December 20, 2012 in Business

Billions lost in LIBOR scam

From Wire Reports
 

WASHINGTON – A federal watchdog has found that government-controlled Fannie Mae and Freddie Mac may have lost more than $3 billion from big banks’ alleged rigging of a key interest rate.

The staff of the inspector general for the Federal Housing Finance Agency, which oversees the two mortgage giants, gave the estimate in an internal memo obtained by the Associated Press. It recommended that the FHFA consider suing banks over the LIBOR rate.

Switzerland’s largest bank, UBS, agreed Wednesday to pay $1.5 billion in fines, becoming the second bank fined for trying to manipulate LIBOR. The rate is used to price trillions of dollars in contracts including mortgages and credit cards.

LIBOR, or the London Interbank Offered Rate, is set daily using information that banks provide.

The memo says Fannie and Freddie sustained the losses on $1 trillion in mortgage securities and other investments linked to the key rate. The Wall Street Journal first reported on the memo Wednesday.

Taxpayers so far have paid about $170 billion to rescue Fannie and Freddie, which suffered huge losses from risky mortgages and were bailed out by the government in September 2008 at the onset of the financial crisis.

FedEx cutting costs to boost profits

NEW YORK – FedEx may be pessimistic about the U.S. economy, but it’s confident about growing its earnings.

The world’s second-largest package delivery company, a bellwether for economic health because of the vast number and kinds of shipments it handles, lowered its economic forecast for the U.S., saying there remains a lot of uncertainty for the country.

FedEx maintained its earnings forecast for the full fiscal year ending in May, counting on a massive cost reduction plan and a slightly more optimistic view of growth overseas. Shares rose 84 cents to close at $93.20

FedEx Corp. posted earnings of $438 million, or $1.39 per share for the quarter that ended in November, compared with $497 million, or $1.57 per share, a year ago. Superstorm Sandy shaved 11 cents per share off of earnings in this year’s quarter, as shipping volumes fell and costs rose.

Revenue rose to $11.1 billion from $10.6 billion a year ago, as the company scaled back its operation to better match demand and some of its raised rates. Wall Street expected $1.41 per share in the recent quarter on revenue of $10.84 billion, according to FactSet.

Getco buying Knight Capital

NEW YORK – Nearly five months after a major software malfunction at Knight Capital roiled financial markets, the trading firm has agreed to sell itself to a competitor, Getco, in a cash-and-stock deal that the companies value at $1.4 billion.

Knight shareholders can choose $3.75 per share in cash or one share of stock in the new holding company. The per-share price – which is more than the $3.50 per share that Getco offered last month – is a 13 percent premium to Knight’s Tuesday closing price. But it’s a fraction of the company’s worth before the meltdown.

Getco’s acquisition is a path forward for Knight, which suffered $461.1 million in losses from the August malfunction that sent the shares of dozens of publicly traded companies haywire.


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