470 Million Dollars Earmarked Released|
U.S. Transportation Secretary Ray LaHood said Friday that nearly $470 million in
unspent 'earmarked' funds will be released to help states pay for transportation
projects. The funds had previously been set aside for 'earmark' projects that
hadn't gotten off the ground. "We are freeing up these funds so states can get
down to the business of moving transportation projects forward and putting our
friends and neighbors back to work," LaHood said.
The University of Michigan-Thomson Reuters consumer-sentiment index released on
Friday shows a preliminary rise in August reading of 73.6 from a final July
reading of 72.3. The sentiment gauge covers how consumers view their personal
finances as well as business and buying conditions and averaged about 87 in the
year before the recession.
The Conference Board reported on Friday, that slow growth in the U.S. economy
looks set to continue, as it reported that its leading economic index grew 0.4%
in July. The index reportedly fell 0.4% in June and rose 0.3% in May, with both
months a tenth of a percentage point worse than previously reported. The leading
economic index consists of 10 components that together are designed to show
turning points in the economy. Led by weekly jobless claims and building
permits, seven of the ten indicators increased in July.
The U.S. Treasury Department announced on Friday a set of steps to expedite the
winding-down of government-controlled housing giants Fannie Mae (FNMA) and
Freddie Mac (FMCC). The move includes a measure that would require that their
massive mortgage portfolios be wound down at an annual rate of 15% whereas they
were previously required to be wound down by 10% a year. The Treasury said that
the change will allow Fannie and Freddie to have its investment portfolios cut
back to $250 billion four years earlier than previously scheduled.
Profits by lead underwriter Morgan Stanley (MS), for initial public offering of
Facebook (FB) were distributed this week from a pool of about $100 million. A
standard procedure in IPOs, Morgan Stanley made the money through a process
known as stabilization. Stabilization works this way: If investors are selling
the stock after the IPO launches, pushing the price lower, bankers can step in
and buy shares at the IPO price in an attempt to keep it from falling below its
issue price - serving to cover their short positions as well. If a short
position remains on their books and the stock keeps falling, which was the case
with Facebook, the underwriters can continue to cover their short positions by
buying back shares at prices below the IPO price, netting a profit. If the stock
only trades higher, the short position is covered when banks exercise what is
known as an 'overallotment option' which consists of buying more shares from the
newly public company at the IPO price. There is no risk to the banks - they
don't lose any money - and the new public company makes more money when the
overallotment is exercised. The amount issued to each underwriter was calculated
based on their participation in the IPO with Morgan Stanley receiving the
largest piece of the multi-million dollar pie. Underwriters are allowed to sell
about 15% more shares of an IPO, than the total deal size to investors the night
before a stock begins trading. The move creates a short position of shares sold
that the banks does not actually own, and it can remain on the bankers' books
for 30 days. The short position is created to allow underwriters to stabilize
the stock in its early days of trading. After the opening day, Facebook began to
drop allowing the bankers to move in and cover their short positions - at a
profit. Due to the size of the IPO for Facebook - $16 billion that sold 421
million shares - bankers' additional short positions totaled nearly 63 million
shares and allowed such a large profit potential.
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Aug 17, 2012