Subprime Mortgages

Major U.S. indices moved slightly positive at the opening bell, but before the noon hours, moved into their haven of negative territory.  Ongoing concerns of the mortgage crisis seems to be escalating. After IndyMac Bancorp Incorporated (NYSE: IMB), the largest U.S. bank collapse in U.S. history and the second largest financial institution to close in U.S. history, was shut down by the Fed on Friday, regulators unanimously approved new mortgage lending rules in an attempt to crackdown on shady practices especially those involving subprime loans made to borrowers with weak credit. IndyMac has since been taken over by the Federal Deposit Insurance Corporation, known as FDIC. In the 11 business days following a letter from Senator Charles Schumer of New York on June 26, depositors withdrew more than $1.3 billion from their accounts, per the Office of Thrift Supervision. The U.S. Treasury and the Federal Reserve said Sunday they would assist Fannie Mae and Freddie Mac if needed. Combined, Freddie and Fannie hold or back $5.3 trillion of mortgage debt, which equals approximately half the outstanding mortgages in the United States.

Treasury Secretary Henry M. Paulson, Jr. issued the following statement: Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction. GSE debt is held by financial institutions around the world. Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore we must take steps to address the current situation as we move to a stronger regulatory structure. In recent days, I have consulted with the Federal Reserve, OFHEO, the SEC, Congressional leaders of both parties and with the two companies to develop a three-part plan for immediate action. The President has asked me to work with Congress to act on this plan immediately. First, as a liquidity backstop, the plan includes a temporary increase in the line of credit the GSEs have with Treasury. Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn. Second, to ensure the GSEs have access to sufficient capital to continue to serve their mission, the plan includes temporary authority for Treasury to purchase equity in either of the two GSEs if needed. Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer.  Third, to protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards. I look forward to working closely with the Congressional leaders to enact this legislation as soon as possible, as one complete package.

The Fed also made some concessions to industry executives, who feared increasing oversight would lead to less lending. "The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Fed Chairman Ben Bernanke. "Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers." The proposals won't help the millions of homeowners who've already fallen behind in their mortgages but, the Fed is aiming to prevent another such crisis by tightening lending standards, particularly for subprime mortgages. The new rules governing "higher-priced," or subprime, loans will: Prohibit creditors from extending credit without regard to a consumer's ability to repay the loan from income and assets other than the home's value. The lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. Require creditors to verify income and assets they rely upon to determine repayment ability. Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. Require creditors to establish escrow account for property taxes and homeowner's insurance. This rule will be phased in during 2010. The Fed changed the definition of higher-priced loans to first mortgages with rates at least 1.5 percentage points above the "average prime offer rate" published by Freddie Mac. Also, second mortgages with rates at least 3.5 percentage points above the Freddie Mac rate will fall into this category.

President George W. Bush announced today that he has lifted an executive ban on offshore oil drilling. President George W. Bush's father, President George H. W. Bush, signed the executive order in 1990 banning offshore drilling. "This means that the only thing standing between the American people and these vast oil reserves is action from the U.S. Congress," Bush said. "In the short run, the American economy will continue to rely largely on oil, and that means we need to increase supply here at home," Bush said, adding that there is no more pressing issue for many Americans than gas prices. In his statement last month, Bush renewed his demand that Congress allow drilling in Alaska's Arctic National Wildlife Refuge, clear the way for more refineries and encourage efforts to recover oil from shale in areas such as the Green River Basin of Colorado, Utah and Wyoming. The White House estimates that there are 18 billion barrels of oil offshore that have not been exploited because of state bans, 10 billion to 12 billion in the Arctic National Wildlife Refuge and 800 billion barrels of recoverable oil in the Green River Basin.

Todays top stock pick for the trading session was M&T Bank Corporation (NYSE: MTB) which began the day at its session high of $71 and tumbled lower from there. M&T reported a 25 percent decline in net income during the second quarter. Income for the period of $160.3 million, or $1.44 a share, analysts were expecting earnings of $1.50 per share. A year ago, M&T reported a net income of $214.2 million or $1.95 a share. "While M&T is not immune to the effects of the higher credit costs evident throughout the banking industry as we move through the current credit cycle, we nevertheless recorded significant profits during the quarter," said Rene Jones, the bank's chief financial officer. "The combination of growth in loans and deposits, a stable net interest margin, core non-interest income growth and controlled expense levels demonstrate the strength of our organization amid a challenging environment." At the closing bell,  M&T had clearly surpassed their previous 52 week low with a loss of almost 11 points.


At the closing bell on the Stock Exchange, here is how the major world indices and major U.S. indices ended the session on the world market as well as the emerging markets including the stock market closing price:
DOW (Dow Jones Industrial Average) loss of 45.59 points on the day to end the trading session at 11,054.95
NYSE (New York Stock Exchange) loss of 59.78 points to end the trading session at 8,287.76
NASDAQ loss of 26.21 points to end the trading session at 2,212.97
S&P 500 loss of 11.25 points to end the trading session at 1,228.24
FTSE All-World ex-U.S. gain of 0.03 points to end the trading session at 222.45
FTSE RAFI 1000 loss of 45.79 points to end the trading session at 4,726.92
BEL 20 (BEL20) gain of 9.71 points to end the trading session at 2,969.06
CAC 40 (CAC40) gain of 41.89 points to end the trading session at 4,142.53
FTSE100 (UKX100) gain of 38.8 points to end the trading session at 5,300.4
NIKKEI 225 (NIK/O) loss of 29.53 points to end the trading session at 13,010.16

Market trends on the New York Stock Exchange (NYSE) today: advanced stocks 1,006; declined stocks 2,253; unchanged stocks 53; stocks hitting new highs 14; stocks hitting new lows 683. List of volatile stocks as well as stock quotes, stock prices and stock symbols of Day Trading Stock Picks on the New York Stock Exchange stock market for Day Trading online and active Day Trading for those who are or would like to be Day Trading for a living: M&T Bank Corporation (NYSE: MTB) shed 10.88 points on the trading session, high on the trading session $71.00, low on the trading session $53.61 for a closing stock price at $58.82; Goldman Sachs Group Incorporated (NYSE: GS) shed 3.81 points on the trading session, high on the trading session $168.00, low on the trading session $158.57 for a closing stock price at $158.67; Ultrashort Financial (NYSE: SKF) gained 17.32 points on the trading session, high on the trading session $192.31, low on the trading session $163.70 for a closing stock price at $192.0;  Potash Corporation Saskatchewan (NYSE: POT) gained 7.17 points on the trading session, high on the trading session $229.95, low on the trading session $223.84 for a closing stock price at $228.55; Fannie Mae (NYSE: FNM) shed 0.37 points on the trading session, high on the trading session $13.50 low on the trading session $8.65 for a closing stock price at $9.88; Freddie Mac (NYSE: FRE) shed 0.45 points on the trading session, high on the trading session $9.80, low on the trading session $6.09 for a closing stock price at $7.30.

Market trends on the NASDAQ today: advanced stocks 868; declined stocks 2,043; unchanged stocks 131; stocks hitting new highs 26; stocks hitting new lows 367. List of volatile stocks as well as stock quotes, stock prices and stock symbols of Day Trading Stock Picks on the NASDAQ stock market for Day Trading online and active Day Trading for those who are or would like to be Day Trading for a living: Apple Incorporated (NasdaqGS: AAPL) gained 0.79 points on the trading session, high on the trading session $179.30, low on the trading session $173.68 for a closing stock price at $173.37; Canadian Solar Incorporated (NasdaqGS: CSIQ) gained 4.90 points on the trading session, high on the trading session $39.22, low on the trading session $35.05 for a closing stock price at $37.30; SunPower Corporation (NasdaqGS: SPWR)  gained 1.17 points on the trading session, high on the trading session $74.63, low on the trading session $71.50 for a closing stock price at $73.00; First Solar Incorporated (NasdaqGS: FSLR) gained 6.13 points on the trading session, high on the trading session $288.00, low on the trading session $281.31 for a closing stock price at $285.23; James River Coal Company (NasdaqGS: JRCC) gained 2.44 points on the trading session, high on the trading session $51.23, low on the trading session $47.00 for a closing stock price at $50.03; Zions Bancorporation (NasdaqGS: ZION) shed 4.52 points on the trading session, high on the trading session $25.44, low on the trading session $19.66 for a closing stock price at $21.16; WestAmerica Bancorporation (NasdaqGS: WABC) shed 2.13 points on the trading session, high on the trading session $47.30, low on the trading session $40.80 for a closing stock price at $42.70; Baidu.com Incorporated Baidu.com Incorporated (NasdaqGS: BIDU) shed 13.81 points on the trading session, high on the trading session $314.53, low on the trading session $287.10 for a closing stock price at $291.27; Google Incorporated (NasdaqGS: GOOG) shed 12.80 points on the trading session, high on the trading session $540.06, low on the trading session $515.45 for a closing stock price at $521.00.

Market trends on the American Stock Exchange (AMEX) today: advanced stocks 463; declined stocks 743; unchanged stocks 95; stocks hitting new highs 15; stocks hitting new lows 154.

Chicago Board of Trade Futures Market activity for the day, September 2008 Contracts, at time of this posting:
E-mini S&P 500 (ES) end of day price 1227.00, change -12.75
E-mini NASDAQ-100 (NQ) end of day price 1800.50, change -20.11
E-mini S&P SmallCap 600 (SMP) end of day price 349.00, change -4.90
$5 DJIA (YM) end of day price 11,026, change -70

World Currencies at time of this posting:
Euro 0.6285 to U.S. Dollars 1.591
Japanese Yen 106.12 to U.S. Dollars 0.0094
British Pound 0.5015 to U.S. Dollars 1.994
Canadian Dollar 1.0052 to U.S. Dollars 0.9948
Swiss Franc 1.0163 to U.S. Dollars 0.984

Commodities Markets:
Energy Sector: Light Crude (NYM) gained $0.10 on the day for a closing price of the range of $145.18 a gallon ($US per bbl.); Heating Oil (NYM) gained $0.01 on the day for a closing price of $4.13 a gallon ($US per gal.); Natural Gas (NYM) gained $0.07 on the day for a closing price of $12.06 per million BTU ($US per mmbtu.); Unleaded Gas (NYM) shed $0.01 on the day for a closing price of $3.56 a gallon ($US per gal.). 

Metals Markets: Gold Market Price (CMX) gained $13.10 on the day for a closing price of $973.70 ($US per Troy oz.); Silver (CMX) gained $0.43 on the day for a closing price of $19.25 ($US per Troy oz.); Platinum (NYM) shed $11.20 on the day for a closing price of $2,036.00 ($US per Troy oz.) and Copper (CMX) gained $0.01 on the day for a closing price of $3.75 ($US per lb.). 

Livestock and Meat Markets (cents per lb.): Lean Hogs (CME) shed 0.38 on the day for a closing price of 70.88; Pork Bellies (CME) shed 0.33 on the day for a closing price of 66.05; Live Cattle (CME) shed 2.18 on the day for a closing price of 106.40; Feeder Cattle (CME) shed 1.55 on the day for a closing price of 110.18. 

Other Commodities (cents per bu.): Corn (CBT) shed 27.00 on the day for a closing price of 682.25 and Soybeans (CBT) shed 37.0 on the day for a closing price of 1,559.00.

Bond action for the day: 2 year bond gained 7/32 on the day for a closing price of 100 24/32 with a Yield of 2.46, Yield Change -0.13; 5 year bond gained 13/32 on the day for a closing price of 100 28/32 with a Yield of 3.17, Yield Change -0.09; 10 year bond gained 23/32 on the day for a closing price of 100 2/32 with a Yield of 3.86, Yield Change -0.09; the 30 year bond gained 1 9/32 on the day for a closing price of 98 21/32 with a Yield of 4.45, Yield Change -0.08.

Access scheduled economic data every market morning by viewing the Daily Market Report from Millennium-Traders, free access to visitors on our website.

Visitors may subscribe to our free Weekly MarketNews for a review of the previous weeks trading news plus, view upcoming economic data scheduled for the week ahead.

Review current edition as well as, archives of the News & Commentary plus, view complete details of calls made in our Trading Rooms and stock picks from our Swing Trading services. Traders should review our FREE Monthly Trading Lesson posted on our website.