Paymo allows online games sites, social networks, virtual world communities and other online merchants to expand monetization and e-commerce capabilities beyond the 30 percent of online consumers who have a credit card. With Paymo, consumers gain a secure and simplified purchasing experience that only requires them to confirm purchases with a text message rather than entering lengthy credit card numbers, passwords and security codes. In markets where Paymo is already serving online merchants, this simplified purchasing process is leading to purchase completion rates up to five times the success rate of credit cards.

"Merchant and consumer demand for Paymo is exploding around the world because this is the payment solution the online world has been waiting for," said Paul McGuire, founder & CEO of Paymo. "Online games, social networks and virtual worlds are driving the transition to a new business model based on free-to-play and virtual goods. These new multi-billion dollar revenue streams can only exist with the right payments network. Paymo is that solution and is already enabling merchants around the world to turn this multi-billion dollar potential into real revenue."

Paymo is already available in 45 countries including Australia, Canada, Chile, France, Hong Kong, Lebanon, Norway, Russia, Saudi Arabia, South Africa, Spain, Thailand, United Kingdom, USA, Vietnam and more. Consumers can use Paymo wherever they see the Paymo logo online.

Reload Page » Readability version 0.3

Brands for the New Economy

2009-03-16T13:12:00.000-07:00

Interesting take on the CDS market...

2009-03-16T02:27:00.000-07:00

When Bear Stearns faltered last March, federal officials rushed to save it by making some $30 billion in loans to Bear's fire sale buyer, JPMorgan Chase (JPM, Fortune 500).

What wounded Bear was a cash crunch that ensued as investors fled from risky mortgage-related assets. But officials acknowledged their decision to keep the brokerage firm from defaulting was driven by the threat a bankruptcy may have posed to Bear's trading partners.

"The sudden discovery by Bear's derivatives counterparties that important financial positions they had put in place to protect themselves from financial risk were no longer operative would have triggered substantial further dislocation in markets," said Tim Geithner, then the president of the Federal Reserve Bank of New York and now the Treasury Secretary, in congressional testimony last April.

http://money.cnn.com/2009/03/16/markets/cds.bear.fortune/index.htm

Steep climb, hard fall for CDS market...?

2009-03-16T02:16:00.000-07:00

Source: INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.

Credit (Card) Cancer -- Peter Schiff

2009-03-16T00:04:00.000-07:00

This is the guy who consistently called the crash...Continuing to opine on the need to realign our economy away from easy and profligate credit. See YouTube tribute below...

"What everyone seems to have forgotten at this point is that credit does not come from thin air. Even in a system in which bank reserves are leveraged many times, someone has to put savings in a bank for the bank to turn around and make a loan. As a result, the bedrock is the savings, which allows for the credit to flow. Credit extended without adequate savings inevitably leads an economy into disaster."

Into the breach...

2009-03-15T23:48:00.000-07:00

Looks like Heartland Payment Systems will be slapped around by VISA for malware breaches through it processor system...

Visa Puts Heartland on Probation Over Security Breach by Anthony M. Freed

...As for the sanctions Visa has prescribed for Heartland, I believe it’s something akin to when Dean Wormer put the Delta House on Double Secret Probation, or at least that’s how it reads:

Removal from Visa’s List of Compliant Service Providers - Visa has removed Heartland from its online list of Payment Card Industry Data Security Standard (PCI DSS) compliant service providers. HPS has advised, however, that it is aggressively working on remediation and re-validation of its systems to comply with PCI DSS standards. The company will be relisted once it revalidates its PCI DSS compliance using a Qualified Security Assessor and meets other related compliance conditions.

System Participation - HPS is now in a probationary period, during which it is subject to a number of risk conditions including more stringent security assessments, monitoring and reporting. Subject to these conditions, Heartland will continue to serve as a processor in the Visa system.

http://seekingalpha.com/article/125849-visa-puts-heartland-on-probation-over-security-breach?source=yahoo

AIG London Office Lost Up To Half A Trillion Dollars

2009-03-15T23:34:00.000-07:00

That's TRILLION...in CDSs.

I think this guy needs a new pair of glasses...

"It is hard for us with, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions." (AIGs) Cassano said.

http://abcnews.go.com/Business/story?id=7045889&page=1

OK, insurance too...CDS anyone?

2009-03-15T23:29:00.000-07:00

Bob Reich says: "And any mention of the word "talent" in the same sentence as "AIG" or "credit default swaps" would be laughable if it laughing weren't already so expensive."

http://www.huffingtonpost.com/robert-reich/the-real-scandal-of-aig_b_175105.html

Our S**T Stinks LESS Than Yours...

2009-03-12T11:07:00.001-07:00

C = Citigroup

Ongoing Saga: GE debt rating cut...

2009-03-12T10:50:00.000-07:00

As cited previously, GE is in deep s**t...not fatal...yet. But it hurts.

I love the comment from Tom Lum Forest on the NYTimes site...LOL

"“GE Capital’s balance sheet is strong relative to other financial institutions”

That’s content-free. Who are they comparing themselves to — AIG? Nearer the truth would be “while we may be mortally wounded, we won’t die as quickly as some other financial institutions. Best of all, our financial straits, though dire, just might not be terminal!”

Oh wait, these corporate statements are mendacity itself; forgive me for paying them any mind."

http://dealbook.blogs.nytimes.com/2009/03/12/ges-debt-rating-is-cut-by-sp/?hp

Facebook won't watch the till...

2009-03-11T14:12:00.000-07:00

Open application development sites are safe enough for most things, but not for handling money and on-line transactions. If Facebook won't manage how these types of applications are developed and managed no payment processor or bank will touch transactions that flow through or originate from Facebook.

http://www.javelinstrategy.com/2009/03/05/facebook-cuts-itself-out-as-a-platform-for-financial-services/

Google Checkout: New Pricing

2009-03-11T14:09:00.000-07:00

Still much cheaper than most on-line payment processors.

http://checkout.google.com/seller/fees.html?hl=en&gl=US

Card delinquencies rise 23% is three months

2009-03-10T12:14:00.000-07:00

During the last three months, the index has climbed 23%, putting the index 30% above historical averages. Fitch started the Prime Credit Card Index in 1991.

"Record credit card delinquencies are just the latest sign that U.S. consumers are under considerable levels of stress," said Fitch managing director Michael Dean in a written statement.

Record delinquency rates are a harbinger of record default rates, according to the report.

"The latest numbers point to even higher default rates and worsening consumer credit quality measures in the coming months," said Dean.

http://money.cnn.com/2009/03/10/pf/fitch_default/index.htm

Do the math...

2009-03-10T09:12:00.000-07:00

Credit Card Defaults: The Next Wave?

2009-03-10T08:48:00.000-07:00

Of the nearly $76 billion in credit card loans in 2008, nearly $46 billion came from Bank of America, JPMorgan Chase and Citigroup alone, according to credit rating agency Moody's.

Industry charge-offs (write-offs) climbed to a historic high of 7.73% in December. Most analysts expect that figure to head higher as more and more people find themselves out of work.

As of January 2009, the amount of outstanding credit in the industry totaled just under $1 trillion, compared to just $70.5 billion in 1982.

http://money.cnn.com/2009/03/09/news/companies/banks_credit_cards/index.htm

They sold their souls to the devil: Quants on Wall Street

2009-03-10T07:25:00.000-07:00

Asked to compare her work to physics, one quant, who requested anonymity because her company had not given her permission to talk to reporters, termed the market “a wild beast” that cannot be controlled, and then added: “It’s not like building a bridge. If you’re right more than half the time you’re winning the game.” There are a thousand physicists on Wall Street, she estimated, and many, she said, talk nostalgically about science. “They sold their souls to the devil,” she said, adding, “I haven’t met many quants who said they were in finance because they were in love with finance.”

Deer in the headlights: Wall Street is not looking for Ph.D.’s, but what he called “P.S.D.s — poor, smart and a deep desire to get rich.”

http://www.nytimes.com/2009/03/10/science/10quant.html?pagewanted=3&em

Twitpay and Amazon: Promises and settlement

2009-03-09T23:39:00.000-07:00

Twitpay launches.
Twitter uses Amazon to settle Twitpay promises...

http://www.thepaypers.com/news/article.aspx?cid=737384

On top of $3 billion placed in escrow at the IPO...

2009-03-09T22:32:00.000-07:00

Visa pours $1.1 billion into escrow account
By Sam Mamudi
Last update: 8:15 a.m. EST Dec. 22, 2008
NEW YORK (MarketWatch) -- Visa Inc. said Monday that it has deposited $1.1 billion into a previously-established litigation escrow account. The account is part of a plan set up when Visa went public. It provides coverage and a payment mechanism for judgments or settlements in specific U.S. legal cases, protecting Visa and its Class A and Class C shareholders from any direct losses. Under terms of the plan, money deposited in the account is at the expense of Class B shareholders, via a reduction in their as-converted share count. "This transaction not only adds the necessary funds to our litigation escrow, but effectively acts as a $1.1 billion Class B share repurchase program," said Joseph Saunders, chairman and chief executive officer.
***************
I like the comment by echristodo:
"why would they buy clss b's back? are they going to issue more common?"
Better question: "Why single out the Bs? Enriching specific holders?"
And "I guess VISA had to after forking over $1.74 billion (from escrow) to Discover in Oct 08. More coming?"

They are the only people with fluidity...

2009-03-09T22:08:00.000-07:00

Center for Financial Services Innovation (CFSI) has announced research results finding that "80 percent of polled prepaid industry executives see underbanked consumers as important or very important to the future growth of the prepaid industry, according to its latest survey of prepaid industry executives. Survey results are detailed in a new white paper, “The Industry Forecast for Prepaid Cards, 2009,” released today at the Prepaid Card Expo."

http://www.paymentsnews.com/2009/03/prepaid-execs-see-underbanked-consumers-as-opportunity.html

Same old (tired) song: The saga began in mid-February, when Foster City, Calif.-based Visa Inc. started to quietly notify banks and credit unions that

2009-03-09T21:59:00.000-07:00

...an unnamed credit card processing company "experienced a compromise of payment card account information from its systems."

http://www.computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName=knowledge_center&articleId=335262&taxonomyId=1&intsrc=kc_top

After almost 4 years: PCI compliance STILL an issue...

2009-03-09T21:53:00.000-07:00

Merchants feel overwhelmed by PCI compliance. Results: Merchant "paralysis". They do nothing or take some of the easier steps. Do the math!

http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9129277

AmEx kicking some out of the club...

2009-03-09T21:51:00.000-07:00

http://money.cnn.com/2009/03/09/news/amex.growth.fortune/index.htm

Soaring cost to underwrite GE Capital exposure...

2009-03-09T21:45:00.000-07:00

GE Capital losses kicks GE earnings in the "you know where". GE CAP backs credit cards issued by Wal-Mart or Lowe's and others...

2009-03-09T21:43:00.001-07:00

...and until recently they were in the sub-prime mortgage business.

http://money.cnn.com/2008/10/09/news/companies/colvin_ge.fortune/index.htm

Walmart soaks the poor and un-banked: $3 to open, $3 a month, and $3 to reload prepaid cards.

2009-03-09T21:39:00.000-07:00

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20090304