- Fed told AIG to hide swap payoff. The New York Fed, led at the time by Tim Geithner, told AIG (NYSE:AIG) to hide details about its payments to banks, e-mails show. In a draft of a regulatory filing, AIG disclosed it paid banks, including Goldman Sachs (NYSE:GS) and Societe Generale (OTCPK:SCGLY), 100 cents on the dollar for credit-default swaps they bought from the firm. But the New York Fed crossed out the reference, and AIG ultimately excluded the detail from its Dec. 24, 2008 filing. The New York Fed took over AIG's negotiations with banks in November 2008, and controversially decided to fully repay banks for $62.1B in swaps written by AIG, prompting lawmakers to call the AIG rescue a 'backdoor bank bailout.'
- FOMC: Some concerns about housing. According to minutes released yesterday from the most recent FOMC meeting, members agreed unanimously on key points but some participants expressed concern the housing market would be hurt as the government winds down its purchases of mortgage-backed securities. A few members suggested that large-scale asset purchases may need to be expanded since resource slack would likely diminish slowly. Members agreed that underlying inflation is subdued and will remain so for some time, but views were split on the two-year outlook; some members felt inflation could be too low for employment/price stability targets, while others worried about upside risk.
- FDIC may tie fees to pay packages. The FDIC could vote as soon as next week on a proposal to tie banks' deposit insurance fees to the risk profile of pay packages for executives. Banks with less risky compensation structures, such as those with clawback clauses, would face lower FDIC fees. The proposal, still in an early stage, is just the latest government effort to get firms to modify their payment structures.
- Congress picks up carried-interest tax debate. After fizzling in 2007 with the onset of the financial crisis, congressional debate has resumed on the "carried-interest" tax. The issue affects private-equity and hedge-fund managers who are often entitled to a 20% cut of a fund's profits, and pay tax on this income at a capital-gains rate of 15% rather than at the regular income tax rate of 35%. The House of Representatives voted last month to tax a large amount of this income at the higher rate, and the issue will now move to the Senate when it reconvenes on Jan. 20.
- BIS concerned over return of excessive risk. Top central bankers and financiers are flying out to Switzerland this weekend for a meeting called by the Bank for International Settlements. The BIS, which is known as the central banks' bank, expressed concern that "financial firms are returning to the aggressive behavior that prevailed during the pre-crisis period," and suggested lowering return-on-equity targets for banks may be one way to discourage "excessive risk-taking." Private sector attendees will include Vikram Pandit of Citigroup (NYSE:C), John Stumpf of Wells Fargo (NYSE:WFC) and Larry Fink of BlackRock (NYSE:BLK).
- EC approves Kraft deal. The deal is far from sealed, but the European Commission has approved Kraft's (KFT) proposed takeover of Cadbury (CBY) on the condition that Kraft sell Cadbury's Polish and Romanian chocolate businesses. While Kraft continues to push forward with its hostile bid, Cadbury has reportedly been meeting with Hershey's (NYSE:HSY) management to encourage a rival offer. Cadbury CEO Todd Stitzer has repeatedly said he sees Hershey as a better fit than Kraft, though Cadbury seems most interested in remaining independent.
- Japan wants a weaker yen. On his first day in office, Naoto Kan, Japan's new finance minister, said he'd like to see the yen weaken "a bit more," specifying many Japanese companies want to see the dollar trading around 95 yen and promising to work to get the currency to 'appropriate' levels. His comments sent the yen down 0.5% against the dollar to 92.75.
- China raises key rate. China unexpectedly raised a key interbank interest rate for the first time in five months, indicating a shift in priorities towards preempting inflation risks. The move comes a day after the People's Bank of China hinted economic growth was no longer its only goal and it would focus on managing inflation expectations as well.
- Texas Instruments bets on e-readers. Texas Instruments (NASDAQ:TXN) plans to announce today that it's entering the increasingly crowded e-reader market with new processors and software for makers of the device. TI said its new e-book technology will allow manufacturers to produce more efficient e-readers that cost less.
- Good time to be a renter. Apartment vacancies in Q4 rose to 8%, the highest rate in at least thirty years. In an effort to find tenants, or to get existing tenants to renew their leases, landlords dropped rents by an average of 3% last year and are offering all sorts of perks: "We'll shampoo their carpets. We'll paint accent walls. We'll add Starbucks cards."
- Justice Dept. to head up Comcast review. The Justice Department announced it will be taking the lead role in assessing Comcast's (NASDAQ:CMCSA) plan to buy a controlling stake in NBC Universal (NYSE:GE), clearing up some confusion as to whether the Justice Department or the Federal Trade Commission would handle the antitrust review. The deal must also be approved by the Federal Communications Commission. Though regulators are expected to greenlight the purchase, they will likely attach significant conditions as the deal would give Comcast control of both the creation and distribution of content.
- GM aims for profitability, waves off Saab. General Motors CEO Ed Whitacre said he expects the company to return to profitability this year after losing $88B since 2005. He was less hopeful about the future of Saab, saying despite an expected new offer from Spyker NV, a deal to save the brand is unlikely and GM will move forward with winding down the unit. Among other comments, Whitacre pointed to new CFO Chris Liddell as a possible candidate for permanent CEO of the company, though he qualified his statement by adding the decision is up to the board.
- Creditors try to jolt JAL into action. Three major banks that are creditors of Japan Airlines suggested a turnaround plan which includes shareholder dilution and over ¥300B ($3.3B) in debt forgiveness. If shareholders reject the plan, the creditors are calling on the troubled airline to file for bankruptcy. On a different front, the Business Travel Coalition is opposing a proposed tie-up between JAL and Delta (NYSE:DAL), saying the move would be bad for competition, while American Airlines (AMR) has increased its investment offer by $300M to $1.4B in an effort to beat out Delta and form a partnership with JAL. JAL closed down 9.5% in Tokyo trading.
- BoE holds steady. As expected, the Bank of England held its key interest rate steady at 0.5% and maintained its target for asset purchases at £200B. The bank is expected to halt its quantitative easing program next month.
- Positive employment signs. Monster.com released its December Employment Index this morning, showing a four point drop to 115 as part of a relatively mild seasonal fall. Year-on-year, the index is down 12%, the mildest rate of annual decline in the past 18 months, with evidence of "a slight firming in underlying employer demand." The ADP Private Payrolls report (.pdf), released yesterday, came in at -84K for December, better than the -90K expected and the -169K in November. Private employment should begin rising in the next few months if these trends continue. Also released yesterday was Challenger's December job-cut report, which showed positive signs, registering 45,094 job reductions vs. 50,349 in November. In Q4, there were 151,121 job cuts, the fewest since early 2000 and down 67% from the previous year.
- MBA mortgage apps. Mortgage applications rose 0.5% in the week ending Jan. 1, and fell 22.8% in the week ending Dec. 25. Thirty-year fixed mortgage rates have moved up significantly and reached 5.18% in the week ending Jan. 1.
Earnings: Thursday Before Open
Earnings: Wednesday After Close
- Bed Bath & Beyond (NASDAQ:BBBY): Q3 EPS of $0.58 beats by $0.15. Revenue of $2B (+11%) vs. $1.9B. Sees Q4 EPS of $0.67-$0.71 vs. $0.62, and full-year EPS of $2.11-$2.15 vs. $1.91. Shares +8.4% AH. (PR)
Markets across the globe are registering losses.
- In Asia, Nikkei -0.5% to 10,682. Hang Seng -0.7% to 22,269. BSE -0.5% to 17,616. Shanghai closed.
- In Europe at midday, London -0.2%. Frankfurt -0.5%. Paris closed.
- Futures: Dow -0.3%. S&P -0.3%. Nasdaq -0.25%. Crude -0.7% to $82.62. Gold -0.6% to $1,129.50..
Thursday's Economic Calendar
- 1:00 Fed's Bullard speaks on monetary policy
6:00 Monthly retail same-store sales
6:00 Monster Employment Index
7:00 BoE Announcement
8:30 Jobless Claims
10:30 EIA Natural Gas Inventory
1:00 PM Fed's Hoenig speaks on economic outlook
4:30 PM Money Supply
- Notable earnings before Thursday's open: LEN, STZ
- Notable earnings after Thursday's close: APOL, LWSN
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.