Stage One of Two Stage Stress Test
Federal Reserve released initial results Thursday for the long awaited stage one
of the two stage stress test for big banks and all but one bank made the cut for
the first stage. The Fed said banks cannot pass or fail Thursday’s test because
the regulatory thresholds do not count this time. On March 14, final results
will be in and could change significantly for some banks because they are based
on each institution’s proposed capital distribution plans, including dividends
and share repurchases, for the next 12 months. The Fed gave some private
guidance to the banks about whether their capital distribution plans will be
approved or rejected. While some banks may publicly disclose their tentatively
approved payout plans, institutions that keep quiet may be doing so because they
have to resubmit less ambitious plans for potential approval on the deadline of
March 14. Ally Financial Inc., with a majority owned by the U.S. government, was
the only bank that failed to meet one of the key ratios. The stress test showed
that Ally had 1.5% in capital set aside under a measure known as Tier 1 common
ratio, which compares the bank’s common equity to its risk-weighted assets. The
result for Ally is significantly below the generally accepted standard of 5%.
With the the stress test, banks and the Fed considered a hypothetical
nine-quarter scenario with an unemployment rate of roughly 12%, up from 7.9% in
January and banks evaluated how their capital buffers would withstand real GDP
declining by nearly 5% while equity prices fell by more than 50%. These results
consider an average of the last four quarters of dividend payments at each bank.
Bank of New York Mellon (BK) had the highest tier 1 common ratio at 13.2% and
State Street (STT) was the strongest in total risk-based capital category at
Everyone (unless of course you are in Hawaii or Arizona (with the exception of
the Navajo Nation) and the territories of Puerto Rico, Virgin Islands, Guam and
American Samoa, which do not partake in the time change) is reminded to turn
your clocks ahead one hour Sunday March 10th at 2:00am ET as the country begins
Daylight Saving Time. Interestingly enough, there are nearly 70 countries around
the world that observe DST. Most countries near the equator do not deviate from
standard time. The spring forward will result in a loss of one hour of sleep,
ugghh! Like we all can afford to give that up. How did this time change thing
come about? The whole idea was initially suggested by Benjamin Franklin in an
effort to save on candles. The change was first imposed in 1918 during World War
I to conserve energy, but was repealed after the war ended. It became the
national time again during World War II with the Uniform Time Act in 1966 and
was left up to the states to decide if they wanted to adopt the change, as well
as when it would start and end. The decision to initiate the rollover at 2:00am
ET was determined as the most practical and minimally disruption for people
effected as most were at home, mostly sleeping. The Energy Policy Act of 2005
lengthened daylight saving to eight months instead of six months. Time changes
have been found to be a good time to automatically program yourself to change
batteries in smoke detectors and carbon monoxide detectors as well as, make sure
they are all in good, working order.
Italy's sovereign credit rating was cut by Fitch Ratings on Friday to BBB plus
from A minus. February's inconclusive outcome of parliamentary elections and a
deeper recession sparked the move. Fitch said the outlook on Italy's rating is
negative with data indicating the country's recession may be deeper and more
protracted than previously expected, setting the stage for yet another potential
downgrade by the rating firm. In a news release, Fitch said "increased political
uncertainty and [a] non-conducive backdrop for further structural reform
measures constitute a further adverse shock to the real economy amidst the deep
recession." Fitch said Italy's debt is expected to peak in 2013 at close to 130%
of gross domestic product.
James Bullard, President of the St. Louis Federal Reserve Bank said on Friday
that the Federal Reserve is likely to continue with its $85-billion-a-month bond
buying program. "I think it's going to be a while on the QE program," Bullard
said. On March 19 and 20 at its two-day meeting, the Fed will review its asset
purchase program, known as quantitative easing. Fed Chairman Ben Bernanke and
his allies have signaled that tapering the purchases too soon could damage the
recovery even though some Fed officials are worried that the program is fueling
The FTSE 100 rose 0.7% to close at 6,483.58 on Friday, marking the highest
closing level since December 2007. The FTSE 100 index gained 1.7% on a weekly
U.S. Labor Department reported Friday 236,000 jobs were added during February,
taking the unemployment rate to 7.7% from 7.9%. The move marks the lowest
unemployment rate since December 2008 with jobs gains at the highest levels
since November and as follows: professional services 73,000, construction
48,000, health care 32,000 and retail 24,000. Average number of jobs created
over the past three months - 191,000 with 246,000 jobs added to the business
sector and 10,000 jobs cut from government jobs. Average workweek for February
rose 0.1 hour to 34.5 and average hourly earnings rose by 4 cents or 0.2%, to
$23.82 with a 12 month hourly wage increase at 2.1%. New jobs created in January
was revised to 119,000 from 157,000 and new jobs created in December was revised
to 219,000 from 196,000.
U.S. Commerce Department reported on Friday that during January, inventories
rose 1.2% to a seasonally adjusted $504.4 billion with wholesale inventories at
25% of overall inventories and inventories of autos rising by 0.4%.
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Mar 8, 2013