KeNo's Housing and Economic Portal: Friday September 2 Housing and Economic stories

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Not-for-Profit College Board Enriched by $660 Million as Fees Hit Students - (www.bloomberg.com) When Gaston Caperton was recruited to run the College Board, owner of the SAT entrance exam, he said he didn’t want to just run “a testing company.” Founded by Harvard and 11 other universities in 1900 to create a standardized test to admit students based on merit rather than family connections, the College Board by 1999 was facing cash-flow problems. Caperton turned the nonprofit company into a thriving business, more than doubling revenue to $660 million by boosting fees, expanding the Advanced Placement program and the sale of names of teenage test-takers to colleges. A former West Virginia governor, he persuaded 11 states to cover fees for a preliminary SAT in the 10th grade. Now, Caperton is planning to retire amid concern that the College Board’s improved revenue has come at the expense of students and their families, who pay hundreds of dollars in fees even before they apply to college, parents, admissions officials and high school counselors said. “The College Board is more interested in marketing and selling things than it is in its primary responsibility, promoting equity and educational opportunity,” said Ted O’Neill, who stepped down as admissions dean of the University of Chicago in 2009 and served on several College Board committees.

Citadel Followed Paulson, Fairholme in Pre-Rout Wager on Regions Financial - (www.bloomberg.com) Citadel LLC and Lansdowne Partners Ltd. boosted stakes in Regions Financial Corp. (RF) in the second quarter, mimicking earlier bets by hedge fund Paulson & Co., before the bank led this month’s rout in U.S. financial stocks. The three firms, along with Capital Research Global Investors,Fairholme Capital Management LLC and Arrowstreet Capital LP, held a total of $1.21 billion in shares of Birmingham, Alabama-based Regions as of June 30, according to the companies’ regulatory filings this month. Regions has plunged 25 percent this month through yesterday, leading a 16 percent slide in the 24-company KBW Bank Index through yesterday. The firm, whose results improved in the first and fourth quarters, drew investors with a stock “inexpensive versus its normalized earnings power,” said Thomas Brown, chief executive officer of Second Curve Capital LLC and a Bloomberg Television contributing editor. The situation changed this month when U.S. regional banks tumbled on concern they’ll be hardest hit by a slowing economy and extended low interest-rate environment, said Jefferson Harralson, an analyst at KBW Inc.

U.S. investigating S&P over mortgages: report - (www.reuters.com) The Justice Department is investigating whether Standard & Poor's improperly rated dozens of mortgage securities in the years before the financial crisis, The New York Times reported on Thursday, citing sources familiar with the matter. The investigation began before S&P, a unit of McGraw-Hill, downgraded the long-term U.S. debt from a AAA rating to AA-plus this month, the paper said. In the mortgage investigation, the Justice Department has been asking about instances in which S&P analysts wanted to assign lower ratings to mortgage bonds but may have been overruled by S&P business managers, the Times reported. Justice Department spokesman declined to comment on the story upon being contacted by Reuters. S&P did not immediately respond to phone calls seeking comment outside regular U.S. business hours.

Chavez Emptying Bank of England Vault as Venezuela Brings Back Gold Hoard - (www.bloomberg.com) Venezuelan President Hugo Chavez ordered the central bank to repatriate $11 billion of gold reserves held in developed nations’ institutions such as the Bank of England as prices for the metal rise to a record. Venezuela, which holds 211 tons of its 365 tons of gold reserves in U.S., European, Canadian and Swiss banks, will progressively return the bars to its central bank’s vault, Chavez said yesterday. JPMorgan Chase & Co. (JPM), Barclays Plc (BARC), and Standard Chartered Plc (STAN) also hold Venezuelan gold, he said. “We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” Chavez said yesterday on state television. “It’s a healthy decision.” Chavez, whose government depends on oil for 95 percent of its export revenue, is looking to diversify Venezuela’s cash reserves from U.S. and European banks to include investments in emerging markets including Brazil, China, India, Russia and South Africa, central bank President Nelson Merentes said yesterday. The world’s 15th-largest holder of gold is bringing back its gold after a 28 percent rally in the price this year.

Interbank Market Vulnerable to Collapse: Frisell - (www.bloomberg.com) Swedish banks must do more to prepare for a deterioration in Europe’s debt crisis that could freeze interbank markets and cut off funding, saidLars Frisell, chief economist at the country’s financial regulator. “It won’t take much for the interbank market to collapse,” Frisell, who is also a member of the Basel Committee for Banking Supervision, said yesterday in an interview in Stockholm. “It’s not that serious at the moment but it feels like it could very easily become that way and that everything will freeze.” Swedish policy makers have been pressing for the nation’s lenders to seek more permanent, longer-term funding after the financial crisis in 2008. Following the collapse of Lehman Brothers Holdings Inc., Sweden’s central bank provided liquidity peaking at $30 billion because the country’s banks weren’t able to borrow in the U.S. currency to repay short-term loans. While Swedish banks’ liquidity situation has improved since 2008, they still need to “do more” to raise the maturity of their financing, primarily the dollar funding, Frisell said. The banks have also said that their funding has become shorter in maturity because of reluctance from U.S. investors to lend long- term, he said.