Author: robsfinance

Robert M. Franklin is a Houston, Texas native receiving his Bachelor of Science degree in Banking and Finance from Virginia's prestigious Hampton University. Mr.Franklin has spent parts of career with management consultancy, federal agency and a global financial institution. Robert has had past membership in the National Association of Securities Professionals and holds current memberships with the Young Professionals in Energy, Kappa Alpha Psi Fraternity Inc.

MTN Nigeria, CWG To Boost E-Commerce Payment

VENTURES AFRICA – MTN Nigeria has partnered with Computer Warehouse Group (CWG), a pan-African ICT company, to launch the MTN XaaS platform, an e-commerce solution designed for microfinance, savings and loans, cooperative and other small scale financial institutions.

The introduction of the mobile commerce platform is in line with the country’s financial sectors’ vision 2020 which aims to make financial services accessible to the banked and unbanked population in a cost effective manner, the statement read.

The mobile payment solution will empower banks and Mobile Money operators to roll out innovative mobile financial services to their numerous customers via mobile telephony, one of which is the just launched MTN Yellow Diamond Account.

According to CWG, payment solution, which includes electronic payments, is an important aspect of its growth story in the country and that there is potential growth in the payment solutions space in the banking and finance sector in the country.

MTN would jointly create a business model that would set new paradigms for mobile commerce, Group Managing Director of CWG, Mr. Austin Okere said.

The platform would enable millions of bank and mobile network customers to make cashless payments and settlements through their mobile phones, he added.

CWG is a leading player in the banking and financial sector while MTN is Nigeria’s largest telecom operator by subscriber base. (more…)

Grantham Says U.S. ‘Blue Chips’ Are Cheapest Stocks

By Sree Vidya Bhaktavatsalam

July 27 (Bloomberg) — Jeremy Grantham, chief investment strategist of Grantham Mayo Van Otterloo & Co., said shares in big U.S. companies are the best values and China’s economy could “come unhinged,” hurting emerging-markets stocks.

“The easy winner of the cheapest equity subcategory contest is still high-quality U.S. blue chips,” Grantham, who oversees about $78 billion, wrote in a quarterly letter posted today on the Boston-based firm’s Web site. “They were really trashed on a relative basis by the second-quarter rally in junk,” he said, without naming any companies he favors.

The Dow Jones Industrial Average of 30 industry-leading U.S. stocks rose 11 percent in the three months ended June 30, while the MSCI Emerging Markets Index jumped 34 percent. Emerging-market equities are “moderately overpriced,” wrote Grantham, 70.

GMO is studying China’s economy to assess its influence on stocks in other emerging markets, Grantham said.

Edward Chancellor, a member of GMO’s asset-allocation team, “strongly suspects that the Chinese economy is dangerously unbalanced and very likely to come unhinged in the next few quarters, surprising the pants off investors,” Grantham wrote.

Chinese stocks have surged to double their low set in 2008 as the government has unveiled a 4 trillion yuan ($585 billion) stimulus plan to revive growth in the world’s third-largest economy.

“Being pro-emerging market yet anti-China is a dilemma for us,” Grantham wrote. “We are working to resolve it.”

Report: Feds’ Wall Street assistance hits $4.7 trillion

neil baroskyBy JIM KUHNHENN Associated Press
July 20, 2009

WASHINGTON — The federal government has devoted $4.7 trillion to help the financial sector through its crisis, a watchdog report said Monday.

Under the worst of circumstances, the report said, the government’s maximum exposure could total nearly $24 trillion, or $80,000 for every American.

The figures are part of a tough new quarterly report to Congress from special inspector general Neil Barofsky, who accuses the Treasury Department of repeatedly failing to adopt recommendations aimed at making one component of the government financial rescue effort more accountable and transparent.

The $4.7 trillion commitment to the industry equals about one third of the overall U.S. economy and takes into account about 50 initiatives and programs set up since 2007 by the Bush and Obama administrations as well as by the Federal Reserve. Barofsky oversees one of the initiatives — the $700 billion Troubled Asset Relief Program.

Much of the government assistance is backed by collateral and Barofsky’s $23.7 trillion estimate represents the gross, not net, exposure that the government could face. No one has suggested that the full amount will be used.

Some repayments
Because of declining participation in short-term loan programs and because some infusions of money have been repaid, the maximum amount actually spent has declined to a current outstanding balance of $3 trillion, Barofsky said.

The agencies and the programs assisting the financial sector include a newly created Federal Housing Finance Agency, increased deposit insurance initiated by the Federal Deposit Insurance Corp., and 18 support programs created by the Fed under the special powers it can deploy to address a systemwide financial crisis.

Banks have cut back on their use of the Fed’s emergency lending program as well as other programs to ease credit stresses. Given that, the Fed has reduced the amount it will lend to financial institutions under two programs and it has decided to let a program to support money market mutual funds to expire as currently scheduled at the end of October.

Barofsky’s $23.7 trillion estimate represents the maximum exposure that the government would face if all eligible applicants requested the maximum assistance at the same time. It does not account for the fees and other costs that some of these programs charge and for the collateral that many of the programs require that participants provide.

“While quantity and quality of the assets backing all of these programs vary, ignoring that side of these programs misrepresents ‘potential exposure’ associated with them,” Treasury spokesman Andrew Williams said.

Barofsky says Treasury has accepted some of his recommendations for greater accountability, but says the department has not taken steps to require all TARP recipients to report on their actual use of funds. Barofsky says Treasury’s inaction means taxpayers have not been told what the financial institutions that have received assistance are doing with the money.

Testimony today
Barofsky’s conclusion is contained in a quarterly report to Congress and in testimony he is prepared to give today to the House Oversight and Government Reform Committee.

His report also says many of the banks that got federal aid to support increased lending have instead used some of the money to make investments, repay debts or buy other banks. However, roughly 80 percent of respondents, or 300 banks, also said at least some of the money had supported new lending.

California strikes deal on $26bn deficit

By Matthew Garrahan in Los Angeles

Published: July 21 2009
California took a step towards ending its long-running fiscal crisis late on Monday evening when Arnold Schwarzenegger, the governor, struck a provisional agreement with the state government to close a $26bn deficit.
Mr Schwarzenegger said that the deal would include new borrowing and spending cuts of around $15bn, but there would be no new tax increases.

“We accomplished a lot,” said Mr Schwarzenegger. “In this budget we make government more efficient and also we are cutting the waste, fraud and abuse in some of the programmes.”

The agreement could bring to an end a stalemate that has crippled California for months, to the alarm of the White House.

The state, the most populous in the US, has been forced to write thousands of IOUs to creditors. Its credit rating has been slashed to a couple of notches above “junk” status, giving it the worst rating in the country.

The preliminary agreement should bring some respite to California’s short term economic woes. However, the scale of the cuts is likely to intensify the social impact of the economic slump that is ravaging the state.

The agreement involves cutting nearly $6bn from schools and community colleges and close to $3bn from the state’s university system, although Mr Schwarzenegger said education cuts would be fully “refunded”.

An additional $1.3bn will be cut from Medi-Cal, the health programme for low earners and the poor.

CalWorks, the state’s welfare-to-work programme – and the target of much criticism from Mr Schwarzenegger – will have its funding cut by $528m, while Healthy Families, a programme that provides health insurance for 930,000 low-income children, will be cut by $124m.

The state’s in-home support services programme for the frail and disabled will also have its funding slashed. Mr Schwarzenegger has maintained that the system is a hot-bed of fraud abuses and won approval to begin fingerprinting care-givers and recipients of aid.

Another contentious part of the agreement will clear the way for oil drilling to resume off the coast of Santa Barbara. The prospect of drilling in the area has attracted a lot of criticism and is likely to be fiercely contested by local residents and environmental campaigners.

Karen Bass, the Democratic speaker of the California assembly, said the deficit had been closed in a “responsible manner”.

“During this time of economic recession… people need a safety net,” she said. “We did not eliminate the safety net.”

But Darrell Steinberg, the Democratic Senate leader, was more downbeat. ”There isn’t a whole lot of good news in this budget,” he said.

The deal represents a victory of sorts for Mr Schwarzenegger, who made reform of California’s government a condition of any deal.

Mr Schwarzenegger has faced criticism for refusing to budge during the course of negotiations, but told the Financial Times recently that he was not playing a high-stakes game of chicken. “This is not about who blinks first,” he said.

Unemployment in California is running at more than 11.5 per cent, higher than the national average, while businesses are leaving the state, lured by more appealing tax regimes in states such as Colorado and Texas.
Copyright The Financial Times Limited 2009

CIT and advisers hunt for funding

By Henny Sender and Saskia Scholtes in New York

Published: July 17 2009 20:15 | Last updated: July 17 2009 20:15

CIT Group and its advisers continued a two-track effort to stave off bankruptcy as JPMorgan tried to raise a cash infusion of $3bn for the embattled lender while bondholders considered either a debt-for-debt or a debt-for-equity exchange offer.

With a funding bridge in place, CIT would then go back to US regulators and ask for permission to transfer more of its assets to its bank subsidiary, people familiar with the case say.

As investors are being approached to contribute to the new facility, they are also being asked about their appetite to be part of any debtor-in-possession financing in case CIT files for bankruptcy protection.

Among banks that would likely participate in any DIP financing are JPMorgan, Goldman Sachs, Morgan Stanley and Barclays, people familiar with the matter say.

Other investors, including hedge funds, also expressed enthusiasm to participate in any DIP financing.

CIT would accumulate cash in the event of a filing, but advisers say that any additional DIP funds could be used to assure customers that the company could continue to make loans to meet their needs.

Both advisers and potential investors seemed slightly more optimistic about CIT’s prospects as the company moved to deal with its problems, following the refusal by regulators to provide additional support this week.

CIT has more than $30bn of unencumbered assets that could provide security for a new bridge financing. In most cases, companies are forced to file for Chapter 11 bankruptcy protection precisely because they lack assets that can be pledged against new borrowings. The company could also raise money by selling off some of its more attractive units, such as its factoring and vendor financing operations – in spite of the fact that CIT has balked at the low prices any sales would generate in the current market.

As late as Wednesday, advisers were confident that CIT would receive government support, if not actual cash.

Earlier this month, CIT was seeking cash from the Federal Reserve in exchange for assets, after being told that the Federal Deposit Insurance Corp would not support its request for loan guarantees.

But by this week, CIT was just seeking permission to move more into its bank subsidiary. It is not clear why the Fed withheld approval for such a move, because regulatory lawyers say such exemptions are routine.

At the time the Fed gave CIT permission to set up its bank last December, it described CIT as “adequately capitalised” while the bank itself was “well-capitalised”.

Meanwhile, CIT’s debt rallied on hopes that the company could reach an out-of-court agreement. Notes maturing in August gained 10 basis points in morning trading, according to Standard & Poor’s Leveraged Commentary and Data.
Copyright The Financial Times Limited 2009

Obama Stimulus Money to Flow as Jobless Await Results

hp5-13-09a
By Matthew Benjamin and Alison Fitzgerald

July 13 (Bloomberg) — David Oneglia was looking at the likelihood of layoffs at his construction company. Then he landed a contract funded by the federal stimulus program to repair roads and bridges on Connecticut’s Merritt Parkway.

The $67 million job and the 80 workers it employs has allowed Oneglia to maintain his current payroll. It doesn’t permit him to expand it.

“The work we’re getting is just keeping the people we have on our workforce day-to-day going,” said Oneglia, 57, president of Torrington, Connecticut-based O&G Industries Inc. “It won’t add anything.”

Even as money begins flowing to projects across the U.S. from the stimulus President Barack Obama signed in February, some lawmakers are questioning its value.

Bigger-than-forecast job losses pushed the June unemployment rate to a 26-year high of 9.5 percent after Obama promised to create or save 3.5 million jobs over two years. Republicans say that is proof the $787 billion measure isn’t working, while Democrats debate whether a second shot of spending is needed to pull out of a recession.

The rising unemployment rate has triggered concerns of a slower-than-anticipated recovery and driven stock prices and bond yields lower.

The Standard & Poor’s 500 dropped 1.9 percent last week to 879.13, the lowest level since May 1. The measure has now retreated 7.1 percent since June 12.

Bond Yields Fall

Yields on 10-year Treasury notes touched the lowest level in seven weeks as concern about a slow recovery drove investors toward the safety of U.S. debt. The benchmark 10-year note yield fell 20 basis points on the week, or 0.20 percentage point, to 3.30 percent, according to BGCantor Market Data. It was at 3.261 on July 10, the lowest since May 21.

Economists say it isn’t realistic to expect stimulus spending and tax cuts to revive the labor market and restore economic good times in just five months.

“Everyone always expects fiscal stimulus to immediately help out, but it never does,” said Allen Sinai, chief economist at New York’s Decision Economics Inc. “The bulk of the effects will come in 2010.”

So far, about $60 billion in spending and $43 billion in tax relief has hit the streets, accounting for 13 percent of the plan’s total. An additional $175 billion has been committed to specific uses.

Every state met the administration’s June 29 target for obligating at least half its highway money, said Elizabeth Oxhorn, a spokeswoman for Vice President Joe Biden. A report last week by the Government Accountability Office, Congress’s investigative arm, said the government is ahead of schedule in distributing stimulus money to the states.

Other Benefits

While attention focuses on infrastructure jobs, other stimulus steps, such as increased unemployment benefits, are pumping money into the economy. Food-stamp use jumped by $725 million to a record $4.5 billion in April, fueled by a $20 billion, five-year funding increase.

By design, much stimulus spending won’t happen for six to nine months, with many road and bridge projects expected to begin late this year or next. The Congressional Budget Office said 70 percent of the money will be spent by September 2010.

“The stimulus was backloaded, so there are a number of features that won’t kick in until next year,” said Richard Berner, co-head of global economics at Morgan Stanley in New York.

‘Bit Too Small’

With unemployment rising, calls are starting for another spurt of stimulus spending. Obama, who says the jobless rate will exceed 10 percent before turning for the better, has neither endorsed nor ruled out additional action.

Laura Tyson, an outside economic adviser to the White House, said last week an additional stimulus should be considered because the first one was “a bit too small.” Billionaire investor Warren Buffett told ABC News in a July 9 interview that more stimulus “may well be called for.”

Biden defended the program on July 9 in Ohio, expressing frustration with criticism that progress has been too slow.

“Remember, we’re only 140 days into this deal — it’s supposed to take 18 months,” Biden said. The stimulus is saving thousands of jobs each day, he said.

Still, Biden said on July 5 that the administration “misread the economy” in initial forecasts that underestimated the depth of the recession and overestimated the stimulus package’s impact.

It would be hard to move more quickly, said former House and Senate budget analyst Stan Collender.

‘Throwing $100 Bills’

“Short of standing on top of the Empire State Building throwing $100 bills out, I don’t know what they could do to get money out there faster than what they’re doing,” said Collender, managing director of Qorvis Communications in Washington.

The stimulus should be judged by how much money has been committed to projects because economic benefits start to appear as work begins, House Transportation Committee Chairman James Oberstar, a Minnesota Democrat, said on June 25.

In April, almost $61 million from the stimulus was designated to help pay for a $95 million laboratory building at the Energy Department’s Oak Ridge National Laboratory in Tennessee.

That let St. Louis-based McCarthy Building Cos. start work at least six months earlier than anticipated, Oak Ridge spokesman Michael Bradley said. While only $2.4 million has been paid through June, about 150 people are at work on the project, which is scheduled for completion in 2011, he said.

Savings Rate Rose

While stimulus tax cuts began showing up in paychecks across the country in April in the form of reduced withholding, the economic impact may be muted as consumers save more money. The personal savings rate in May rose to 6.9 percent, the highest since December 1993.

If spending eventually picks up, “reductions in withholding normally have a lag of two to four quarters before any of it begins to be spent in any clear way,” Sinai said.

Instead of focusing on unemployment to gauge the stimulus’s initial benefits, Moody’s Economy.com chief economist Mark Zandi said he will watch retail sales and initial unemployment claims, which he expects to improve in the next three months.

The unemployment rate isn’t the best measuring stick because “it significantly lags what’s going on in the economy,” said Zandi, who expects the jobless rate to peak at about 10.5 percent next spring.

Judging Effectiveness

Even some of the critics who say the stimulus was poorly designed, such as Douglas Holtz-Eakin, an adviser in Arizona Senator John McCain’s 2008 Republican presidential campaign, say unemployment isn’t the best way to judge its effectiveness now.

The stimulus’s biggest weakness is that it “won’t affect the economy’s primary problems, which are falling values of assets like homes and stocks,” Holtz-Eakin said.

Statements by economists that job growth may be slow to arrive hasn’t lessened public concern — or attacks by Republicans. The stimulus bill passed in February over unanimous opposition by House Republicans and got only three Republican votes in the Senate.

“People want their jobs,” House Republican Leader John Boehner of Ohio said on July 9. “They want to see the economy moving again, and they don’t see anything happening.”

Faster Recovery Sought

That’s the case for John da Silva, 33, an unemployed heavy- equipment operator in Litchfield, Connecticut.

Out of work since December, when he lost his $76,000-a-year job with Blue Bell, Pennsylvania-based Henkels and McCoy Inc., da Silva supports a stay-at-home wife and a daughter with respiratory ailments who requires frequent medical treatment.

“I felt that it would have funneled down a lot quicker than it has,” da Silva said of the recovery funds. “We need stimulus money for new big super-projects that are going to have guys working for a year or two. That’s not happening right now.”

The $150-a-week union check that supplemented da Silva’s unemployment benefits stopped coming on June 1. If not for union medical benefits, he said, “I would have been another statistic, with a foreclosure and a bankruptcy.”

Those benefits end in October. “Instead of getting better,” da Silva said, “it looks like things are getting worse.”

Tepid offers for BofA asset manager

6a00fa967ce23100020109d07d3ab1000e-500piBy Julie MacIntosh, Francesco Guerrera and Greg Farrell in New York

Published: July 1 2009 01:27 | Last updated: July 1 2009 01:27

Bank of America’s asset management business is drawing lukewarm bids now that BlackRock, once its likeliest suitor, has opted to pay $13.5bn for Barclays Global Investors, according to people close to the matter.

BofA is hoping to reap at least $3bn from a sale of Columbia Management, those people say, but bids so far have come in closer to $2bn.

To boost those results, BofA could consider dividing Columbia into twoand entertain separate offers for its large money market funds operation, which is less valuable to some bidders.

Many asset managers are shrinking or shutting their money market funds businesses, which operate on low margins and pose new legal and financial risks as a result of the banking crisis. A company with significant scale in money market funds, however, such as Federated Investors, could be willing to pay for those assets separately, allowing other bidders clearer access to the rest.

A decision on whether to split the business has not been made, and with several bidders interested in the entire operation, such a move may not be necessary if the pricing gap narrows.

Citigroup analysts said Columbia could be worth $2.5bn-$3.5bn as a multiple of net income, or about $3bn as a percentage of assets under management.

Bank of America had no comment on the matter.

BlackRock had been a leading candidate to buy the business, but its hands have become full, say people close to the situation. Chief executive Larry Fink said when he announced the $13.5bn BGI purchase two weeks ago he was “not doing any more transactions for the time being”.

Bankers say Columbia could draw interest from other large asset managers, such as Invesco, Oppenheimer or Franklin Templeton, which is considering the purchase of AIG’s asset management business, as well as insurance companies. Private equity investors initially looked at Columbia, but were later told the auction would be limited to strategic bidders.

Buy-out firms remain interested, however, in First Republic, the private bank and mortgage lender BofA is also attempting to sell. A group led by former bank executive Gerry Ford, which has included Blackstone, Carlyle, Oakhill and TPG, appears to have the highest degree of interest in the business, according to people close to the matter.

First Republic, if sold, could be priced at about its tangible book value, which people close to the business said ranged from $600m to $800m depending on how its assets were marked and the degree to which BofA agreed to share losses.

Interested buyers are hoping BofA will provide similar structured loss-sharing benefits to what the US government has provided in bank rescue deals.
Copyright The Financial Times Limited 2009