Wall Street Breakfast: Must-Know News

• Geithner's New Deal. Telling lawmakers the American financial system "will require comprehensive reform. Not modest repairs at the margin, but new rules of the game," Geithner pushed for a broad regulatory overhaul yesterday before the House Financial Services Committee. Geithner's proposal, which offered limited details, would mark the most comprehensive changes to financial-market regulation since the New Deal. It could take months for the changes to clear Congress and the reforms face several hurdles, including opposition from lawmakers concerned the administration is seeking too much power and from hedge funds and their investors anxious about the loss of autonomy. However, most hedge fund managers, investors, lawyers and lobbyists have accepted the fact that some reform is inevitable and are aiming to limit overly-invasive provisions rather than fight the proposal outright. (more: expanded SEC oversight) (Read Geithner's prepared remarks)
• Obama meets bank execs. Obama will meet with bank executives today to try and secure their support for his financial stabilization plan, as well as to encourage increased lending and reduced foreclosures. As many as 15 executives will attend the White House meeting, including Citigroup's (C) Pandit, JPMorgan Chase's (JPM) Dimon and Goldman Sachs' (GS) Blankfein. Lawrence Summers said the meeting is a reflection of the fact that "the country’s major financial institutions have a major role to play" in supporting "a robust and sustained economic expansion."
• AIG subpoenaed on CDS. New York Attorney General Andrew Cuomo subpoenaed AIG (AIG) yesterday for information on its credit default swaps contracts. At issue are contracts going back seven months and involving billions of dollars, some of which have subsequently been wound down by AIG's Financial Products unit. Cuomo said "CDS contracts were at the heart of AIG's meltdown. The question is whether the contracts are being wound down properly and efficiently or whether they have become a vehicle for funneling billions in taxpayer dollars to capitalize banks all over the world."
• Obama to help auto firms. Obama said his administration will soon unveil the next part of its plan to help the auto industry, assuming the companies continue to move forward with sweeping restructuring plans. The comments reinforced expectations that the administration would demand tough concessions but not force General Motors (GM) and Chrysler into bankruptcy. The signal of additional federal support helped GM shares close up 14% yesterday and came as GM announced that 12% of its U.S. hourly workers had accepted buyouts. Though GM may miss the March 31 deadline for securing concessions from its main union and bondholders, auto task force officials appear willing to extend the deadline by 30 days.
• Swiss bank execs face travel ban. Several private banks in Switzerland have started to ban their top executives from travelling abroad on fears the executives will be detained as part of a global crackdown on banking secrecy. The travel bans have primarily focused on those visiting the U.S., following the detention there last year of a senior private banker from UBS (UBS) as part of a federal tax investigation. However, some banks have issued a complete travel ban, including to neighboring countries in Europe. None of the banks with travel bans were willing to discuss the issue publicly.
• Newspapers cut back. In response to dramatic declines in advertising revenue, the Washington Post Co. (WPO) and the New York Times Co. (NYT) are both embarking on cost-cutting missions. The Times laid off 100 workers, or around 5% of its workforce, and is cutting non-union salaries at the New York Times and the Boston Globe. Last year its management said no newsroom cuts were expected in 2009, but it now says this year's numbers have been worse than expected. The Washington Post is offering a new round of buyouts to newsroom, production and circulation employees and said it can't rule out firing staff.
• Google shrinks sales/marketing unit. Google (GOOG) announced plans to cut its sales and marketing team by around 200 employees, saying it had over-invested in certain parts of the company. This is the latest in a series of cost-cutting moves, including 100 recruiters that were laid off in January and up to 40 February layoffs when Google closed its radio advertising unit.
• Amazon closes some distribution sites. Amazon (AMZN) will close distribution centers in three states, and either lay off or transfer around 210 employees to other nearby facilities. Though its sales have continued to rise despite the recession, an Amazon spokesman said the closures were part of a continuing evaluation to "make sure we are positioning ourselves for future growth."
• GDP shrinkage smaller than expected. Fourth quarter GDP fell 6.3% from Q3, vs. -6.6% consensus, a preliminary figure of -6.2%, and +0.5% growth in Q3. Weak exports, personal consumption, and residential construction all contributed to the big drop. For the year, GDP rose 1.1% after growing 2% in 2007. Prices fell 3.9% in Q4, vs. -4.1% preliminary. Personal consumption expenditures dropped 4.3% vs. -3.8% in Q3. Exports were down a whopping 23.6% in contrast to a 3% increase in Q3. Imports fell 17.5%.

Earnings: Thursday After Close

• Accenture (ACN): FQ2 EPS of $0.63 beats by $0.01. Revenue of $5.3B (-6.1%) vs. $5.5B. (PR)
• Embraer-Empresa Brasileira de Aeronautica (ERJ): Q4 EPS of $0.72 misses by $0.37. Revenue of $1.8B (-3.0%) vs. $1.9B. (PR)
• Tibco Software (TIBX): Q4 EPS of $0.09 beats by $0.01. Revenue of $133M (-9.3%) vs. $142M. (PR)

Today's Markets

• Asia: Nikkei -0.11% to 8,627. Hang Seng +0.07% to 14,119. Shanghai +0.54% to 2,374. BSE +0.45% to 10,048.
• Europe: London -0.1%. Paris -0.8%. Frankfurt -0.7%.
• Futures: Dow -0.7%. S&P -0.8%. Nasdaq -0.7%. Crude -1.7% to $53.44. Gold -1.3% to $928.

Friday's Economic Calendar

• 8:30 Personal Income and Outlays
  9:55 University of Michigan Consumer Sentiment
• Notable earnings before Friday's open: KBH

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[billp37:]

"The elderly have been harder hit than most. Personal bankruptcy filings among those 65 and older jumped 150% from 1991 through 2007, according to a study released last year by AARP. Although they have been known as the most frugal savers, today, many of them are deep in debt and without a safety net. ..."

www.usatoday.com/money...

"March 2009

Re: Upcoming Declines in Variable Annuity Income from the CREF and TIAA Real Estate Accounts

Dear Participant:

In late April, you will receive a Confirmation Statement from TIAA-CREF about annual changes to your variable annuity income that will take effect on May 1, 2009. These changes reflect the performance of the underlying College Retirement Equities Fund (CREF) Stock, Global Equities, Growth, Equity Index, Social Choice, Bond Market, Inflation-Linked Bond and Money Market Accounts, as well as the TIAA Real Estate Account. ..."

jpg below.

home.comcast.net/~bpayne37/whitman59/w...

Mar 27 08:32 AM

[notsosmart:]

the elderly should all have been retired ceo's.no problem there.the AARP should start listing all the perks the congress give themselves in its monthly magazine.show this list every month @ thesame spot in the mag.the dumb-dumbs are beginning to see that it was all ponzi.better wake up & care more about your finances than the sport scores.

Mar 27 09:30 AM

[JCCIII:]

"The Times ... is cutting non-union salaries at the New York Times and the Boston Globe." Interesting. Not sure is this supports more unionization (workers in the union benefit in the short-term) or less (the NYT can better respond to market conditions and increase their probability of survival long-term).

"Personal bankruptcy filings among those 65 and older jumped 150% from 1991 through 2007, according to a study released last year by AARP." Billp37, I suspect the population of those 65 and older also increased by a considerable percentage between 1991 and 2007. Can you provide that number? Thanks.

Mar 27 09:37 AM

[Andy_in_973:]

Good question, JC!
Over 65 :
Pop in 1990 = 31.2mm, 2000 = 34.9mm.
growth of 12%.
Actual % of pop dropped slightly, from 12.6% to 12.4%

www.infoplease.com/ipa...

Mar 27 10:24 AM

[joes:]

Another step down the ladder by the newspaper business, as an individual that spent the 80's in the newspaper biz and the 90's as an owner in an Internet development company it is with a mixed bag of emotions to watch the printed newspaper business collapse.

In with the new however, journalism is what matters to democracy, not publishing.

Mar 27 10:25 AM

[axelrod608:]

Credit default swaps (CDS) are nothing but "insurance: without the reserve requirement to back them up ( insure them). In AIG's case, the backup is being provided by taxpayer funds. It is time for a requirement for mandated reserves for any and all financial products. And it is time that any and all "financial products" be approved before they can be sold - just as insurance products are now. And it would be wise to require banks and other financials to do as reserve insurance companies do now - prrovide the backup for any company that fails. If a reserve insurance company goes under, the other reserve insurance companies cover the products of the one that failed. Time to make the financials do the same.

If this kind of requirement had been in place, none of those idiotic MBS's would have been approved or sold, and the industry would have screamed bloody murder at AIG writing tons of CDS's without sufficient reserves.

If "too big to fail" is a reality, it's time to lump them together and make them each others' reserve. Make the financials police each other. Why have the gummint do it ? Any financial institution that KNOWS it will be held responsible for its competitors' failures will make sure its competitors don't screw up.

Mar 27 10:47 AM

[BlueOkie:]

Maybe it is time to rethink retirement age. 65 may be too young to retire for many. As we live longer, maybe we'll need to work longer as well. Then again who says retirement is a right?

Mar 27 11:38 AM

[Steve20423:]

Or the premiums to back those securities would rise accordingly. That would be reflected in the interest rate and fewer riskier loans would have been written.
We're going to find out that signifcant fraud by the lenders was taking place but could not be avoided because congress passed a law forbidding the scrutiny that good banking requires.
AIG is a victim but alos did not do their due diligence backing these securities.


On Mar 27 10:47 AM axelrod608 wrote:

> Credit default swaps (seekingalpha.com/symbo...) are nothing
> but "insurance: without the reserve requirement to back them up (
> insure them). In AIG's case, the backup is being provided by taxpayer
> funds. It is time for a requirement for mandated reserves for any
> and all financial products. And it is time that any and all "financial
> products" be approved before they can be sold - just as insurance
> products are now. And it would be wise to require banks and other
> financials to do as reserve insurance companies do now - prrovide
> the backup for any company that fails. If a reserve insurance company
> goes under, the other reserve insurance companies cover the products
> of the one that failed. Time to make the financials do the same.
>
>
> If this kind of requirement had been in place, none of those idiotic
> MBS's would have been approved or sold, and the industry would have
> screamed bloody murder at AIG writing tons of CDS's without sufficient
> reserves.
>
> If "too big to fail" is a reality, it's time to lump them together
> and make them each others' reserve. Make the financials police each
> other. Why have the gummint do it ? Any financial institution that
> KNOWS it will be held responsible for its competitors' failures will
> make sure its competitors don't screw up.

Mar 27 11:43 AM

[bobbobwhite:]

The lack of reserves required is the main reason these financial houses got "too big to fail". And, thanks so much to the gov't for allowing its Wall Street cronies to "do business" this fatally risky way. When nearly nothing is required for reserves and controls are removed on growth, the sky is the limit in boom times and the only disaster backup becomes the taxpayer's wallets. What could be more obviously wrong than that, and why didn't "our best and brightest" see this coming and better protect us as is their duty? That corrupt system can only work well when everything is going gangbusters, and will not work even in a slow growth cycle, let alone in a recession, so what were they thinking they would do with that mess when business slowed? That's the American economic "system" today...."do what you can to make a killing today, and we'll worry about tomorrow tomorrrow."

For the religious out there, where would we be if Noah thought that way?


On Mar 27 10:47 AM axelrod608 wrote:

> Credit default swaps (seekingalpha.com/symbo...) are nothing
> but "insurance: without the reserve requirement to back them up (
> insure them). In AIG's case, the backup is being provided by taxpayer
> funds. It is time for a requirement for mandated reserves for any
> and all financial products. And it is time that any and all "financial
> products" be approved before they can be sold - just as insurance
> products are now. And it would be wise to require banks and other
> financials to do as reserve insurance companies do now - prrovide
> the backup for any company that fails. If a reserve insurance company
> goes under, the other reserve insurance companies cover the products
> of the one that failed. Time to make the financials do the same.
>
>
> If this kind of requirement had been in place, none of those idiotic
> MBS's would have been approved or sold, and the industry would have
> screamed bloody murder at AIG writing tons of CDS's without sufficient
> reserves.
>
> If "too big to fail" is a reality, it's time to lump them together
> and make them each others' reserve. Make the financials police each
> other. Why have the gummint do it ? Any financial institution that
> KNOWS it will be held responsible for its competitors' failures will
> make sure its competitors don't screw up.

Mar 27 11:45 AM

[DavyJ:]

We need "thumbs up" and "thumbs down" buttons for articles as we have for comments. You can't rely on a article being on the most read list as often the title will lead you astray and even though you didn't like the article, just by reading it you are endorsing it. Complimentary comments don't help since they aren't available until you have committed to read the article.

In particular, this article comes to mind:

seekingalpha.com/artic...

By the way, I looked for a more appropriate place for suggestions didn't readily find one.

Mar 27 11:56 AM

[Conan the B...:]

DavJ: how about a Thumbs up/down by the Writers of the Articles themselves? On the commentators. That way they can show their gratitude for our comments.

I'm doomed.

Mar 27 12:11 PM

[AndrewBaker:]

We all know that financial and banking reform is needed, and all are waiting to find out what it will be, but all we get is hot air and nebulous comment and speeches. Bankers are being spoken with to get things going, yet at the same time bankers are scared to travel for fear of being detained. I can see it now: Politician: "Excuse me, are you a banker? ... Yes ... Good, here is $1,000,000 I printed yesterday. Use it to save the financial system and don't take too much in pay and bonuses. There will be more soon when we get a few investors to buy your bad assets for top dollar. Got to go now and tell the people I'm doing stuff that will save the world from financial ruin. Oh, before I forget: we've ramped your stock up a few bucks recently, so don't forget that when you're telling everyone who you couldn't do it without, and move my money back Stateside before your foreign based pals hand out any lists."

Mar 27 12:23 PM

[sticktoitiv...:]

Retirement age, witch is based on social security, won't exist for too many more years. "If" we retire it will be your own doing and your decision.


On Mar 27 11:38 AM BlueOkie wrote:

> Maybe it is time to rethink retirement age. 65 may be too young
> to retire for many. As we live longer, maybe we'll need to work
> longer as well. Then again who says retirement is a right?

Mar 27 12:36 PM

[Joseph Sherman:]

Newspapers cut back - The choice should not be to cut back but rather to change the business model for the modern era. Given the internet and Kindle, do we need paper newspapers?

Mar 27 12:43 PM

[Nanacat:]

"Given the internet and Kindle, do we need paper newspapers? "

Of course we do, Joseph! What else can we unfold on the subway/train and jab someone in the eye with?

Mar 27 05:45 PM

[henarl:]

Or line the bird cage.

Mar 27 11:24 PM