KeNo's Housing and Economic Portal: Wednesday November 2 Housing and Economic stories

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BofA Said to Split Regulators Over Shifting Merrill Derivatives - (www.bloomberg.com) Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation. The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position. Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

Debt panic in China's Wenzhou may auger wider woes - (finance.yahoo.com) Wenzhou's private entrepreneurs, scrappy survivors in an economy ruled by state industries, once thrived on a formula of cheap backstreet loans and low-cost manufacturing. Now, they're at the center of what some have dubbed China's own subprime debt crisis, a festering mess of borrowings gone sour that has become one of the weakest links in the economy -- at a time when strength here is most needed to offset weakness in the U.S. and Europe. "Do anything, but not manufacturing in China!" exclaimed Yang Guanghua, boss of a Wenzhou electroplating factory. Unable to collect from customers who themselves have no money, Yang said he stopped paying salaries two months ago. "I can't get raw materials because suppliers are afraid I will run away," Yang said. "It's just impossible to get loans from the bank unless you have connections," he said.

France Risks Losing Top Grade as EFSF Bailout Fund Bulks Up: Euro Credit - (www.bloomberg.com) Proposals to beef up Europe’s bailout fund by offering to guarantee portions of the debt owed by the region’s weaker governments threaten to trash France’s top credit rating. The nation’s 10-year notes are the fourth-worst performers this quarter -- behind Greece, Belgium and Ireland -- as traders speculate the European Financial Stability Facility will be used to insure the first portion of losses in the event of a sovereign default. France’s rating is under pressure, Moody’s Investors Service said yesterday, and investors now demand a record 112 basis points more to hold its bonds rather than German notes, up from 29 basis points in April. “France is the key factor here,” said Bob McKee, chief economist at Independent Strategy Ltd. in London. “Offering insurance increases France’s contingent liability and that puts pressure on its rating. If France loses its AAA status, that in turn increases the pressure on Germany.”

Mayor Bloomberg makes a new threat to the protesters - (www.businessinsider.com) New York City Mayor Michael Bloomberg issued another veiled threat to the Occupy Wall Street protests, saying at a Queens press conference on Monday that “the Constitution doesn’t protect tents — it protects speech and assembly.” “I’m 100 percent in favor of protecting — 1,000 percent in favor — of giving people rights to say things, but also we have to protect those who don’t want to say anything,” he said according to Bloomberg News. “There are places where I think it’s appropriate to express yourself and then there are other places that are appropriate to set up a tent city, and they don’t necessarily have to be one and the same." Bloomberg said earlier this month that the protests would be allowed to continue as long as participants obeyed the law. Last week the protesters tried to interrupt Bloomberg's dinner at Cipriani to protest Bloomberg's plan to close Zuccotti Park for cleaning.

Bank Of America Reports Horrible Quarter For Trading And Banking - (www.businessinsider.com) A terribly opaque number. Bank of America's earnings report is out. This number stands out right away: Fixed Income, Currency and Commodities sales and trading revenues excluding DVA gains were $314 million, a decrease of $3.2 billion compared to the same quarter last year, due to lower client activity and adverse market conditions. Equities sales and trading revenues excluding DVA gains were $757 million, a decrease of $201 million primarily driven by lower trading revenue in equity derivatives. And this number looks pretty awful: Global Banking and Markets reported a net loss of $302 million, down from net income of $1.5 billion in the year-ago quarter. Pretax income was $727 million, down from $2.9 billion a year ago. Revenue declined 26 percent to $5.2 billion, primarily driven by lower sales and trading revenue and investment banking fees. Tax expense for the most recent period included a $774 million charge related to the U.K. tax rate change enacted during the quarter, which reduced the carrying value of the deferred tax assets.