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There it is...
All the volume is in FNM...
FNM moving...
US 30-yr fixed mortgage rate up on government plan
09/19 03:40 PM
NEW YORK, Sept 19 (Reuters) - Interest rates on 30-year fixed-rate mortgages climbed on Friday as a result of news of a sweeping U.S. government plan to contain the credit crisis.
The 30-year fixed-rate mortgage rose to near 6.25 percent on Friday versus 6.16 percent on Thursday and 5.875 percent on Tuesday when the global credit crises was in full swing, according to Greg McBride, senior financial analyst at Bankrate, Inc, in North Palm Beach, Florida.
"The revelation that the Treasury plans to take certain debt off the books of financial institutions helped push mortgage rates higher," he said. "Mortgage rates, however, are still low enough and are not a barrier to affordability."
Global stocks soared and bonds fell as news of a U.S. plan to buy illiquid bank assets and guarantee money market funds, combined with a U.K. and U.S. ban on short-selling financial stocks, raised hopes for an end to the year-long global credit crunch.
U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke intend to work through the weekend on a plan to deal with mortgage-related assets that are choking the financial system.
Treasury yields, which move inversely to price, are linked to mortgage rates. Treasury yields surged higher on the government's plan.
"Mortgage rates are not the issue, so if you are in the market to buy a house it may be a good time," said McBride. (Reporting by Julie Haviv; Editing by Dan Grebler)
US 30-yr fixed mortgage rate up on government plan
09/19 03:40 PM
NEW YORK, Sept 19 (Reuters) - Interest rates on 30-year fixed-rate mortgages climbed on Friday as a result of news of a sweeping U.S. government plan to contain the credit crisis.
The 30-year fixed-rate mortgage rose to near 6.25 percent on Friday versus 6.16 percent on Thursday and 5.875 percent on Tuesday when the global credit crises was in full swing, according to Greg McBride, senior financial analyst at Bankrate, Inc, in North Palm Beach, Florida.
"The revelation that the Treasury plans to take certain debt off the books of financial institutions helped push mortgage rates higher," he said. "Mortgage rates, however, are still low enough and are not a barrier to affordability."
Global stocks soared and bonds fell as news of a U.S. plan to buy illiquid bank assets and guarantee money market funds, combined with a U.K. and U.S. ban on short-selling financial stocks, raised hopes for an end to the year-long global credit crunch.
U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke intend to work through the weekend on a plan to deal with mortgage-related assets that are choking the financial system.
Treasury yields, which move inversely to price, are linked to mortgage rates. Treasury yields surged higher on the government's plan.
"Mortgage rates are not the issue, so if you are in the market to buy a house it may be a good time," said McBride. (Reporting by Julie Haviv; Editing by Dan Grebler)
These last 15 minutes should be fast and furious, IMO...
US Treasury to double MBS purchases to $10 billion
09/19 02:57 PM
WASHINGTON, Sept 19 (Reuters) - The U.S. Treasury intends to double its planned purchases of mortgage-backed securities to $10 billion this month as part of its broad plan to stabilize markets and deal with problem bank assets.
Treasury spokeswoman Jennifer Zuccarelli said the increase would accompany unspecified increases in MBS purchases by Fannie Mae (FNM:$0.764,0$0.2740,55.92%) and Freddie Mac (FRE:$0.6063,$0.2763,83.73%) .
The Treasury has not yet begun purchases in the open market, and may make more MBS purchases in future months, subject to the national debt limit, she said.
The two government-controlled housing finance firms would be allowed to increase MBS purchases up to their new portfolio limits of $850 billion each, Zuccarelli said. (Reporting by David Lawder, Editing by Chizu Nomiyama)
US Treasury to double MBS purchases to $10 billion
09/19 02:57 PM
WASHINGTON, Sept 19 (Reuters) - The U.S. Treasury intends to double its planned purchases of mortgage-backed securities to $10 billion this month as part of its broad plan to stabilize markets and deal with problem bank assets.
Treasury spokeswoman Jennifer Zuccarelli said the increase would accompany unspecified increases in MBS purchases by Fannie Mae (FNM:$0.764,0$0.2740,55.92%) and Freddie Mac (FRE:$0.6063,$0.2763,83.73%) .
The Treasury has not yet begun purchases in the open market, and may make more MBS purchases in future months, subject to the national debt limit, she said.
The two government-controlled housing finance firms would be allowed to increase MBS purchases up to their new portfolio limits of $850 billion each, Zuccarelli said. (Reporting by David Lawder, Editing by Chizu Nomiyama)
FHLB Canceled Short-Term Debt Auction Thursday Amid Turmoil
09/19 02:54 PM
NEW YORK (Dow Jones)--At the height of the turmoil in financial markets on Thursday, the Federal Home Loan Banks canceled its auction of discount notes due to the dislocation in the short-term funding markets.
However, the FHLB said it was able to raise $41 billion through negotiations with clients outside of the auction process.
"We elected not to have the discount note auction yesterday because we negotiated more than $41 billion in discount notes during the first two hours after the open," said Mike Ciota, a spokesman for the agency, confirmed on Friday.
Ciota said he would not comment on speculation that the FHLB was forced to cancel the auction due to lack of interest as many money market funds flooded into Treasury bills.
The spokesman did say, however, that the company's ability to place the $41 billion of notes demonstrated investor demand was still intact.
The system of 12 regional banks typically uses these notes to raise money for its operations, and these are of maturities one year and less.
The discount note auctions are held every Tuesday and Thursday. The agency says it will raise $2.8 trillion through such notes this year.
However, investors who typically consider these securities as safe options were spooked this week. The complete meltdown of the financial markets made investors flee to safe-haven Treasury notes for most of this week.
"This temporary lack of demand for non-Treasury assets was part of the driving force behind the decision earlier this week by the FHLB to cancel its discount note auction," said a Scott Peng-led analyst team at Citi in a research note.
Another analyst said investors were shying away from debt that carried maturities longer than a month in the discount note market, which pushed the market used by all government sponsored enterprises, including Fannie Mae (FNM:$0.7700,$0.2800,57.14%) and Freddie Mac (FRE:$0.6037,$0.2737,82.94%) into a tailspin on Thursday.
On Friday, the Federal Reserve announced that it would buy these agency discount notes directly from primary dealers as another means of getting short- term markets back on track.
The first auction takes place Friday, with bids due by 3 p.m.
-By Prabha Natarajan, Dow Jones Newswires, 201-938-5071; prabha.natarajan@ dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=Tuf6jlTSR9asUD3iYofXbg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
09-19-081454ET
Copyright (c) 2008 Dow Jones & Company, Inc.
FHLB Canceled Short-Term Debt Auction Thursday Amid Turmoil
09/19 02:54 PM
NEW YORK (Dow Jones)--At the height of the turmoil in financial markets on Thursday, the Federal Home Loan Banks canceled its auction of discount notes due to the dislocation in the short-term funding markets.
However, the FHLB said it was able to raise $41 billion through negotiations with clients outside of the auction process.
"We elected not to have the discount note auction yesterday because we negotiated more than $41 billion in discount notes during the first two hours after the open," said Mike Ciota, a spokesman for the agency, confirmed on Friday.
Ciota said he would not comment on speculation that the FHLB was forced to cancel the auction due to lack of interest as many money market funds flooded into Treasury bills.
The spokesman did say, however, that the company's ability to place the $41 billion of notes demonstrated investor demand was still intact.
The system of 12 regional banks typically uses these notes to raise money for its operations, and these are of maturities one year and less.
The discount note auctions are held every Tuesday and Thursday. The agency says it will raise $2.8 trillion through such notes this year.
However, investors who typically consider these securities as safe options were spooked this week. The complete meltdown of the financial markets made investors flee to safe-haven Treasury notes for most of this week.
"This temporary lack of demand for non-Treasury assets was part of the driving force behind the decision earlier this week by the FHLB to cancel its discount note auction," said a Scott Peng-led analyst team at Citi in a research note.
Another analyst said investors were shying away from debt that carried maturities longer than a month in the discount note market, which pushed the market used by all government sponsored enterprises, including Fannie Mae (FNM:$0.7700,$0.2800,57.14%) and Freddie Mac (FRE:$0.6037,$0.2737,82.94%) into a tailspin on Thursday.
On Friday, the Federal Reserve announced that it would buy these agency discount notes directly from primary dealers as another means of getting short- term markets back on track.
The first auction takes place Friday, with bids due by 3 p.m.
-By Prabha Natarajan, Dow Jones Newswires, 201-938-5071; prabha.natarajan@ dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=Tuf6jlTSR9asUD3iYofXbg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
09-19-081454ET
Copyright (c) 2008 Dow Jones & Company, Inc.
80 cents?
Only if the GOVT Q's...
Bingo. This and FMN, are good even without a short position, IMO.
UPDATE: Bush Says Econ Intervention Needed At 'Pivotal Moment'
09/19 11:50 AM
(Updates to include additional Bush comments and details)
By Henry J. Pulizzi
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--U.S. President George W. Bush warned Friday that a " significant" amount of taxpayer funds will be put at risk with the government's plan to bolster shaky markets but said intervention is necessary to keep the financial system from grinding to a halt.
"This a pivotal moment for America's economy," Bush said. "In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment."
In his nine-minute statement, Bush called on Congress to pass legislation allowing the government to purchase the bad debt jamming the financial system and restricting access to credit. The potential costs of inaction, Bush said, outweigh the risks of the plan.
"Our system of free enterprise rests on the conviction that the federal government should interfere in the marketplace only when necessary," Bush said. "Given the precarious state of today's financial markets, and the vital importance to the daily lives of the American people, government intervention is not only warranted, it is essential."
Treasury Secretary Henry Paulson said earlier Friday that the plan being negotiated between the administration and lawmakers could cost hundreds of billions of dollars. Bush said the White House expects to eventually be paid back.
The creation of a mechanism to purchase out-of-favor mortgage assets is the most aggressive in a series of measures unveiled recently by the government to stabilize financial markets. Bush said the federal takeover of Fannie Mae (FNM:$0.6899,$0.1999,40.80%) and Freddie Mac (FRE:$0.5499,$0.2199,66.64%) , the $85 billion lifeline to American International Group Inc. (AIG:$3.1399,$0.4499,16.72%) , and emergency liquidity injections by the Federal Reserve and other central banks were designed to prevent sweeping disruptions.
"These were targeted measures, designed primarily to stop the problems of individual firms from spreading even more broadly," he said. "But more action is needed."
In addition to the proposal to buy bad debt, the Treasury Department on Friday said it will insure the holdings of any eligible publicly offered money market fund. The Securities and Exchange Commission proposed a 10-day ban on short- selling on 799 financial stocks.
"America's economy is facing unprecedented challenges; we are responding with unprecedented action," Bush said. "These measures will act as grease for the gears of our financial system, which were at risk of grinding to a halt."
Bush lauded the SEC's effort to curb illegal and market-distorting short- selling, saying: "Anyone engaging in illegal financial transactions will be caught and persecuted (sic)."
While Bush acknowledged the challenges facing Wall Street in grave language, he sounded an optimistic note on the U.S. economy's long-term prospects.
"In the long run," he said, "Americans have good reason to be confident in our economic strength."
-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; henry.pulizzi@ dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=Tuf6jlTSR9asUD3iYofXbg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
09-19-081150ET
Copyright (c) 2008 Dow Jones & Company, Inc.
UPDATE: Bush Says Econ Intervention Needed At 'Pivotal Moment'
09/19 11:50 AM
(Updates to include additional Bush comments and details)
By Henry J. Pulizzi
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--U.S. President George W. Bush warned Friday that a " significant" amount of taxpayer funds will be put at risk with the government's plan to bolster shaky markets but said intervention is necessary to keep the financial system from grinding to a halt.
"This a pivotal moment for America's economy," Bush said. "In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment."
In his nine-minute statement, Bush called on Congress to pass legislation allowing the government to purchase the bad debt jamming the financial system and restricting access to credit. The potential costs of inaction, Bush said, outweigh the risks of the plan.
"Our system of free enterprise rests on the conviction that the federal government should interfere in the marketplace only when necessary," Bush said. "Given the precarious state of today's financial markets, and the vital importance to the daily lives of the American people, government intervention is not only warranted, it is essential."
Treasury Secretary Henry Paulson said earlier Friday that the plan being negotiated between the administration and lawmakers could cost hundreds of billions of dollars. Bush said the White House expects to eventually be paid back.
The creation of a mechanism to purchase out-of-favor mortgage assets is the most aggressive in a series of measures unveiled recently by the government to stabilize financial markets. Bush said the federal takeover of Fannie Mae (FNM:$0.6899,$0.1999,40.80%) and Freddie Mac (FRE:$0.5499,$0.2199,66.64%) , the $85 billion lifeline to American International Group Inc. (AIG:$3.1399,$0.4499,16.72%) , and emergency liquidity injections by the Federal Reserve and other central banks were designed to prevent sweeping disruptions.
"These were targeted measures, designed primarily to stop the problems of individual firms from spreading even more broadly," he said. "But more action is needed."
In addition to the proposal to buy bad debt, the Treasury Department on Friday said it will insure the holdings of any eligible publicly offered money market fund. The Securities and Exchange Commission proposed a 10-day ban on short- selling on 799 financial stocks.
"America's economy is facing unprecedented challenges; we are responding with unprecedented action," Bush said. "These measures will act as grease for the gears of our financial system, which were at risk of grinding to a halt."
Bush lauded the SEC's effort to curb illegal and market-distorting short- selling, saying: "Anyone engaging in illegal financial transactions will be caught and persecuted (sic)."
While Bush acknowledged the challenges facing Wall Street in grave language, he sounded an optimistic note on the U.S. economy's long-term prospects.
"In the long run," he said, "Americans have good reason to be confident in our economic strength."
-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; henry.pulizzi@ dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=Tuf6jlTSR9asUD3iYofXbg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
09-19-081150ET
Copyright (c) 2008 Dow Jones & Company, Inc.
UPDATE: Bush Says Econ Intervention Needed At 'Pivotal Moment'
09/19 11:50 AM
(Updates to include additional Bush comments and details)
By Henry J. Pulizzi
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--U.S. President George W. Bush warned Friday that a " significant" amount of taxpayer funds will be put at risk with the government's plan to bolster shaky markets but said intervention is necessary to keep the financial system from grinding to a halt.
"This a pivotal moment for America's economy," Bush said. "In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment."
In his nine-minute statement, Bush called on Congress to pass legislation allowing the government to purchase the bad debt jamming the financial system and restricting access to credit. The potential costs of inaction, Bush said, outweigh the risks of the plan.
"Our system of free enterprise rests on the conviction that the federal government should interfere in the marketplace only when necessary," Bush said. "Given the precarious state of today's financial markets, and the vital importance to the daily lives of the American people, government intervention is not only warranted, it is essential."
Treasury Secretary Henry Paulson said earlier Friday that the plan being negotiated between the administration and lawmakers could cost hundreds of billions of dollars. Bush said the White House expects to eventually be paid back.
The creation of a mechanism to purchase out-of-favor mortgage assets is the most aggressive in a series of measures unveiled recently by the government to stabilize financial markets. Bush said the federal takeover of Fannie Mae (FNM:$0.6899,$0.1999,40.80%) and Freddie Mac (FRE:$0.5499,$0.2199,66.64%) , the $85 billion lifeline to American International Group Inc. (AIG:$3.1399,$0.4499,16.72%) , and emergency liquidity injections by the Federal Reserve and other central banks were designed to prevent sweeping disruptions.
"These were targeted measures, designed primarily to stop the problems of individual firms from spreading even more broadly," he said. "But more action is needed."
In addition to the proposal to buy bad debt, the Treasury Department on Friday said it will insure the holdings of any eligible publicly offered money market fund. The Securities and Exchange Commission proposed a 10-day ban on short- selling on 799 financial stocks.
"America's economy is facing unprecedented challenges; we are responding with unprecedented action," Bush said. "These measures will act as grease for the gears of our financial system, which were at risk of grinding to a halt."
Bush lauded the SEC's effort to curb illegal and market-distorting short- selling, saying: "Anyone engaging in illegal financial transactions will be caught and persecuted (sic)."
While Bush acknowledged the challenges facing Wall Street in grave language, he sounded an optimistic note on the U.S. economy's long-term prospects.
"In the long run," he said, "Americans have good reason to be confident in our economic strength."
-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; henry.pulizzi@ dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=Tuf6jlTSR9asUD3iYofXbg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
09-19-081150ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Maybe because FNM is a 'girl' stock?
Bush, Bernanke, Paulson, and Cox are in a meeting right now, says Maria...
Freddie Says Directed To Focus Positive Stockholder Equity
09/18 03:23 PM
(MORE TO FOLLOW) Dow Jones Newswires (201-938-5400)
09-18-081523ET
Copyright (c) 2008 Dow Jones & Company, Inc.
...Bucking the downward trend in financials, Freddie Mac (FRE:$0.32,00$0.05,0018.52%) gained 17.9%. The government-sponsored mortgage buyer earlier reported the 30-year fixed-rate mortgage fell last week to an average 5.78%, its lowest level since February...
American Capital Director Appointed Chairman of Freddie Mac
09/18 12:32 PM
BETHESDA, Md., Sept. 18 /PRNewswire-FirstCall/ -- American Capital, Ltd. (ACAS:$20.32,00$1.72,009.25%) announced today that its Director John A. Koskinen has been appointed to serve as the non-executive Chairman of Freddie Mac (FRE:$0.3322,$0.0622,23.04%) , the mortgage finance firm recently placed into conservatorship by the federal government. Mr. Koskinen intends to remain on American Capital's Board, which he joined in 2007.
"Freddie Mac (FRE:$0.3322,$0.0622,23.04%) stands to benefit from John's outstanding experience in complex management environments," said Malon Wilkus, Chairman and CEO, American Capital. "I wish John great success in his new role and am very appreciative that he will continue with American Capital."
Mr. Koskinen, former Chairman of the Board of Trustees of Duke University, was also Chief Executive of The Palmieri Company, which restructured large, troubled operating companies. During Mr. Koskinen's 21 years with Palmieri, he helped reorganize the Penn Central Transportation Co.; Levitt and Sons, Inc.; the Teamsters Pension Fund and Mutual Benefit Life Insurance Co. Following Palmieri, Mr. Koskinen served on the White House staff and in the District of Columbia government. Mr. Koskinen recently stepped down as President of the United States Soccer Foundation but continues to serve as a Director of the AES Corporation, one of the world's largest global power companies, since 2004.
While Mr. Koskinen will remain on the American Capital Board, he will not participate in any American Capital investments involving Freddie Mac (FRE:$0.3322,$0.0622,23.04%) securities, including its affiliate American Capital Agency Corp. (AGNC:$16.39,00$-0.38,00-2.27%) .
ABOUT AMERICAN CAPITAL
American Capital, with $20 billion in capital resources under management(1), is the only private equity fund and the largest alternative asset management company in the S&P 500. American Capital, both directly and through its global asset management business, originates, underwrites and manages investments in private equity, leveraged finance, real estate and structured products. American Capital and its affiliates invest from $5 million to $800 million per company in North America and euro 5 million to euro 500 million per company in Europe. American Capital was founded in 1986 and currently has 12 offices in the U.S. and Europe.
As of August 31, 2008, American Capital shareholders have enjoyed a total return of 292% since the Company's IPO -- an annualized return of 13%, assuming reinvestment of dividends. American Capital has paid a total of $2.5 billion in dividends and paid or declared $29.25 dividends per share since going public in August 1997 at $15 per share.
Companies interested in learning more about American Capital's flexible financing should contact Mark Opel, Senior Vice President, Business Development, at (800) 248-9340, or visit http://www.AmericanCapital.com or http://www.EuropeanCapital.com.
Performance data quoted above represents past performance of American Capital. Past performance does not guarantee future results and the investment return and principal value of an investment in American Capital will likely fluctuate. Consequently, an investor's shares, when sold, may be worth more or less than their original cost. Additionally, American Capital's current performance may be lower or higher than the performance data quoted above.
This press release contains forward-looking statements. The statements regarding expected results of American Capital are subject to various factors and uncertainties, including the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions, or changes in the conditions of the industries in which American Capital has made investments.
(1) Capital resources under management is internally and externally
managed assets and available capital resources as of June 30, 2008.
SOURCE American Capital, Ltd.
Try not to chase later...GLTY!
U.S. 30-year mortgage rates fall in latest week
09/18 10:54 AM
WASHINGTON, Sept 18 (Reuters) - U.S. 30-year mortgage rates fell slightly in the latest week, according to a survey released on Thursday by home funding company Freddie Mac (FRE:$0.3591,$0.0891,33.00%) .
U.S. 30-year mortgage rates dropped to an average of 5.78 percent from 5.93 percent last week, while 15-year mortgages dipped to an average of 5.35 percent from 5.54 percent last week.
One-year adjustable rate mortgages, or ARMs, also fell in the week to an average of 5.03 percent from 5.21 percent last week.
Freddie Mac (FRE:$0.3591,$0.0891,33.00%) said the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 5.67 percent compared with 5.87 percent a week earlier.
A year ago, 30-year mortgage rates averaged 6.34 percent, 15-year mortgages 5.98 percent and the one-year ARM 5.65 percent. The 5/1 ARM averaged 6.21 percent.
For the fifth week in a row, 30-year mortgage rates have fallen, totaling a 0.75 percent drop.
"As a result, mortgage applications surged nearly 58 percent since Aug. 15, largely led by a 122 percent gain in applications for refinancing, according to the Mortgage Bankers Association," said Frank Nothaft, Freddie Mac (FRE:$0.3591,$0.0891,33.00%) vice president and chief economist, in a statement.
"The MBA also reports that fixed-rate mortgages are currently the predominant choice among homebuyers and families looking to refinance," he added. "Over the first two weeks of September, 95 percent of new applications were for fixed-rate mortgages."
Nothaft noted that applications for ARMs have fallen by almost 50 percent since the end of 2007.
Lenders charged an average of 0.6 percent in fees and points on 30-year mortgages and the 5/1 ARM, both unchanged from last week.
Fees and points also averaged 0.6 percent on 15-year mortgages, up from 0.5 percent last week. The one-year ARM fees were 0.5 percent, down from 0.6 percent a week ago.
Freddie Mac (FRE:$0.3591,$0.0891,33.00%) is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio.
(Reporting by Jasmin Melvin)
U.S. 30-year mortgage rates fall in latest week
09/18 10:54 AM
WASHINGTON, Sept 18 (Reuters) - U.S. 30-year mortgage rates fell slightly in the latest week, according to a survey released on Thursday by home funding company Freddie Mac (FRE:$0.3591,$0.0891,33.00%) .
U.S. 30-year mortgage rates dropped to an average of 5.78 percent from 5.93 percent last week, while 15-year mortgages dipped to an average of 5.35 percent from 5.54 percent last week.
One-year adjustable rate mortgages, or ARMs, also fell in the week to an average of 5.03 percent from 5.21 percent last week.
Freddie Mac (FRE:$0.3591,$0.0891,33.00%) said the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 5.67 percent compared with 5.87 percent a week earlier.
A year ago, 30-year mortgage rates averaged 6.34 percent, 15-year mortgages 5.98 percent and the one-year ARM 5.65 percent. The 5/1 ARM averaged 6.21 percent.
For the fifth week in a row, 30-year mortgage rates have fallen, totaling a 0.75 percent drop.
"As a result, mortgage applications surged nearly 58 percent since Aug. 15, largely led by a 122 percent gain in applications for refinancing, according to the Mortgage Bankers Association," said Frank Nothaft, Freddie Mac (FRE:$0.3591,$0.0891,33.00%) vice president and chief economist, in a statement.
"The MBA also reports that fixed-rate mortgages are currently the predominant choice among homebuyers and families looking to refinance," he added. "Over the first two weeks of September, 95 percent of new applications were for fixed-rate mortgages."
Nothaft noted that applications for ARMs have fallen by almost 50 percent since the end of 2007.
Lenders charged an average of 0.6 percent in fees and points on 30-year mortgages and the 5/1 ARM, both unchanged from last week.
Fees and points also averaged 0.6 percent on 15-year mortgages, up from 0.5 percent last week. The one-year ARM fees were 0.5 percent, down from 0.6 percent a week ago.
Freddie Mac (FRE:$0.3591,$0.0891,33.00%) is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio.
(Reporting by Jasmin Melvin)
Posted by: roiresearch Date: Thursday, September 18, 2008 9:27:58 AM
In reply to: None Post # of 2865
Central banks' $180 billion deal
Fed and others will pump billions into markets to soothe global financial upheaval.
NEW YORK (CNN) -- Central banks around the world are pumping billions of dollars into money markets in a coordinated bid to calm global financial upheaval.
The package of up to $247 billion comes from the U.S. Federal Reserve, the European Central Bank, the Swiss National Bank, the Bank of England, the Bank of Canada and the Bank of Japan.
The injection of cash, which amounts to an expansion of up to $180 billion in available funds, is an effort to fuel economic activity. An agreement was reached earlier this year to provide $67 billion.
With major financial and insurance institutions teetering, commercial banks have tightened their lending policies and increased interest rates, taking billions of dollars out of the economy.
Under the plan, the European Central Bank will inject up to $110 billion, the Swiss National Bank up to $27 billion, the Bank of Japan up to $60 billion, the Bank of England up to $40 billion and the Bank of Canada up to $10 billion.
"We're very grateful that the rescue package has been put on the table, because frankly the world's inter-bank markets are just simply not working in the manner that they should do," said David Buik of the BGC Partners brokerage firm in London.
"There's a wholesale mistrust ... amongst everybody." "It is essential that the central banks do stand there and massage the trust back into action," Buik said. "Without them, we would be in unbelievably uncontrollable turmoil."
Markets react
Britain's Lloyds TSB has announced a $22 billion deal to take over struggling HBOS, the UK's biggest mortgage lender. The government said it would facilitate the deal by overriding anti-monopoly regulations.
News of the central banks' plan cheered stock markets in Europe, with Britain's FTSE-100 up nearly 1.9%, Germany's DAX up nearly 1.5% and France's CAC 40 index up 1.6%. Russia's main stock exchanges suspended trading for a second consecutive day as the government tried to stop plunging in share prices and restore confidence.
Hong Kong's Hang Seng sank more than 7% at one point on Thursday, but closed flat as Asia shares staged an afternoon comeback to partially recoup losses.
On Wednesday, the Dow Jones industrials tumbled 449 points -- its second worst day of the year, but only the second worst day this week. The Nasdaq and the S&P also suffered drops of more than 4%.
The sell-off came in the wake of investment bank Lehman Brothers' (LEH, Fortune 500) bankruptcy, Merrill Lynch (MER, Fortune 500)'s sale to Bank of America (BAC, Fortune 500), and the U.S. government announcing an $85 billion plan to bail out insurance giant American International Group (AIG, Fortune 500) (AIG).
American financial investor Jim Rogers told CNN: "It's going to get worse. There are going to be more bankruptcies. There's going to be a big cleanout in the financial system."
"It's a complete collapse of confidence," Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong, told The Associated Press. "The financial crisis in the U.S. is hitting everyone, everyone is running for cover. If the largest insurance company can fail, than no one is safe."
Bank deals
The remaining two Wall Street investment banks were hit particularly hard on Wednesday with Morgan Stanley (MS, Fortune 500) down 29% and Goldman Sachs (GS, Fortune 500) down 21%. (Full story)
British bank Barclays said it had reached a deal Wednesday to purchase key units of U.S. investment bank Lehman Brothers for $1.75 billion. The deal came just two days after Barclays walked away from talks to buy the beleaguered financial institution in its entirety.
Barclays will acquire Lehman's North American investment banking and capital markets businesses for $250 million in cash. Barclays will also purchase Lehman's New York headquarters and two data centers in New Jersey at their current market value estimated at $1.5 billion, a company statement said. To top of page
First Published: September 18, 2008: 7:35 AM EDT
Posted by: roiresearch Date: Thursday, September 18, 2008 9:27:58 AM
In reply to: None Post # of 2865
Central banks' $180 billion deal
Fed and others will pump billions into markets to soothe global financial upheaval.
NEW YORK (CNN) -- Central banks around the world are pumping billions of dollars into money markets in a coordinated bid to calm global financial upheaval.
The package of up to $247 billion comes from the U.S. Federal Reserve, the European Central Bank, the Swiss National Bank, the Bank of England, the Bank of Canada and the Bank of Japan.
The injection of cash, which amounts to an expansion of up to $180 billion in available funds, is an effort to fuel economic activity. An agreement was reached earlier this year to provide $67 billion.
With major financial and insurance institutions teetering, commercial banks have tightened their lending policies and increased interest rates, taking billions of dollars out of the economy.
Under the plan, the European Central Bank will inject up to $110 billion, the Swiss National Bank up to $27 billion, the Bank of Japan up to $60 billion, the Bank of England up to $40 billion and the Bank of Canada up to $10 billion.
"We're very grateful that the rescue package has been put on the table, because frankly the world's inter-bank markets are just simply not working in the manner that they should do," said David Buik of the BGC Partners brokerage firm in London.
"There's a wholesale mistrust ... amongst everybody." "It is essential that the central banks do stand there and massage the trust back into action," Buik said. "Without them, we would be in unbelievably uncontrollable turmoil."
Markets react
Britain's Lloyds TSB has announced a $22 billion deal to take over struggling HBOS, the UK's biggest mortgage lender. The government said it would facilitate the deal by overriding anti-monopoly regulations.
News of the central banks' plan cheered stock markets in Europe, with Britain's FTSE-100 up nearly 1.9%, Germany's DAX up nearly 1.5% and France's CAC 40 index up 1.6%. Russia's main stock exchanges suspended trading for a second consecutive day as the government tried to stop plunging in share prices and restore confidence.
Hong Kong's Hang Seng sank more than 7% at one point on Thursday, but closed flat as Asia shares staged an afternoon comeback to partially recoup losses.
On Wednesday, the Dow Jones industrials tumbled 449 points -- its second worst day of the year, but only the second worst day this week. The Nasdaq and the S&P also suffered drops of more than 4%.
The sell-off came in the wake of investment bank Lehman Brothers' (LEH, Fortune 500) bankruptcy, Merrill Lynch (MER, Fortune 500)'s sale to Bank of America (BAC, Fortune 500), and the U.S. government announcing an $85 billion plan to bail out insurance giant American International Group (AIG, Fortune 500) (AIG).
American financial investor Jim Rogers told CNN: "It's going to get worse. There are going to be more bankruptcies. There's going to be a big cleanout in the financial system."
"It's a complete collapse of confidence," Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong, told The Associated Press. "The financial crisis in the U.S. is hitting everyone, everyone is running for cover. If the largest insurance company can fail, than no one is safe."
Bank deals
The remaining two Wall Street investment banks were hit particularly hard on Wednesday with Morgan Stanley (MS, Fortune 500) down 29% and Goldman Sachs (GS, Fortune 500) down 21%. (Full story)
British bank Barclays said it had reached a deal Wednesday to purchase key units of U.S. investment bank Lehman Brothers for $1.75 billion. The deal came just two days after Barclays walked away from talks to buy the beleaguered financial institution in its entirety.
Barclays will acquire Lehman's North American investment banking and capital markets businesses for $250 million in cash. Barclays will also purchase Lehman's New York headquarters and two data centers in New Jersey at their current market value estimated at $1.5 billion, a company statement said. To top of page
First Published: September 18, 2008: 7:35 AM EDT
Posted by: Direstorm Date: Thursday, September 18, 2008 1:06:01 AM
In reply to: None Post # of 295
Statements of SEC Chairman Christopher Cox and Enforcement Division Director Linda Thomsen Regarding Immediate Commission Actions to Combat Market Manipulation
FOR IMMEDIATE RELEASE
2008-209
Washington, D.C., Sept. 17, 2008 — Securities and Exchange Commission Chairman Christopher Cox and SEC Enforcement Division Director Linda Chatman Thomsen issued the following statements today concerning ongoing and forthcoming Commission actions to investigate fraud and manipulation in the nation's securities markets:
"Millions of investors entrust their savings to our securities markets because they can be confident that our markets are orderly, liquid, efficient, and rational," said Chairman Cox. "The turmoil in today's markets, particularly in the financial sector, is challenging that assumption for ordinary Americans. Markets are the best tool a free society has to price and allocate assets across a complex economy, but as is well known from experience, sometimes the wisdom of crowds is supplanted by crowd behavior. We need well-functioning markets to help us draw the line between reasonable miscalculation and error or something worse involving the failure of due diligence, self-dealing, and conflicts of interest. It is thus vitally important that the market mechanism continue to inspire investor confidence.
"In order to ensure that hidden manipulation, illegal naked short selling, or illegitimate trading tactics do not drive market behavior and undermine confidence, the SEC today took several actions to address short selling abuses," Chairman Cox continued. "In addition to these initiatives, which will take effect at 12:01 a.m. ET on Thursday, I am asking the Commission to consider on an emergency basis a new disclosure rule that will require hedge funds and other large investors to disclose their short positions. Prepared by the staffs of the Division of Investment Management and the Division of Corporation Finance, the new rule will be designed to ensure transparency in short selling. Managers with more than $100 million invested in securities would be required to promptly begin public reporting of their daily short positions. The managers currently report their long positions to the SEC."
Chairman Cox continued, "Director Thomsen and the Division of Enforcement will also expand their ongoing investigations by undertaking a series of additional enforcement measures against market manipulation. The Enforcement Division will obtain disclosure from significant hedge funds and other institutional traders of their past trading positions in specific securities. Those institutions will also be required immediately to secure all of their communication records in anticipation of subpoenas for these records."
SEC Director of Enforcement Linda Chatman Thomsen said, "The Enforcement Division has been investigating and will continue to investigate any suggestion of manipulative trading. We are committed to using every weapon in our arsenal to combat market manipulation that threatens investors and capital markets."
The Commission is actively considering additional actions as appropriate.
Posted by: Direstorm Date: Thursday, September 18, 2008 1:06:01 AM
In reply to: None Post # of 295
Statements of SEC Chairman Christopher Cox and Enforcement Division Director Linda Thomsen Regarding Immediate Commission Actions to Combat Market Manipulation
FOR IMMEDIATE RELEASE
2008-209
Washington, D.C., Sept. 17, 2008 — Securities and Exchange Commission Chairman Christopher Cox and SEC Enforcement Division Director Linda Chatman Thomsen issued the following statements today concerning ongoing and forthcoming Commission actions to investigate fraud and manipulation in the nation's securities markets:
"Millions of investors entrust their savings to our securities markets because they can be confident that our markets are orderly, liquid, efficient, and rational," said Chairman Cox. "The turmoil in today's markets, particularly in the financial sector, is challenging that assumption for ordinary Americans. Markets are the best tool a free society has to price and allocate assets across a complex economy, but as is well known from experience, sometimes the wisdom of crowds is supplanted by crowd behavior. We need well-functioning markets to help us draw the line between reasonable miscalculation and error or something worse involving the failure of due diligence, self-dealing, and conflicts of interest. It is thus vitally important that the market mechanism continue to inspire investor confidence.
"In order to ensure that hidden manipulation, illegal naked short selling, or illegitimate trading tactics do not drive market behavior and undermine confidence, the SEC today took several actions to address short selling abuses," Chairman Cox continued. "In addition to these initiatives, which will take effect at 12:01 a.m. ET on Thursday, I am asking the Commission to consider on an emergency basis a new disclosure rule that will require hedge funds and other large investors to disclose their short positions. Prepared by the staffs of the Division of Investment Management and the Division of Corporation Finance, the new rule will be designed to ensure transparency in short selling. Managers with more than $100 million invested in securities would be required to promptly begin public reporting of their daily short positions. The managers currently report their long positions to the SEC."
Chairman Cox continued, "Director Thomsen and the Division of Enforcement will also expand their ongoing investigations by undertaking a series of additional enforcement measures against market manipulation. The Enforcement Division will obtain disclosure from significant hedge funds and other institutional traders of their past trading positions in specific securities. Those institutions will also be required immediately to secure all of their communication records in anticipation of subpoenas for these records."
SEC Director of Enforcement Linda Chatman Thomsen said, "The Enforcement Division has been investigating and will continue to investigate any suggestion of manipulative trading. We are committed to using every weapon in our arsenal to combat market manipulation that threatens investors and capital markets."
The Commission is actively considering additional actions as appropriate.
How's life been, lady? I see you are still at it, glad you could be a part of this. GLTY!
http://www.foxbusiness.com/story/markets/claman-sec-announce-new-short-selling-rules/
Wednesday, September 17, 2008
SEC Announces New Short-Selling Rules
Securities & Exchange Commission announced new trading rules Wednesday to curb the use of what's known as "naked" short selling.
This was first reported by FOX Business's Liz Claman.
Naked short selling is a Wall Street maneuver where a trader “shorts” a stock, or bets that a stock will go down in price, without borrowing the shares immediately first. Traditional short selling requires borrowing the shares before selling them. Naked shorts can usually push a stock's price lower than a traditional short can.
According to the rules instituted by the SEC, short sellers now must deliver the securities to the borrower by the end of business within three business days or face penalties that might included banning from further short sales of that same security.
The SEC issued a temporary ban on naked short selling on specific stocks that included Fannie Mae (FNM: 0.43, -0.05, -10.41%) and Freddie Mac(FRE: 0.27, +0.01, +3.84%) along with 17 investment banks. These rules now apply to all stocks and industries as of 12:01 a.m. ET on Thursday.
"These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling," said SEC Chairman Christopher Cox in a statement.
Naked short selling became much more common after the SEC eliminated a regulation known as the “uptick” rule on July 6 of last year.
Many companies, notably companies in the financial industry, have complained that without the “uptick” rule, their companies’ stocks can fall dramatically--commonly called a “bear run.”
http://www.foxbusiness.com/story/markets/claman-sec-announce-new-short-selling-rules/
Wednesday, September 17, 2008
SEC Announces New Short-Selling Rules
Securities & Exchange Commission announced new trading rules Wednesday to curb the use of what's known as "naked" short selling.
This was first reported by FOX Business's Liz Claman.
Naked short selling is a Wall Street maneuver where a trader “shorts” a stock, or bets that a stock will go down in price, without borrowing the shares immediately first. Traditional short selling requires borrowing the shares before selling them. Naked shorts can usually push a stock's price lower than a traditional short can.
According to the rules instituted by the SEC, short sellers now must deliver the securities to the borrower by the end of business within three business days or face penalties that might included banning from further short sales of that same security.
The SEC issued a temporary ban on naked short selling on specific stocks that included Fannie Mae (FNM: 0.43, -0.05, -10.41%) and Freddie Mac(FRE: 0.27, +0.01, +3.84%) along with 17 investment banks. These rules now apply to all stocks and industries as of 12:01 a.m. ET on Thursday.
"These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling," said SEC Chairman Christopher Cox in a statement.
Naked short selling became much more common after the SEC eliminated a regulation known as the “uptick” rule on July 6 of last year.
Many companies, notably companies in the financial industry, have complained that without the “uptick” rule, their companies’ stocks can fall dramatically--commonly called a “bear run.”
(yawn)
2nd UPDATE: SEC Tightens Short-Sale Rules With Firm Close-Out
09/17 02:22 PM
(Adds details on restrictions in third paragraph, and background on previous tick-test restrictions and the SEC's emergency order in the tenth and 11th paragraphs. Also adds reaction from bankers' group in eighth and ninth paragraphs and from hedge fund group at end.)
By Judith Burns
Of DOW JONES NEWSWIRES
WASHINGTON ()--The Securities and Exchange Commission announced measures Wednesday to curb abusive "naked short sales" by imposing a firm close- out requirement on short sellers and their brokers.
Short sellers and brokers must deliver securities borrowed for short sales on the trade settlement date, three days after the transaction, or face penalties if they do not, the SEC said.
The tighter delivery requirement was adopted by the SEC as an interim final rule, an unusual step for federal regulators, and will take effect for all public-company securities starting at 12:01 a.m. EDT Thursday. Brokers acting on behalf of customers who violate the new close-out requirement will be barred from further short sales in the affected stock for any customer unless the shares are located and borrowed in advance, the SEC said.
Additionally, the SEC finalized two other changes it previously proposed. One eliminates an exception from the close-out requirements for options market makers, making them subject to the same rules as everyone else. Regulators said that change will take effect five days after it is published in the Federal Register.
The SEC also approved a new anti-fraud rule targeted to short sellers who lie about their ability to deliver borrowed securities, which the SEC said takes effect immediately.
Short sellers aim to profit from declining stock prices by borrowing shares to sell and replacing them later at a lower price. So-called "naked" short sellers do not borrow shares before engaging in short sales and may never do so, a practice that can have punishing effects on a stock's price.
SEC Chairman Christopher Cox said in a statement that the changes "make it crystal clear that the SEC has zero tolerance for abusive naked short selling."
The American Bankers Association said it strongly supports the SEC's actions and the "aggressive" timetable for stricter delivery requirements, saying it has advocated for such changes since early July.
"In recent weeks, this unlawful manipulation of stock prices has resulted in precipitous drops in stock prices, extremely high trading volumes, and huge spikes in failures to deliver among our publicly traded member banks and bank holding companies," the ABA said in a statement.
SEC critics may not be satisfied with the changes, which do not call for reviving "tick test" restrictions outlawed by the SEC last year after a lengthy experiment. The Depression-era restrictions ban short sales unless prices are moving higher; the SEC concluded that they had little effect and weren't needed any longer. Wachtell, Lipton, Rosen & Kaz, a New York law firm, has called for the SEC to reimpose the uptick rule, and did so again this week.
The changes are the latest in a series of actions the SEC has taken to attack short-selling abuses. A temporary emergency order issued this summer required borrowing shares in advance of short sales in 19 financial stocks, including federal housing-finance giants Fannie Mae (FNM) and Freddie Mac (FRE), and U.S. Treasury securities dealers, chiefly Wall Street firms. After the order expired, Cox promised the SEC would look to extend similar protections market-wide.
The SEC's short-sale initiatives predate the current market turmoil. The agency adopted a package of reforms known as Regulation SHO in 2004 to tighten delivery requirements for short-sale trades. Among other things, the rule requires delivery failures in hard-to-borrow "threshold" securities to be closed out within 13 days. Option market makers were excluded from the stricter delivery requirements, however.
Option market makers balked at a 2007 SEC proposal to eliminate the exception, but the SEC reissued it in July after its economists found that many failures to deliver borrowed stocks were due to the option-market maker exception.
Although option market makers have warned that market liquidity could suffer if they are subject to stricter stock delivery requirements, SEC commissioners appear to have put those concerns aside and opted to treat option market makers like other market participants.
The new anti-fraud rule, proposed in March, expressly targets fraudulent short sales. Since the SEC already has broad anti-fraud powers, "whether they actually needed to do a rule is debatable," said Larry Bergmann, a special counsel at the law firm of Willkie, Farr & Gallagher LLP, in Washington, D.C., and former senior associate director in the SEC division that oversees trading and markets.
The Coalition of Private Investment Companies, whose members include hedge funds, praised the new anti-fraud rule, saying it sends "a strong signal to market participants that providing false information about stock borrowing will be dealt with harshly."
In a prepared statement, CPIC Chairman James Chanos, founder and president of Kynikos Associates, a New York firm known for short selling, called the changes "tough and balanced."
While Chanos endorsed having stock deliveries occur within three days of a trade settlement, he expressed concern that the change could have "unintended consequences" and urged the SEC to carefully monitor any fallout. Chanos also questioned the need to have the new rule take effect without any advance notice or public comment period.
-By Judith Burns, Dow Jones Newswires, 202-862-6692; Judith.Burns@dowjones.com
2nd UPDATE: SEC Tightens Short-Sale Rules With Firm Close-Out
09/17 02:22 PM
(Adds details on restrictions in third paragraph, and background on previous tick-test restrictions and the SEC's emergency order in the tenth and 11th paragraphs. Also adds reaction from bankers' group in eighth and ninth paragraphs and from hedge fund group at end.)
By Judith Burns
Of DOW JONES NEWSWIRES
WASHINGTON ()--The Securities and Exchange Commission announced measures Wednesday to curb abusive "naked short sales" by imposing a firm close- out requirement on short sellers and their brokers.
Short sellers and brokers must deliver securities borrowed for short sales on the trade settlement date, three days after the transaction, or face penalties if they do not, the SEC said.
The tighter delivery requirement was adopted by the SEC as an interim final rule, an unusual step for federal regulators, and will take effect for all public-company securities starting at 12:01 a.m. EDT Thursday. Brokers acting on behalf of customers who violate the new close-out requirement will be barred from further short sales in the affected stock for any customer unless the shares are located and borrowed in advance, the SEC said.
Additionally, the SEC finalized two other changes it previously proposed. One eliminates an exception from the close-out requirements for options market makers, making them subject to the same rules as everyone else. Regulators said that change will take effect five days after it is published in the Federal Register.
The SEC also approved a new anti-fraud rule targeted to short sellers who lie about their ability to deliver borrowed securities, which the SEC said takes effect immediately.
Short sellers aim to profit from declining stock prices by borrowing shares to sell and replacing them later at a lower price. So-called "naked" short sellers do not borrow shares before engaging in short sales and may never do so, a practice that can have punishing effects on a stock's price.
SEC Chairman Christopher Cox said in a statement that the changes "make it crystal clear that the SEC has zero tolerance for abusive naked short selling."
The American Bankers Association said it strongly supports the SEC's actions and the "aggressive" timetable for stricter delivery requirements, saying it has advocated for such changes since early July.
"In recent weeks, this unlawful manipulation of stock prices has resulted in precipitous drops in stock prices, extremely high trading volumes, and huge spikes in failures to deliver among our publicly traded member banks and bank holding companies," the ABA said in a statement.
SEC critics may not be satisfied with the changes, which do not call for reviving "tick test" restrictions outlawed by the SEC last year after a lengthy experiment. The Depression-era restrictions ban short sales unless prices are moving higher; the SEC concluded that they had little effect and weren't needed any longer. Wachtell, Lipton, Rosen & Kaz, a New York law firm, has called for the SEC to reimpose the uptick rule, and did so again this week.
The changes are the latest in a series of actions the SEC has taken to attack short-selling abuses. A temporary emergency order issued this summer required borrowing shares in advance of short sales in 19 financial stocks, including federal housing-finance giants Fannie Mae (FNM) and Freddie Mac (FRE), and U.S. Treasury securities dealers, chiefly Wall Street firms. After the order expired, Cox promised the SEC would look to extend similar protections market-wide.
The SEC's short-sale initiatives predate the current market turmoil. The agency adopted a package of reforms known as Regulation SHO in 2004 to tighten delivery requirements for short-sale trades. Among other things, the rule requires delivery failures in hard-to-borrow "threshold" securities to be closed out within 13 days. Option market makers were excluded from the stricter delivery requirements, however.
Option market makers balked at a 2007 SEC proposal to eliminate the exception, but the SEC reissued it in July after its economists found that many failures to deliver borrowed stocks were due to the option-market maker exception.
Although option market makers have warned that market liquidity could suffer if they are subject to stricter stock delivery requirements, SEC commissioners appear to have put those concerns aside and opted to treat option market makers like other market participants.
The new anti-fraud rule, proposed in March, expressly targets fraudulent short sales. Since the SEC already has broad anti-fraud powers, "whether they actually needed to do a rule is debatable," said Larry Bergmann, a special counsel at the law firm of Willkie, Farr & Gallagher LLP, in Washington, D.C., and former senior associate director in the SEC division that oversees trading and markets.
The Coalition of Private Investment Companies, whose members include hedge funds, praised the new anti-fraud rule, saying it sends "a strong signal to market participants that providing false information about stock borrowing will be dealt with harshly."
In a prepared statement, CPIC Chairman James Chanos, founder and president of Kynikos Associates, a New York firm known for short selling, called the changes "tough and balanced."
While Chanos endorsed having stock deliveries occur within three days of a trade settlement, he expressed concern that the change could have "unintended consequences" and urged the SEC to carefully monitor any fallout. Chanos also questioned the need to have the new rule take effect without any advance notice or public comment period.
-By Judith Burns, Dow Jones Newswires, 202-862-6692; Judith.Burns@dowjones.com
2nd UPDATE: SEC Tightens Short-Sale Rules With Firm Close-Out
09/17 02:22 PM
(Adds details on restrictions in third paragraph, and background on previous tick-test restrictions and the SEC's emergency order in the tenth and 11th paragraphs. Also adds reaction from bankers' group in eighth and ninth paragraphs and from hedge fund group at end.)
By Judith Burns
Of DOW JONES NEWSWIRES
WASHINGTON ()--The Securities and Exchange Commission announced measures Wednesday to curb abusive "naked short sales" by imposing a firm close- out requirement on short sellers and their brokers.
Short sellers and brokers must deliver securities borrowed for short sales on the trade settlement date, three days after the transaction, or face penalties if they do not, the SEC said.
The tighter delivery requirement was adopted by the SEC as an interim final rule, an unusual step for federal regulators, and will take effect for all public-company securities starting at 12:01 a.m. EDT Thursday. Brokers acting on behalf of customers who violate the new close-out requirement will be barred from further short sales in the affected stock for any customer unless the shares are located and borrowed in advance, the SEC said.
Additionally, the SEC finalized two other changes it previously proposed. One eliminates an exception from the close-out requirements for options market makers, making them subject to the same rules as everyone else. Regulators said that change will take effect five days after it is published in the Federal Register.
The SEC also approved a new anti-fraud rule targeted to short sellers who lie about their ability to deliver borrowed securities, which the SEC said takes effect immediately.
Short sellers aim to profit from declining stock prices by borrowing shares to sell and replacing them later at a lower price. So-called "naked" short sellers do not borrow shares before engaging in short sales and may never do so, a practice that can have punishing effects on a stock's price.
SEC Chairman Christopher Cox said in a statement that the changes "make it crystal clear that the SEC has zero tolerance for abusive naked short selling."
The American Bankers Association said it strongly supports the SEC's actions and the "aggressive" timetable for stricter delivery requirements, saying it has advocated for such changes since early July.
"In recent weeks, this unlawful manipulation of stock prices has resulted in precipitous drops in stock prices, extremely high trading volumes, and huge spikes in failures to deliver among our publicly traded member banks and bank holding companies," the ABA said in a statement.
SEC critics may not be satisfied with the changes, which do not call for reviving "tick test" restrictions outlawed by the SEC last year after a lengthy experiment. The Depression-era restrictions ban short sales unless prices are moving higher; the SEC concluded that they had little effect and weren't needed any longer. Wachtell, Lipton, Rosen & Kaz, a New York law firm, has called for the SEC to reimpose the uptick rule, and did so again this week.
The changes are the latest in a series of actions the SEC has taken to attack short-selling abuses. A temporary emergency order issued this summer required borrowing shares in advance of short sales in 19 financial stocks, including federal housing-finance giants Fannie Mae (FNM) and Freddie Mac (FRE), and U.S. Treasury securities dealers, chiefly Wall Street firms. After the order expired, Cox promised the SEC would look to extend similar protections market-wide.
The SEC's short-sale initiatives predate the current market turmoil. The agency adopted a package of reforms known as Regulation SHO in 2004 to tighten delivery requirements for short-sale trades. Among other things, the rule requires delivery failures in hard-to-borrow "threshold" securities to be closed out within 13 days. Option market makers were excluded from the stricter delivery requirements, however.
Option market makers balked at a 2007 SEC proposal to eliminate the exception, but the SEC reissued it in July after its economists found that many failures to deliver borrowed stocks were due to the option-market maker exception.
Although option market makers have warned that market liquidity could suffer if they are subject to stricter stock delivery requirements, SEC commissioners appear to have put those concerns aside and opted to treat option market makers like other market participants.
The new anti-fraud rule, proposed in March, expressly targets fraudulent short sales. Since the SEC already has broad anti-fraud powers, "whether they actually needed to do a rule is debatable," said Larry Bergmann, a special counsel at the law firm of Willkie, Farr & Gallagher LLP, in Washington, D.C., and former senior associate director in the SEC division that oversees trading and markets.
The Coalition of Private Investment Companies, whose members include hedge funds, praised the new anti-fraud rule, saying it sends "a strong signal to market participants that providing false information about stock borrowing will be dealt with harshly."
In a prepared statement, CPIC Chairman James Chanos, founder and president of Kynikos Associates, a New York firm known for short selling, called the changes "tough and balanced."
While Chanos endorsed having stock deliveries occur within three days of a trade settlement, he expressed concern that the change could have "unintended consequences" and urged the SEC to carefully monitor any fallout. Chanos also questioned the need to have the new rule take effect without any advance notice or public comment period.
-By Judith Burns, Dow Jones Newswires, 202-862-6692; Judith.Burns@dowjones.com
I was thinking the same thing...market down 300...
GREEN
I am seeing flashing lights, so it is not halted, GLTY!
You shouldn't mess with Uncle Sam...
I am trying to keep my enthusiasm contained, but it does make me happy. GLTA!!!(except shorts)