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Freddie Mac's Acting CFO Found Dead - (www.cnbc.com) David Kellermann, acting chief financial officer of mortgage giant Freddie Mac, was found dead Wednesday in his suburban Virginia home, a Fairfax County police spokeswoman said. Police were called at 4:48 am New York time to Reston, Virginia, spokeswoman Lucy Caldwell told Reuters. Local media reported that Kellermann's wife called in an apparent suicide, but Caldwell did not elaborate on the cause of death. The incident is "under investigation," she said. According to Freddie Mac's website, Kellermann, 41, was with Freddie Mac for more than 16 years and named acting CFO in September. Freddie Mac and rival mortgage finance company Fannie Mae were taken over by the U.S. government last year as mounting losses on housing investments weakened their balance sheets and played a role in the U.S. housing and global credit crisis

Morgan Stanley's Loss Much Wider than Expected - (www.cnbc.com) Morgan Stanley sharply missed market expectations on Wednesday, posting a net loss of 57 cents per share in the first quarter. But its Tier 1 capital ratio was more than double the required limit, at 16.4 percent. Analysts surveyed by ThomsonReuters had expected the bank to post a loss of just 8 cents a share in the first quarter. Morgan Stanley reported a net income of $1.26 per share in the first quarter last year. Net revenue at Morgan Stanley was $3 billion in the first quarter, 62 percent below last year's similar period and lower than analyst estimates of about $5 billion. The results were negatively impacted by a $1.5 billion decrease in net revenue related to the tightening of its credit spreads on certain of its long-term debt, the bank said in a statement. It also said it had net losses of $1 billion on investments in real estate. Shares in Morgan Stanely, which also cut its dividend to 5 cents a share to boost its capital, fell by nearly 9 percent in pre-market trading.

Geithner Hints at High Bar In Letting Banks Repay Aid - (www.washingtonpost.com) Treasury Secretary Timothy F. Geithner said yesterday that the "ultimate test" for determining which banks can repay government bailout money is whether the entire financial system is capable of offering enough credit to revive the economy. Geithner's remarks indicate that regulators will require banks to meet high standards to get out from under the government's thumb. Industry and federal officials are bracing for a showdown over this issue beginning Friday when the chief financial officers of 19 of the nation's major banks will be summoned to the Federal Reserve and told the results of the government's "stress tests." This federal initiative is examining whether the firms have enough capital to continue lending if the economy significantly worsens. Senior administration officials say the tests may show that some banks need to raise more money or take additional government aid. But the banks say federal bailout money, which requires firms to restrict executive pay and submit to other limits, now carries a stigma. Several of the firms, such as J.P. Morgan Chase and Goldman Sachs, have been lobbying the government to be released from the bailout and have taken steps to repay the money.

Still-fuzzy rules dog Geithner's toxic-asset purchase plan - (www.latimes.com) The Treasury can't seem to unequivocally guarantee major investment firms that they won't be subject to executive-pay limitations if they partner with the government to buy banks’ toxic assets. That could be a deal-killer, because it’s inconceivable that giants such as Pimco and TCW Group in Southern California, and BlackRock Inc. in New York, would agree to pay cuts to participate in the program. The public-private investment plan, unveiled in March, calls for big money managers to invest alongside the government to buy banks’ troubled assets, such as mortgage-backed securities. Treasury Secretary Timothy F. Geithner envisions these partnerships buying up to $1 trillion of toxic debt to unburden banks. But unlike the government’s injections of capital into major banks, which were mandatory for the banks and came with strings attached (such as pay restrictions), money managers’ participation in the public-private investment plan would be voluntary. So how could the government tell the firms that they'd have to limit employees' pay, and still expect them to join in? It wouldn’t work, Geithner acknowledged last month, when he told reporters that federal compensation rules "will not apply to the asset managers and investors in the program."

How the U.S. Will Save GM and Chrysler - (www.washingtonpost.com) Negotiations over the government's bailout of Chrysler and General Motors have shifted into high gear in recent days, and from this point until the end of June, things are likely to get more tense and more complicated. My guess is that when it's all over, both companies will have been run through a quickie bankruptcy process and will emerge smaller, with less debt, a lower cost structure and Uncle Sam as the majority owner. The process is now being driven largely by Steven Rattner and Ron Bloom, the Obama administration's auto czars. Over the past month, they have laid down the parameters for talks among the companies; the United Auto Workers; the banks and bondholders; and, in the case of Chrysler, Italy's Fiat, which seeks to integrate Chrysler with its newly revived European operations. The Obama team understands that it will get only one good shot at a rescue and that if its plan doesn't work, the companies will be shut down and sold off in pieces. Its priorities are to minimize damage to an already weak economy, protect workers and pensioners, and get the government out of the deal as quickly as possible with all of its money back. The government has the upper hand here for the simple reason that all the parties know they would be better off with almost any restructuring that involves $40 billion of federal financing than with the normal bankruptcy process, which would almost certainly result in the liquidation of the companies. But the government's leverage has its limits. As a legal matter, if the plan tilts too much in favor of unionized workers, the bankers and bondholders can demand that the judge reject it, based on a bankruptcy law requirement that all unsecured creditors be treated equally. And as a political matter, a Democratic administration may be reluctant to ask a bankruptcy court to impose an overly onerous labor contract on an unwilling union.

Bank Profits Appear Out of Thin Air - (www.nytimes.com) This is starting to feel like amateur hour for aspiring magicians. Another day, another attempt by a Wall Street bank to pull a bunny out of the hat, showing off an earnings report that it hopes will elicit oohs and aahs from the market. Goldman Sachs, JPMorgan Chase, Citigroup and, on Monday, Bank of America all tried to wow their audiences with what appeared to be — presto! — better-than-expected numbers. But in each case, investors spotted the attempts at sleight of hand, and didn’t buy it for a second. With Goldman Sachs, the disappearing month of December didn’t quite disappear (it changed its reporting calendar, effectively erasing the impact of a $1.5 billion loss that month); JPMorgan Chase reported a dazzling profit partly because the price of its bonds dropped (theoretically, they could retire them and buy them back at a cheaper price; that’s sort of like saying you’re richer because the value of your home has dropped); Citigroup pulled the same trick. Bank of America sold its shares in China Construction Bank to book a big one-time profit, but Ken Lewis heralded the results as “a testament to the value and breadth of the franchise.” Sydney Finkelstein, the Steven Roth professor of management at the Tuck School of Business at Dartmouth College, also pointed out that Bank of America booked a $2.2 billion gain by increasing the value of Merrill Lynch’s assets it acquired last quarter to prices that were higher than Merrill kept them. “Although perfectly legal, this move is also perfectly delusional, because some day soon these assets will be written down to their fair value, and it won’t be pretty,” he said.

Four states dominate city foreclosure rankings - (www.msnbc.msn.com) The top 26 areas are in California, Florida, Arizona and Nevada. The 26 U.S. cities with the worst foreclosure problems are concentrated in four states — California, Florida, Arizona and Nevada, a report released Wednesday shows. The report on foreclosures for the first quarter by RealtyTrac Inc. found the highest foreclosure rates were found in Las Vegas, Merced, Calif. and the Cape Coral-Fort Myers area in Florida. Next on the list were the California metro areas of Stockton, Riverside, Modesto, Bakersfield and Vallejo-Fairfield. Rounding out the top 10 were Phoenix and Port St. Lucie, Fla. Outside of the four high-foreclosure states, the worst foreclosure rate was in Boise City, Idaho (No. 27) and Greeley, Colo. (No. 29).

OTHER STORIES:

Geithner Acknowledges US Fault in Crisis - (www.cnbc.com)
Refinancing Demand Boosts Mortgage Applications - (www.cnbc.com)
Boeing Profit Narrows as Economy Hits Orders - (www.cnbc.com)
AT&T Profit Beats Forecasts, Boosted by Wireless - (www.cnbc.com)
A Whiff of Revival in Northeast US Home Market - (www.cnbc.com)
The Latest Threat to Housing: Worsening Job Losses - (www.cnbc.com)
Billions More in Mortgage Aid? - (www.cnbc.com)

U.S. Stock Futures Retreat; Morgan Stanley, Capital One Fall - (www.bloomberg.com)
European Stocks Fluctuate; Asian Shares, U.S. Futures Decline - (www.bloomberg.com)
Oil hovers under $49 ahead of US inventory report - (finance.yahoo.com)
Base metals retreat while oil steadies - (www.ft.com)
Soaring U.S. Budget Deficit Will Mean Billions in Bond Sales - (www.bloomberg.com)
Geithner Says Most U.S. Banks Have Enough Capital - (www.bloomberg.com)
Credit Swaps Market Cut to $38 Trillion, ISDA Says - (www.bloomberg.com)

Hedge Fund Redemptions Slowed on Outperformance - (www.bloomberg.com)
Banks in Europe Lag in Recovery - (www.washingtonpost.com)
U.K. Unemployment Rises to Highest Level in 12 Years - (www.bloomberg.com)
Darling Plans Record U.K. Deficit, Limiting Stimulus - (www.bloomberg.com)
Japan hit by first trade deficit in 30 years - (www.ft.com)
Hope and Caution on Chinese Economy - (www.nytimes.com)
For Housing Crisis, the End Probably Isn’t Near - (www.nytimes.com)
Mortgage applications up 5.3% last week: MBA - (www.marketwatch.com)

Public universities predict hefty tuition hikes - (www.usatoday.com)
California, Florida Metropolitan Areas Lead in Foreclosures - (www.bloomberg.com)
Morgan Stanley Loss Exceeds Analysts’ Estimates - (www.bloomberg.com)
Banks May Get Mix of U.S. Stock Conversions, Private Funding - (www.bloomberg.com)
By This Measure, a Battered Bottom Line - (www.washingtonpost.com)

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