Category Archives: Investing

PwC reaches $335 million settlement with FDIC over Taylor, Bean & Whitaker/Colonial Bank audits

PricewaterhouseCoopers will pay $335 million to the Federal Deposit Insurance Corp. in a settlement that ends claims that the auditor failed in its duties by not discovering the accounting malfeasance that led to the late-2000s collapse of Colonial Bank, which funded the mortgages originated by Taylor, Bean Whitaker.

Once upon a time, TBW was the largest privately held mortgage company in the country, employing more than 2,000 people. But TBW collapsed in 2009 after it was discovered that TBW Chairman Lee Farkas and others were cooking the books to cover for hundreds of millions of dollars in nonexistent mortgages.

PwC acted as the auditor for Colonial Bank, which also collapsed when the issues at TBW were uncovered.

When it failed, Colonial Bank was taken over by the FDIC, which then sued PwC and claimed that the bank’s failure cost the insurer $5 billion, making it one of the country’s largest ever bank failures.

Eventually, a federal judge ruled that PwC was “negligent” in its role as Colonial Bank’s auditor, stating that the company could have done more to prevent Colonial’s collapse.

And last year, the judge ordered PwC to pay more than $625 million for its actions in the Colonial/TBW matter.

But, late last week, the two sides announced that they’d reached a settlement in the matter that will see PwC pay $335 million to the FDIC for its role in the TBW affair.

That amount is much closer to the $306.75 million that PwC originally contended it should pay the FDIC, rather than the $625 million awarded to the agency by District Judge Barbara Jacobs Rothstein.

And the FDIC agreed to the settlement over the objections of former FDIC Chair Martin Gruenberg, who still serves on the FDIC board of directors.

Gruenberg issued a statement through the FDIC, in which he stated that he did not vote to approve the settlement because the settlement did not require PwC to admit liability in the matter.

“As a result of its failure to follow required auditing standards, PwC did not detect that hundreds of millions of dollars of assets claimed by Colonial did not in fact exist, had been sold to others, or were worthless. If PwC had complied with auditing standards, it would have discovered the fraud, the fraud would have been stopped, and the damages to Colonial Bank would have been limited,” Gruenberg said in his statement.

“As noted, the settlement announced today did not include a written admission of liability by PwC,” Gruenberg added. “Given PwC’s professional negligence, which contributed directly to the failure of Colonial Bank and large losses to the Deposit Insurance Fund, I voted against authorizing the settlement without a written admission of liability by PwC.”

Nevertheless, the FDIC agreed to the settlement.

“PricewaterhouseCoopers LLP and the Federal Deposit Insurance Corporation as Receiver for Colonial Bank have settled professional negligence claims brought by the FDIC-R against PwC to their mutual satisfaction,” a spokesperson for PwC said in a statement.

According to Rothstein, PwC was negligent in its audits of Colonial Bank’s business in 2003, 2004, 2005, and 2008. Rothstein ruled that PwC’s audits were not designed to detect fraud and did not fully inspect Colonial’s business in the relevant years.

According to Rothstein, PwC did not inspect any of TBW’s loan files at Colonial in 2003 or 2004, failed to follow up on the “illogical” dates on Colonial’s financial reports, failed inspect any of the supposed collateral backing the mortgages in question, and neglected to follow-up on sample loans that failed quality control checks.

TBW is one of housing crisis’ most notorious collapses.

Beginning in 2002 and stretching to 2009, Farkas and his fellow conspirators swept funds between accounts at Colonial and Ocala Funding, a TBW subsidiary that also provided funding for TBW’s mortgages to cover constant overdrafts.

By December 2003, the rolling overdraft had grown to more than $120 million and sweeping the funds back and forth became too complex, so Farkas and others began selling mortgages that didn’t exist to cover the shortages.

By 2009, Colonial Bank had more than $500 million in nonexistent loans on its books.

TBW also sold loans to Fannie Mae and Freddie Mac. In 2002, loans sold to Fannie represented 85% of TBW’s business, but Fannie Mae canceled its seller/servicer agreement with TBW after it learned that Farkas had personally taken out $2 million in loans that were not actually backed by homes or any other eligible collateral to pay for the buybacks on non-compliant loans that TBW sold to Fannie.

In fact, Farkas planned to sell eight fraudulent loans (totaling $2 million) to Fannie to cover the money he needed pay Fannie for other non-compliant loans.

Fannie Mae discovered this fraud when Farkas was unable to make payments on the eight fraudulent loans, but did not communicate its findings to Freddie Mac, its regulator or other interested parties.

Subsequently, Freddie considerably increased the volume of its business with TBW.

Farkas’ schemes were finally discovered when Colonial, which was on the verge of insolvency, applied for $553 million in funding from the Troubled Asset Relief Program.

According to a 2014 report from the Federal Housing Finance Agency’s Office of the Inspector General, Farkas planned to use TBW to invest $150 million in Colonial and help raise the additional $150 million because he knew that without the injection of funding, TBW’s massive fraud would be discovered.

The additional $150 million wound end up being diverted from Ocala’s books to Colonial’s, but the entire nature of Colonial’s fundraising raised a red flag with the Special Inspector General for TARP.

Investigators questioned whether the injection of funding from Farkas was a “round trip” transaction, where the $300 million from TBW would be paid back from the TARP funds.

In the process of the investigation, several of Farkas’ co-conspirators eventually revealed the details of the multi-year, multi-billion dollar fraud.

Farkas eventually received a 30-year prison sentence and was ordered to forfeit $38.5 million in ill-gotten gains for the $2.9 billion scheme after he was found guilty on 14 counts of bank, wire and securities fraud, becoming one of the only people actually jailed for financial crimes in the run-up to the housing crisis.

And this isn’t the first time that PwC has been forced to pay up over its role in the TBW collapse. Back in August 2016, the auditor settled a $5.5 billion lawsuit over the same issue.

For much more on the fall of TBW, click here.

Article source: https://www.housingwire.com/articles/48456-pwc-reaches-335-million-settlement-with-fdic-over-taylor-bean-whitakercolonial-bank-audits

Your Money: State taxes are too hard for mere mortals to compute

NEW YORK(Reuters) – Can regular people calculate their state taxes in light of the new U.S. tax law?

No way, experts say.

“There isn’t a way to figure it out,” said Craig Smalley, an enrolled agent tax preparer in Orlando, Florida. “I’ve worked with clients all over the United States. There’s nothing you can do.”

But surely, users of do-it-yourself software can get a little window into what is going on?

TurboTax’s answer is that you need not know the intricacies of state law. The software “automatically imports your information into your state tax return from your federal tax return,” explained Lisa Greene-Lewis, a CPA and tax expert with TurboTax.

The Tax Cuts Jobs Act passed in December 2017 has already created a particularly challenging tax year. But situations in the 44 states that levy income tax are even more confusing.

Some states are following federal rules, but others like New York have broken ranks. Some, like New Jersey, have never been on board.

Virginia may be the winner for the most complicated taxes, according to Tynisa Gaines, an enrolled agent tax preparer based in Herndon, Virginia. It is among those states that say if you take the standard deduction on the federal return, you cannot itemize on your state return.

Since federal changes doubled the standard deduction to $12,000 for singles and $24,000 for married couples, fewer taxpayers are expected to itemize than before. But Virginia’s standard deduction is low, just $3,000 for singles and $6,000 for married.

Gaines said she would pay $1,000 more in state taxes if she did not itemize. She runs returns multiple ways to figure out the least painful options for her clients.

Keeping up with changes for her nationwide clientele requires constant attention. The only way Gaines manages is to download the regulation handbook from each state’s tax information website and pore over it.

“It’s not easy. I have to look it up for almost every client every year,” Gaines said. “A state might decide not to tax veteran retirement pay when they did before, or they might exempt military spouse pay suddenly. There is no shortcut to it at all.”

Even in a small state like Massachusetts, tax law can send professionals into a tizzy. The state conforms to federal law on issues like 529 college saving plan rules, but not on others like the tax treatment of debt cancellations, said John Warren, an enrolled agent tax preparer in Medford, Massachusetts.

“If I call up my tax software company, it’s most likely on the state side,” Warren said.

WITHHOLDING ISSUES

One reason you cannot just let the software figure it out is that the state takes out money from each of your paychecks. It is likely that the amount withheld in 2018 was incorrect and carried over to this year.

Even if you did projections, those may be obsolete. Enrolled agent Phyllis Jo Kubey did an analysis for each of New York clients, but the state later announced it would decouple from the federal rules.

New York still allows $1,000 per dependent personal exemption, for instance. “So if you just say, I’m going to use the standard deduction and not think about it, you might be leaving money on the table,” Kubey said.

Some state tax websites have withholding calculators, and you can navigate through the inputs – which, like the federal W-4 calculator, now require a lot of information.

You can also use your completed 2018 return as a baseline. Take your total state taxes due and then figure out the filing status and number of allowances that will equal the correct amount for 2019, divided by the number of paychecks you get for the rest of the year.

“The state is the stepchild. People forget about the state until the end,” Gaines said.

Editing by Lauren Young and Richard Chang

Article source: http://feeds.reuters.com/~r/news/wealth/~3/R2gNhOaIROA/your-money-state-taxes-are-too-hard-for-mere-mortals-to-compute-idUSKCN1QI4H3

Role of a Lifetime: Life Lessons with Peter Krause

NEW YORK (Reuters) – If you are looking for steady work, it is probably best not to go into show business. Unless you are Peter Krause, that is.

The 53-year-old Minnesota native has been a staple of U.S. TV screens for years, with roles in shows like “Sports Night,” “Six Feet Under,” “Parenthood,” and his current series “9-1-1,” which begins its spring season tonight on Fox.

For the latest in Reuters’ “Life Lessons” series, Krause talked with us about the heartland principles that have kept him working steadily in Hollywood for a couple of decades.

Q: Was an acting career always on your radar, even as a kid?

A: When I turned 16 in Roseville, Minnesota, it was expected that I would get a job, so I got one at the local movie theater.

It’s gone now, which is kind of sad. But I got to see every movie that came out, multiple times: Films like “The Mission,” “Chariots of Fire,” “On Golden Pond,” and “The Pope of Greenwich Village.”

So I got to really study those performances, even though I wasn’t thinking about being an actor at the time.

Q: Did your folks give you a hard time about your career choice?

A: My dad was a farm kid, always doing chores, who didn’t even have plumbing or electricity until he was 16. By the time he was 18, he was boots on the ground in Germany, as part of the army of occupation after World War Two. So the idea of acting was very foreign to him. We had a bit of a battle at first.

Q: What was the money situation like early on?

A: My parents didn’t have a lot of money. All of our family vacations were by car. So when I flew into New York City to go to New York University, I had never even been on a plane before.

I took the bus from LaGuardia Airport to Grand Central Station, and then walked from there down to NYU, which was about 40 blocks. Seeing the city like that was a shock to the system, since I had grown up in a small town in the middle of cornfields.

Q: Were those early acting years tough financially?

A: I had been bartending on Broadway in theaters, which is where I first met Aaron Sorkin, who was a bar manager at the Palace Theatre at the time, when they were playing “La Cage aux Folles.”

But one of my first shows out of college was with Carol Burnett, which was helpful with my parents, because they knew who she was. I finally got to take my dad out for lunch, and grabbed the check and signed the bill. He looked at me and said, “Well, this is different.”

Q: Which of your roles taught you the most?

A: All roles teach you something new. Different characters have different life rules, and some of those characters end up bleeding into me a little.

Nate Fisher from “Six Feet Under” was very difficult to play, because he was so at odds with himself all the time. That was a defining moment in my career. Working on that show was like a daily meditation on life and death.

Q: Have you thought about the future, and what retirement is going to look like for you?

A: I don’t plan on retiring. I’ll do this as long as I can. I still enjoy acting as much as I ever did. Right now on “9-1-1” I get to be a firefighter, which is basically my childhood dream come true.

Q: You have a kid, so what life lessons do you try to pass along to him?

A: He just turned 17, so I have taught him all sorts of things: How to ride a bike, drive a car. I was even his baseball coach for three years. What I have tried to impart to him the most is to figure out what makes him happy. For myself, I spent a fair amount of time trying to make my parents happy, and wanting to be a success in their eyes. That kind of messed me up. So I want to get my son to listen to his own compass.

(The writer is a Reuters contributor. The opinions expressed are his own.)

Editing by Beth Pinsker; Editing by David Gregorio

Article source: http://feeds.reuters.com/~r/news/wealth/~3/IdxlrtcwkEA/role-of-a-lifetime-life-lessons-with-peter-krause-idUSKCN1QZ14Z

Who would dare buy Ditech’s reverse mortgage servicing business?

The mortgage space is in the throes of a “massive and truly terrible period of restructuring that conjures up biblical images of the apocalypse,” wrote R. Christopher Whalen in his latest, weekly article for the Institutional Risk Analyst, and the fate of Ditech Holdings serves as a critical example.

Ditech, which filed for bankruptcy for the second time, is seeking bids for the sale of some or all of its business. But, as Whalen questioned, do its remaining assets have any value?

Specially, Whalen pondered, what will happen to Reverse Mortgage Solutions, Ditech’s HECM servicing business?

“RMS is consuming cash to such an extent that the company’s DIP lenders had to allocate a big portion of resources – $1 billion in working capital – to RMS as part of the bankruptcy filing,” Whalen wrote, noting that Ginnie Mae will be on the hook if the business is abandoned in bankruptcy.

The problem, according to Whalen, for those holding mortgages and mortgage servicing rights? The unstable climate created by the Federal Reserve’s policies that is wreaking havoc on the market.

Rumor has it that the Federal Open Markets Committee may end the runoff of the system open market account – or SOMA – portfolio later in 2019, and if that’s the case, expectations for rising rates will need to be adjusted, Whalen said.

The constant manipulation is giving the market whiplash.

“In effect, the Fed is discarding any hope of restoring private function and particularly unsecured lending in the U.S.,” Whalen wrote.

“By manipulating all manner of asset valuations, the FOMC has created two very specific risks for holders of mortgages and MSRs that are not well understood in the equity or debt markets,” he continued.

Whalen said that by accelerating prices for homes, mortgages and MSRs to “ridiculous levels,” the Fed has essentially crafted a short-put position for those holding mortgage credit and servicing exposures. 

Its policy of “quantitative easing,” or injecting new money into the nation’s money supply, will inevitably damage the financial markets, he said.

“Like shooting heroin, once a central bank gets onto the QE habit, it is impossible to stop without deflating the financial markets,” he said.

Further, “fair value” accounting rules imposed by the Financial Accounting Standards Board and the Securities and Exchange Commission add an extra bit of nonsense into the equation, according to Whalen.

“As benchmark interest rates fall, the modeled prepayment speeds for mortgage exposures will accelerate, this on the assumption that mortgage refinancing activity will increase –maybe,” he wrote. “Holders of MSRs, specifically, will be forced to take ‘fair value’ non-cash losses on their mortgage exposures, even if they are running aggressive hedge positions.”

And, the credit risk embedded in all one- to four-family mortgages that were originated during the three phases of QE may begin to emerge in the next 18-24 months, Whalen predicted, and this will drive up servicing costs for MSR holders. As owners of the servicing asset, MSR holders are responsible for the cost of resolving a distressed mortgage.

If the Fed does indeed resume another QE policy, should we face another downturn (as housing predicts) Whalen said those operating and investing in mortgage finance need to take note.

“With MSR valuations under the twin pressure of again falling long-term interest rates and rising capital costs of default servicing, investors could see the double-digit gains in the best performing asset class in the fixed-income market suddenly reversed, with catastrophic consequences for the mortgage market and certain publicly traded mortgage REITs,” he wrote.

“Given the impending resumption of QE, investors who are long servicing need to take pause,” he continued. “MSRs carry both interest risk and, as many have forgotten, default risk garnished with reputational hazard.”

 

Article source: https://www.housingwire.com/articles/48228-who-would-dare-buy-ditechs-reverse-mortgage-servicing-business

[Pulse] Did Amazon’s about-face on its NY HQ2 plans turn the Long Island City real estate market upside down?

Well before Amazon announced its plans to pursue a second headquarters in Long Island City, the Queens neighborhood was among the fast-growing real estate markets of NYC.

Major players in the real estate industry such as Durst, The Lightstone Group, Rockrose Development, Tishman Speyer, RXR Realty and TF Cornerstone have set their foot on the once-crumbling industrial neighborhood and secured millions of dollars to finance massive commercial and industrial projects that promise thousands of rental units to hit the market over the time span of up to five years.

To some extent, the gradual transformation of LIC exemplified Mayor Bill de Blasio’s vision of creating a “Tale of Two Cities” across the five boroughs.

Yet, Amazon’s snafu announced last week still stunned the LIC real estate market.

Chairman and CEO at The Lightstone Group, David Lichtenstein, dubbed Amazon’s about-face on its LIC HQ2 plans “the worst day for NYC since 9/11,” blaming elected politicians who voiced their strong resistance and stymied the deal.

With Lightstone owning two multifamily luxury rental properties in an LIC neighborhood – including a 413,000-square-foot, 428-unit building just a couple of miles from what was going to be Amazon’s LIC campus – Lichtenstein undoubtedly felt the staggering financial impact of Amazon’s abrupt pullout.

Unsurprisingly, Lichtenstein is not alone. Many real estate figures echoed his sentiments on the broken deal.

EVP Seth Pinsky at RXR Realty, another major player in the NYC’s real estate scene, said to The Wall Street Journal: “I think for some of the people opposing the project it was kind of a game. They enjoyed being the center of attention and having their statements tweeted and retweeted, but this isn’t a game.”

RXR Realty owns, among others, the 330,000-square-foot, seven-floor commercial property Standard Motor Products Building that would have become Amazon’s neighbor should the deal have gone through.

The idea of being close to Amazon’s HQ2 is too desirable to resist and definitely not a game in the NYC commercial real estate market. Indeed, a real-estate frenzy ignited over LIC upon Amazon’s November announcement.

More than 30 commercial and multifamily properties have changed hands since Amazon announced its LIC plans, according to WSJ. Now that the retail giant has ditched its plans to pursue a LIC HQ2, the frenzy has come up short.

And it doesn’t take a real estate professional to discern either the prospect of property value hikes thanks to Amazon’s upcoming presence or the financial implications of Amazon’s turnaround months later.

Having noticed skyrocketing interest and climbing asking prices in the area following Amazon’s November announcement, Nancy Wu, StreetEasy’s economic data analyst, said she expects “asking prices and buyer interest to fairly quickly revert back to their pre-announcement levels” as buyers have already started “backing out of their plans.”

Provided that LIC has been emerging as the burgeoning real estate market of NYC well before Amazon’s era, Amazon’s about-face on its LIC HQ2 plans certainly did not turn the LIC real estate market upside down.

However, Amazon’s presence could have accelerated the LIC transformation at an exponential rate. And it is safe to say that its abrupt snafu has caused the LIC real estate market a bit of a stroke. 

Article source: https://www.housingwire.com/blogs/7-pulse/post/48239-pulse-did-amazons-about-face-on-its-ny-hq2-plans-turn-the-long-island-city-real-estate-market-upside-down

[WATCH] Are we really headed for a recession? First American’s chief economist answers

Single-family authorizations are declining?

Do unemployment levels really predict a recession

What does the the inverted yield curve tell us about a looming economic slowdown?

These questions are swirling around the internet right now, as speculation abounds on where the economy is headed and what path interest rates are likely to take in 2019.

Lucky for us, housing expert and First American Chief Economist Mark Fleming sits down with Editor-in-Chief Jacob Gaffney to answer these questions and more. Gaffney asks Fleming if, after 10 years of sustained economic growth, we are headed for the dreaded R-word? See what Fleming has to say about that and more in the video below. 

 

Article source: https://www.housingwire.com/articles/48248-watch-are-we-really-headed-for-a-recession-first-americans-chief-economist-answers

Citigroup invests in digital mortgage company Better Mortgage

The investors in digital mortgage company and 2018 HW Tech100 winner Better Mortgage are a veritable who’s who of the finance space. And there’s a new big name joining that list.

Just last month, the company announced that American Express Ventures, the strategic investment group of American Express, led its $70 million Series C funding round.

Another of the biggest names in financial services is also one of Better Mortgage’s backers. That would be Goldman Sachs.

And now, the digital mortgage company boasts a new investor: Citigroup.

Better Mortgage announced Thursday that Citigroup has made an investment in the company, although Better did not specify just how much of an investment Citi is making.

In a release, the company describes Citi’s investment as an “add-on” to the company’s $70 million Series C funding. But the news release pegs the company’s Series C funding at $75 million after Citi’s investment, which would lead one to believe that Citi invested $5 million in the company.

But a spokesperson for Better Mortgage told HousingWire that the company is not disclosing the details of Citi’s investment.

Regardless of the dollar amount, the fact that Citi, Amex, and Goldman Sachs have invested in Better shows that the company and its business model has some appeal.

Better’s platform works by moving the mortgage process completely online. Its customers are able to upload and eSign documents, have instant access to lending discounts and receive personalized mortgage recommendations.

And the company is finding success.

Since launching three years ago, Better Mortgage has grown significantly. Last year, the company doubled its geographic footprint and originated $1.3 billion in mortgages, representing an approximate increase of 300% from the prior year.

The company expanded throughout 2018, adding 13 more states throughout the year. The company also expanded into four new states already this year.

Better Mortgage is now available in 30 states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, New Jersey, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, West Virginia, Wisconsin, plus Washington, D.C.

And with the backing of American Express and Citigroup, the company plans to continue expanding.

“We are proud and humbled to be partnering with Citi. As one of the world’s premier consumer banks with deep roots in the mortgage business, Citi has a unique perspective and understanding on the innovation Better.com is bringing to home finance,” Vishal Garg, CEO and founder of Better.com, said. “We hope to learn from them and partner with them to make the future of homeownership better for all Americans.”

Citi’s investment in Better is also interesting considering the company’s love-hate relationship with mortgages in the last few years.

Last year, the company dove headfirst into digital mortgages, partnering with Digital Risk and Black Knight to form a digital mortgage origination platform. The company also appointed a new mortgage management team, but its originations suffered last year.

And two years ago, Citi got out of mortgage servicing.

But, Matt Zhang, Citi’s head of spread products investment technologies, said the investment in Better makes sense for the megabank.

“Better.com is a phenomenal success story,” Zhang said. “This investment round underlines the brand’s continued growth and further commitment to world-class operational execution. We look forward to this partnership and are thrilled to be a part of the continued growth and progress of Better.com.”

As is Goldman Sachs and American Express. How interesting.

Article source: https://www.housingwire.com/articles/48249-citigroup-invests-in-digital-mortgage-company-better-mortgage

U.S. consumer spending, factory data point to weak first quarter GDP growth

WASHINGTON (Reuters) – U.S. personal income fell for the first time in more than three years in January and consumer spending dropped by the most since 2009 in December, putting the economy on a weak growth path early in the first quarter.

The economic outlook was also darkened by other data on Friday showing factory activity hit a more than two-year low in February, with manufacturers reporting slowing new orders and hiring. The reports extended the run of soft data on an economy that lost momentum at the tail end of 2018 and gave more credence to the Federal Reserve’s “patient” stance towards raising interest rates further this year.

The economy is losing speed as the stimulus from a $1.5 trillion tax cut package and increased government spending fades. A trade war between the United States and China, higher interest rates, softening global growth and uncertainty over Britain’s exit from the European Union are clouding the outlook.

“A modest slowdown remains the most likely path for 2019,” said Eric Winograd, senior U.S. economist at AllianceBernstein in New York. “We shouldn’t expect any action from the Fed into at least the second half of the year.”

The Commerce Department said personal income slipped 0.1 percent in January, the first decline since November 2015, after jumping 1.0 percent in December. Income was weighed down by decreases in dividend, farm proprietors’ and interest income.

Income was boosted in December by a one-time special dividend by information technology firm VMware Inc as well as government payments to farmers caught up in the U.S.-China trade war.

Wages increased by a moderate 0.3 percent in January after rising 0.5 percent in December. Economists polled by Reuters had forecast incomes rising 0.3 percent in January.

The Commerce Department did not publish the January consumer spending portion of the report as the collection and processing of retail sales data was delayed by a 35-day partial shutdown of the government that ended on Jan. 25.

It reported that consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 0.5 percent in December. That was the biggest decline since September 2009 and followed a 0.6 percent increase in November.

Households cut back on purchases of motor vehicles and recreational goods in December, leading to a 1.9 percent plunge in spending on goods. Spending on goods increased 1.0 percent in November. Outlays on services edged up 0.1 percent, held back by a decline in spending on household electricity and gas. Spending on services advanced 0.4 percent in November.

When adjusted for inflation, consumer spending fell 0.6 percent in December, also the largest drop since September 2009, after rising 0.5 percent in November.

The December data was included in the fourth-quarter gross domestic product report published on Thursday, which showed consumer spending growing at a 2.8 percent annualized rate during that period, slower than the third quarter’s robust 3.5 percent pace.

The economy grew at a 2.6 percent rate in the October-December quarter after notching a 3.4 percent pace in the third quarter.

The dollar was little changed against a basket of currencies. Stocks on Wall Street were trading higher, while U.S. Treasury prices fell.

STRONG SAVINGS

The sharp deceleration in consumer spending in December puts consumption on a lower growth trajectory in the first quarter and bolsters analysts’ expectations that the economy will slow down further in the first three months of the year.

“Unless there is a big upward revision to the disastrous December retail sales figure, the weak end-of-quarter consumption profile provides for very challenging arithmetic for first-quarter consumption growth,” said Michael Feroli, an economist at JPMorgan in New York.

Still, consumer spending likely remains supported by a strong accumulation of savings, which surged to a six-year high of $1.2 trillion in December from $961.3 billion in November. The saving rate jumped to a three-year high of 7.6 percent. In addition, consumer sentiment remains high.

With spending tanking, inflation remained tame in December. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components rose 0.2 percent after a similar gain in November.

That left the year-on-year increase in the so-called core PCE price index at 1.9 percent. The core PCE index is the Fed’s preferred inflation measure.

It hit the U.S. central bank’s 2 percent inflation target in March for the first time since April 2012.

Inflation is likely to remain benign despite a tight labor market as supply constraints at factories ease. A third report on Friday showed the Institute for Supply Management’s (ISM) national factory activity index fell 2.4 points to 54.2 last month, the lowest reading since November 2016.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy. Raw material prices fell for a second straight month in February after nearly three years of increases.

Manufacturers offered mixed views of business conditions. Machinery manufacturers said orders remained strong, but makers of fabricated metal products expressed concern “about indicators showing a slight recession for the second half of the calendar year.”

Plastics and rubber products manufacturers said “general business conditions started to slow at the end of January, continuing through February.”

“This supports our move to lower our first-quarter GDP forecast,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “We need to see a turnaround in coming months.”

Reporting by Lucia Mutikani; Editing by Andrea Ricci

Article source: http://feeds.reuters.com/~r/news/wealth/~3/Z-kYG8gOqXk/u-s-consumer-spending-factory-data-point-to-weak-first-quarter-gdp-growth-idUSKCN1QI4P7

BlueMountain names slate for PG&E board

NEW YORK (Reuters) – PGE Corp investor BlueMountain Capital Management LLC on Friday named 13 people it hopes to install as directors at the embattled power utility weeks after the company filed for bankruptcy in the wake of California’s catastrophic wildfires.

The hedge fund’s group of director nominees includes an expert in resolving victim claims, a former treasurer of the state of California, a prominent hedge fund manager, and people with banking and energy industry expertise.

BlueMountain, which owns roughly 8 million PGE shares, in January announced plans for a proxy contest, criticizing the company for filing for Chapter 11 protection, a move it called unnecessary and harmful to investors.

The company and the hedge fund have been talking and last week agreed to extended the deadline to nominate directors to Friday.

PGE said on Friday it has had a “constructive dialogue” with shareholders and stakeholders.

PGE previously promised to make board changes, saying that only five of its current directors would stand for re-election at the May 21 annual meeting.

By offering to refresh its own board, PGE could be trying to curry favor with big investors who may not be ready to back the hedge fund’s slate, analysts said.

BlueMountain’s slate includes former California Treasurer Phil Angelides who chaired the U.S. Financial Crisis Inquiry Commission to uncover the causes of the financial crisis and lawyer Kenneth Feinberg, known for administering compensation to victims including those of the Sept. 11 attacks.

Christopher Hart, a former chairman of the National Transportation Safety Board, Jeffrey Ubben, who founded $15 billion San Francisco-based hedge fund ValueAct Capital and is now focusing on sustainability, and clean energy expert David Crane, a former chief executive at NRG Energy, are also on the list.

California business and civic leaders Marjorie Bowen, a former Houlihan Lokey banker, and Alvaro Aguirre, a former banker and lawyer who has managed several corporate turnarounds, were also named.

The group also includes Fred Buckman, Donald Chappel, Tanuja Dehne, Dick Rosenblum, Mark Lerdal and Barbara Lloyd.

With a new board and fresh oversight, the hedge fund forecasted that the company’s share price could trade at $50 in the future. It closed at $17.03 on Thursday.

PGE faces crushing liabilities related to deadly wildfires in 2017 and 2018 that killed dozens of people and destroyed thousands of homes.

Reporting by Svea Herbst-Bayliss; Editing by Phil Berlowitz

Article source: http://feeds.reuters.com/~r/news/wealth/~3/p3h3m67S1fo/bluemountain-names-slate-for-pge-board-idUSKCN1QI4Q1

Rising Star nominations end today!

Who are the Rising Stars?

The Rising Stars represent the best young leaders in the mortgage industry – in lending, servicing, investing and real estate.

Know someone who would qualify for this? Nominate them here! Nominations for 2019 are open now but they will close TODAY!

So let’s talk about the basics. What are the qualifications?

Age: This is an award for young professionals. And while young is all relative, we have to put a cap on it. To qualify for this award, you must be 40 or under by June 1, 2019.

Accomplishments: They help run major corporations, and are the entrepreneurs building tomorrow’s great businesses. They work in any and every area of the housing economy: lenders, servicers, investors, and real estate. They come from diverse backgrounds but share one common trait: an outsized impact on the industry and their businesses.

Previous winners: YES, you can win again. BUT, show us something new. A new position, a new path. You’re a RISING Star, so we want to see how much you’ve risen from the last time you won the award.

Nominations: Know someone who you see as a Rising Star? Great! Nominate them! But self-nominations are also accepted. Sometimes you just gotta show yourself a little love!

We encourage a wide range of professionals to apply for consideration for this unique and powerful award, one of the only of its kind in the industry. Remember, the winners will be featured in the June issue of HousingWire Magazine.

Have any questions that go beyond this? Feel free to reach out! kramirez@housingwire.com.

Or connect with me on LinkedIn or Twitter.

But don’t take too long, nominations close tonight!

Article source: https://www.housingwire.com/articles/48251-rising-star-nominations-end-today

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