- SEC eyes tighter exec pay rules. The SEC may change how companies are required to disclose stock options given to executives, a change that could profoundly affect the reporting of executive pay. As an example, Citigroup (C) reported CEO Vikram Pandit received $10.8M in compensation in 2008, a number that would have risen to $38.2M under the potential new rule. Meeting later today, the SEC will also propose giving investors a greater say in setting executive compensation levels at firms that received TARP funds.
- FDIC gets tougher on bank buyers. The FDIC is expected to propose stricter guidelines today for private-equity firms looking to buy failed banks. The FDIC has to walk a fine line on the issue, reducing the agency's potential cost of bank failures by encouraging more types of investors while simultaneously preventing largely unregulated private-equity firms from acting too aggressively. The guidelines could include a mandatory investment period to prevent firms from buying and flipping banks, and could require private-equity investors to hold higher capital reserves than traditional banks in the same situation.
- Finra probes muni bond sales. The Financial Industry Regulatory Authority is 'conducting sweeps' of firms involved in several recent municipal bond collapses, and may initiate formal investigations along with possible disciplinary actions. Finra is gathering information from firms that underwrote securities tied to derivatives that were sold to municipalities and firms that sold so-called municipal gas bonds and are now distressed securities.
- Morgan, MUFG get cozy. Morgan Stanley (MS) and Mitsubishi UFJ Financial Group (MTU) unveiled more details of their planned $100B loan-marketing tie-up in which MUFG will share its lending expertise while Morgan gives clients capital-markets service and advice. The venture will start in the U.S., with plans to expand into Canada and Latin America, and MUFG will have final say on when to loan money to Morgan investment-banking clients. The two firms will also refer customers to each other in Europe and Asia (excluding Japan), and operate a limited employee exchange program to 'share knowledge.' The venture is a de facto admission by Morgan that having a strong balance sheet is crucial to success in the post-crisis economy.
- China postpones internet filter. Industry groups welcomed China's surprise announcement that it will delay enforcement of a rule requiring new computers be sold with web filtering software. The government didn't set a new deadline for installing the software but also didn't close the door on resurrecting the plan sometime in the future.
- Lukewarm bids for BoA asset manager. Bank of America (BAC) is getting lower than expected bids for Columbia Management, its asset management unit, and may break Columbia into two pieces to boost results. Bank of America, which has been trying to sell the unit since the beginning of the year, is hoping to get at least $3B but bids have been closer to $2B after BlackRock (BLK), the most likely suitor, closed a major deal earlier this month to buy Barclays' (BCS) BGI investment unit instead.
- Citi hikes credit card rates. Citigroup (C) has sharply raised interest rates on as many as 15M credit card accounts, months before new legislation curbing these increases goes into effect. In a statement, Citi said the changes "reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit." Separately, Citi reached a deal to sell NikkoCiti Trust and Banking Corp. to Nomura Trust & Banking Co. (NMR) for ¥19B ($197M).
- Toyota credit rating cut. Toyota (TM) had its credit rating lowered two notches by Fitch, to A+ from AA. Fitch director Jeong Min Pak said it could take "several years for Toyota to approach previous levels of profitability," and that "decision making and management reaction to the crisis seems to be faster at its rivals." Toyota is expecting a ¥550B ($5.7B) annual loss for the fiscal year ending in March, its second unprofitable year in a row.
- GM wind-down costs rise. Testifying at General Motors' bankruptcy hearing, CEO Fritz Henderson said the $950M set aside by GM and the government to wind the company down could fall short of what's actually needed. Taking into account environmental liabilities, Henderson said the costs may be closer to $1.2B. GM restructuring chief Albert Koch, who will run 'old GM,' put the number a little higher, forecasting the wind-down could cost "slightly in excess of $1.25B."
- California: We'll pay you later. After failing to balance its budget by the start of its fiscal year this morning, California will suspend payments to the state's vendors and local agencies and will issue 'IOU' notes instead. It's the first time in 17 years that California, the nation's most populous state, has been forced to rely on such drastic measures.
- Iraq oil auction disappoints. Iraq's first international oil tender since 1972 was called a 'disappointment,' as a consortium including BP (BP) and China National Petroleum made the only foreign deal - for the 17B barrel Rumaila oilfield, Iraq's biggest. The government's tough terms discouraged bidders for the other seven fields on offer and forced BP to lower the fee on its deal. The tender results left some questioning the wisdom of BP's move, wondering why the company agreed to terms that Exxon Mobil (XOM) and others rejected.
- Freddie picks new CEO. Freddie Mac's (FRE) board picked Charles E. "Ed" Haldeman Jr. as its choice for CEO. The expected appointment needs to be approved by the Federal Housing Finance Agency and the Treasury.
- Monster employment dips (.pdf). Monster's online employment index inched down in June, falling one point to 117 to reflect a seasonal lull in online recruitment activity. The year-on-year growth rate improved slightly over the previous two months.
- Retail sales. Chain store sales fell 4.4% in the first four weeks of June, Redbook said, worse than the -4.1% expected. According to ICSC, weekly sales were up 1.6% vs. last week, though sales are still on track for a 'tough month.'
- Home prices down but not out (.pdf). The S&P/Case-Shiller 20-City Home Price Index came in at -18.1% in April vs. last year, narrower than last month's 18.7% drop, and the third straight monthly improvement. "While one month’s data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions," David Blitzer said.
- NY business activity drops. New York City business activity contracted in June after expanding in May, NAPM reported. The Current Business Conditions index fell to 44.8 from 61.3, but purchasing and supply management executives still think a recovery could happen this year.
- Consumer confidence. Conference Board's Consumer Confidence Index came in at 49.3, down from 54.8 last month, after jumping there from 40.8 in April. Expectations dropped slightly to 65.5 from 71.5. The decline "continues to imply that conditions, while not as weak as earlier this year, are nonetheless weak." The ABC Consumer Confidence Index rose to -51, up 2 from last week, but (unsurprisingly) on pace for its worst year in 23 years of polls. Just 39% of Americans rate their personal finances positively.
- Investor confidence rises. The State Street Investor Confidence Index rose 7 points to 115.5 in June, the third increase in as many months, as "institutional investors continue to endorse the long-run outlook." Confidence jumped in Europe but still lags North America.
- MBA apps fall. Mortgage applications fell 18.9% last week, MBA reported. The average interest rate on 30-year fixed-rate mortgages fell to 5.34% from 5.44%.
Earnings: Wednesday Before Open
- General Mills (GIS): FQ4 EPS of $0.86 beats by $0.05. Revenue of $3.6B (+5%) vs. $3.7B. Issues upside EPS guidance for FY '10 of $4.20-4.25, assuming no mark-to-market impact in FY '10. (PR)
Earnings: Tuesday After Close
Asian markets closed mixed, but Europe is getting off to a strong start and U.S. futures are inching up.
- In Asia, Nikkei -0.2% to 9,940. Hang Seng closed. Shanghai +1.65% to 3,008. BSE +1.05% to 14,645.
- In Europe at midday, London +1.4%. Paris +1.7%. Frankfurt +1.4%.
- Futures: Dow +0.5%. S&P +0.6%. Nasdaq +0.8%. Crude +2.1% to $71.33. Gold +0.45% to $931.60.
Wednesday's Economic Calendar
- Motor Vehicle Sales
6:00 Monster Employment Index
7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:00 Pending Home Sales
10:30 EIA Petroleum Status
11:15 Fed's Evans speaks on the credit crunch
- Notable earnings before Wednesday's open: GIS, STZ
Seeking Alpha editor Eli Hoffmann contributed to this post.
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