Friday, May 22, 2009

Quick Notes for the Day - May 22

Just a quick reminder that Monday is Memorial Day, and Rollins & Associates and Rollins Financial will be closed (as will banks, the stock market, etc.). Have a great LONG weekend!


TARP Funds to Be Considered Tier 1 Capital - The Federal Reserve on Friday adopted a rule that will allow banks receiving capital from the bank bailout fund to consider some of the financial injections they have received to be a high-level of capital. According to the Federal Reserve, banks can consider senior perpetual preferred stock they have received from the Treasury Department as grade-A, Tier 1 capital, the kind of assets a bank needs to have lots of. Private preferred equity stakes are often considered Tier 2, a lower form of capital, while common equity has traditionally been considered Tier 1 capital. However, the Treasury is considering the preferred stake investments it has been making in banks to be considered Tier 1. As the financial crisis has worsened, some banks in the program have found that their common equity value has diminished, making the government preferred investment a larger percentage of their Tier 1 Capital. Banks typically need to have a large percentage of their risk-weighted assets as Tier 1.

Dollar Slides Against the Euro - The dollar fell to the lowest level versus the euro since December on Friday. It seems that most traders are looking for some alternatives to the US dollar with diminishing fears about the global economy (the US dollar is considered to be a "safe harbor" during times of economic crisis). The euro topped $1.4026 on Friday, before trading at $1.4007, still up from $1.3904 in trading Thursday.

GM Down on Bankruptcy Fears - Shares of General Motors fell as much as 9% Friday as traders backed out of the stock on fresh reports the automaker was unlikely to keep itself out of bankruptcy. GM was up on Thursday on news the federal government would pump another $7.5 billion of emergency loans into GMAC and reports that at least three bidders have emerged for GM's Opel unit in Europe.

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