June 21st, 2012
Moody’s could downgrade the debt ratings of as many as 15 global investment banks after the closing bell today, a move that would cost the banks billions of dollars in extra collateral.
In February, Moody’s announced it would review the ratings of 17 global investment banks and has already downgraded Macquarie and Nomura. In the U.S., the companies that are most likely to be affected by today’s action: Bank of America [BAC 7.82 -0.32 (-3.93%) ] , Citigroup [C 27.83 -1.03 (-3.57%) ] , Goldman Sachs [GS 93.90 -2.65 (-2.74%) ] , JPMorgan [JPM 35.51 -0.94 (-2.58%) ] and Morgan Stanley [MS 13.96 -0.24 (-1.69%) ] .
The current credit actions are part of a comprehensive review of the overall global banking system by Moody’s. In the middle of last month Moody’s downgraded Italian, Spanish, German and Austrian bank credit ratings. The U.S. banks with global capital markets capabilities have had an open dialogue with the ratings company, in an effort to soften the severity of the downgrades.
This afternoon’s anticipated announcement could affect the long-term debt ratings of the bank-holding companies of five of the biggest U.S. banks — only Wells Fargo [WFC 32.34 -0.47 (-1.43%) ] is not on the list. Moody’s is also looking at the short-term debt of the five bank-holding companies and the main bank operating subsidiaries of all except JPMorgan.
The company that has the most to lose: Morgan Stanley. Moody’s is contemplating cutting Morgan Stanley’s senior long term debt rating three notches to Baa2, or just two notches above “junk”. That could put its credit rating on a level with Bank of America’s and Citigroup’s — if its debt is downgraded as expected.
In an interview with CNBC in April, Morgan Stanley Chairman and CEO, James Gorman said the downgrade could affect about 8 percent of the firm’s derivatives contracts. Downgrades of its senior debt could cost Morgan Stanley between $868 million and $7.2 billion in additional collateral and termination payments on derivatives contracts, according to SEC filings.
As for the other banks, dropping its senior debt rating to Baa2 would mean a one notch downgrade for Bank of America, and could mean the bank has to put up an additional $2.7 billion in collateral. Citigroup’s expected two notch downgrade to Baa2 could cost the bank an additional $4.7 billion in collateral.
If Goldman is downgraded two notches, as expected, it will end up with an A3 long term debt rating that would cost $2.2 billion in added collateral. JPMorgan Chase is expected to get a two notch downgrade to A2, costing the bank $4.7 billion in additional collateral and termination payments.
June 21st, 2012
The Washington Post
NEW YORK — The second of two bird flu studies once considered too risky to publish was released Thursday, ending a saga that pitted concerns about terrorism against fears of a deadly global epidemic.
Both papers describe how researchers created virus strains that could potentially be transmitted through the air from person to person. Scientists said the results could help them spot dangerous virus strains in nature.
But last December, acting on advice of a U.S. biosecurity panel, federal officials asked the researchers not to publish details of the work, which identified the genetic mutations used to make the strains. They warned the papers could show terrorists how to make a biological weapon.
That led to a wide-ranging debate among scientists and others, many of whom argued that sharing the results with other researchers was essential to deal with the flu risk.
Bird flu has spread among poultry in Asia for several years and can be deadly in people, but it only rarely jumps to humans. People who get it usually had direct contact with infected chickens and ducks. Scientists have long worried that if the virus picked up mutations that let it spread easily from person to person, it could take off in the human population, with disastrous results.
The two teams that conducted the controversial research eventually submitted revised versions of their papers to the federal biosecurity panel. They said the changes focused on things like the significance of the findings to public health, rather than the experimental details themselves.
The panel announced in March it supported publishing the revised manuscripts, saying it had heard new evidence that sharing information about the mutations would help in guarding against a pandemic. It also concluded that the data didn’t appear to pose any immediate terrorism threat. The government agreed in April.
The benefit of scientists sharing data from the new paper “far outweighs the risk,” Dr. Anthony Fauci, director of the National institute of Allergy and Infectious Diseases, said Wednesday.
One paper, from Yoshihiro Kawaoka of the University of Wisconsin-Madison and colleagues, was published last month by the journal Nature. On Thursday, the journal Science published the second paper, from a team led by Ron Fouchier of the Netherland’s Erasmus Medical Center in Rotterdam.
Both papers tested the ability of the altered bird flu viruses to spread through the air between ferrets, none of which died from those infections. The Fouchier paper reports that the virus could spread this way by acquiring as few as five specific mutations.
Two of those mutations are already found frequently in strains of the virus. And the other three could arise during infection of people or other mammals, a new mathematical analysis in Science concluded. But the likelihood is unclear. An author of the analysis compared the situation to earthquake prediction.
“We now know we’re living on a fault line,” Derek Smith of Cambridge University and the Erasmus center told reporters. “It’s an active fault line. It really could do something.”
Fouchier said the ferret results don’t give a clear answer about how deadly an altered virus would be in people.
Eddy Holmes of Penn State University, who studies the evolution of flu viruses but did not participate in the Fouchier or Kawaoka studies, said those works present the first good experimental evidence about how the bird flu virus could mutate to become more easily spread between people.
The studies are “a useful frame of reference” for studying that question, but not the final answer, he said.
Journal Science: http://www.sciencemag.org
Malcolm Ritter can be followed at http://www.twitter.com/malcolmritter
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June 21st, 2012
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June 21st, 2012
BLS Note" What the hell? Why are they worried about a dinosaur skeleton?
NEW YORK -
A New York judge's approval has cleared the way for a dinosaur skeleton held by an auction house to be moved to U.S. control on Friday.US Dept
Authorities said Wednesday the skeleton will be carefully transferred in boxes so no damage is done to the 70 million-year-old bones.
Department of Homeland Security spokesman Luis Martinez says the skeleton will be moved to a government warehouse. He says the government cannot disclose the name or address of the storage site because other priceless antiquities are there.
The government sued to recover the dinosaur earlier this week. It says the dinosaur should be returned to Mongolia, where it was unearthed in the last two decades.
Heritage Auctions co-chairman Jim Halperin says Heritage looks forward to releasing the dinosaur after it was assured it will be properly and carefully transported and stored.
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June 21st, 2012
LONDON - Britain's Queen Elizabeth has another reason to be cheerful in her Diamond Jubilee year - her annual pay is about to jump by 20 percent to 36 million pounds ($56 million).
Her property holdings, known as the Crown Estate, posted a record profit of 240.2 million pounds ($377.4 million), a net rise of 4 percent in the year through March 2012 largely due to strong tenant demand for its shops in the upmarket Regent Street and St James's districts of London.
At a time when Britain is in recession and many families are feeling the pinch of higher household costs and taxes, the Queen's allowance will rise to 36 million pounds from 30 million pounds, the level at which it was frozen in October 2010 under new laws which peg her pay to the estate's profits.
"It's a great set of results and I'm sure everyone's going to be happy," Crown Estate Chief Executive Alison Nimmo said.
The 85-year-old queen celebrated her 60th year on the throne this month with a 1,000-vessel flotilla on London's River Thames and nationwide street parties.
She has been paid by taxpayers through an allowance set by Parliament and via other government grants since King George III ceded all property profits to the Treasury in 1760.
The Crown Estate pays all of its profit to the Treasury, or finance ministry. Under new laws that come into effect in 2013-14, the monarch's pay is calculated as 15 percent of the estate's profits from two years prior.
The changes were designed to ensure the queen's pay would rise and fall with the health of the British economy, which this year entered its second recession since the start of the global financial crisis.
Used mainly to pay the Royal household's staff as well as for items like laundry, stationery and official functions, her 2013-14 pay will be the highest since 2008 though still less than half of her 1991 pay of 77.3 million pounds ($121.2 million).
The Crown Estate, which owns a mix of wind farms, retail parks and most of Britain's seabed in addition to its central London properties, outperformed the industry's Investment Property Databank (IPD) benchmark index due to strong international interest in the London property market and the country's growing dependency on renewable energy.
The value of its property portfolio rose 7.4 percent to 7.6 billion pounds from the previous year, while the total return, which includes rental income, was 16.8 percent, outperforming the IPD index by 10.4 percentage points.
Its London projects include the 500 million pound ($784 million) regeneration of the St James's district, where it will redevelop almost 300,000 square feet of new shops, offices and homes.
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