July 16th, 2009
02:32 PM ET

Financial Dispatch: Paulson defends BofA’s shotgun wedding

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Andrew Torgan
CNN Financial News Producer

Former Treasury Secretary Henry Paulson, testifying today before Congress for the first time since leaving office, defended his role in salvaging a controversial deal struck during the height of the financial crisis last fall.

Lawmakers grilled Paulson about whether he overstepped his authority in pushing Bank of America to follow through on its takeover of troubled brokerage Merrill Lynch - a deal which wound up costing taxpayers billions of dollars.

Paulson testified before the House Committee on Oversight and Government Reform, whose members have already questioned the chiefs of Bank of America and the Federal Reserve.

Bank of America's purchase of Merrill Lynch last September was trumpeted as good news, especially when compared to the near-simultaneous bankruptcy of Lehman Brothers.

Yet the deal later nearly collapsed, only to be rescued by billions of taxpayer dollars and government intervention, the full extent of which had not fully surfaced until officials started investigating earlier this year.

Jobless claims at 6-month low

The number of Americans filing first-time claims for unemployment insurance fell to the lowest level in six months last week, coming in well below estimates, but the drop may be attributable to quirks in the auto industry rather than improvement in the economy.

There were 522,000 initial jobless claims filed in the week ended July 11, down 47,000 to from a revised 569,000 the previous week, the Labor Department said.

Additionally, the number of Americans continuing to receive unemployment insurance for one week or more dropped by 642,000 to 6.27 million – according to the most recent data available.

1.5 million homes in foreclosure

The foreclosure plague is not going away. In fact, it's only getting worse.

A record 1.53 million properties were in the foreclosure process - default notices, auction sale notices and bank repossessions - during the first six months of 2009. That was 9% more than the previous six months and 15% more than the same period of 2008, according to a report released today by RealtyTrac.

And, in a bad sign for a housing recovery, there was no recorded improvement in June, the last month of the cycle. More than 336,000 homes reported foreclosure filings, the fourth straight 300,000-plus month. Filings were up 33% over last June and nearly 5% compared with May.

JPMorgan earns $2.7 billion

JPMorgan Chase once again proved that it’s been one of the better-run banks during the financial crisis today after reporting quarterly results that blew past Wall Street estimates.

Buoyed by a solid performance in its investment banking division, the company said second-quarter profits rose 36% from a year ago to $2.7 billion.

On Tuesday, rival Goldman Sachs also crushed estimates, posting a quarterly profit of $3.4 billion.

CIT on the brink

The small business credit market is about to take another major hit.

Six weeks after Advanta abruptly froze all of its 1 million credit-card accounts, lending giant CIT Group faces potential bankruptcy.

The ailing company announced late Wednesday that it would not receive government assistance. There is "no appreciable likelihood of additional government support being provided over the near term," the company said in statement.

CIT’s board and executives are no said to be evaluating alternatives.

CIT was historically the biggest issuer of Small Business Administration-backed loans, topping the agency's lender list year after year. But in the wake of the credit crisis that followed Lehman Brothers' September collapse, CIT's lending came to a standstill.

Gas drops below $2.50 per gallon

Gas prices are back below $2.50 per gallon for the first time since May, dropping 1.2-cents overnight to $2.492.

In the last 25 days, the average price has decreased 20.1 cents, or 7.46%. The average price of a gallon of gas is also down $1.62, or 39.4%, from the record high price of $4.114 that AAA reported on July 17, 2008.

The highest gas prices are in Hawaii ($3.243). The cheapest are in Missouri ($2.245).

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Filed under: Andrew Torgan • Economy
soundoff (6 Responses)
  1. Annie Kate

    Such a mess – and all that money to help save people from foreclosure and stabilize the banks and create jobs – it hasn't done any of those things and on our level we have seen nothing from it all. Unemployment not up this week but not really down either and no new jobs of note. Foreclosures continuing to devastate families and only the banks seem to be surviving. Also, the press isn't really reporting much on this mess anymore – like its gone away! I guess its time for misery as usual......

    July 16, 2009 at 10:09 pm |
  2. Kim

    What a mess. Too low interest rates for too long. Creates mucho debt and financial chaos

    July 16, 2009 at 7:17 pm |
  3. JC- Los Angeles

    Since the second plane hit on 9/11, America has been in a recession kept afloat only by an octogenarian's egregious rate cuts and 100% pure uncut American mortgage fraud.

    When the Bush administration realized America was nothing but a morally bankrupt, culturally corrupt cesspool of failed policies, they needed someone willing to pimp out his company, employees and shareholders.

    Ken Lewis raised his hand and in exchange for cold hard cash, agreed to acquire the Countrywide and Lehman fraud factories.

    Henry Paulson, hack of ages, simply lifted the rug and tried to hide the contagion; any suggestion othewise is laughable beyond belief.

    July 16, 2009 at 5:08 pm |
  4. Jim,Calif

    Should have used the shotgun & filled it with rock salt & shot Bof A in the Behind. I would not do bussiness with them if they were the only bank on earth.

    July 16, 2009 at 4:58 pm |
  5. Kat

    Bank Of America.. Employees overworked..and totally underpaid

    July 16, 2009 at 3:44 pm |
  6. Joanne Pacicca

    So, you are saying that the banks are doing great, but the people are losing their jobs...and homes?

    July 16, 2009 at 3:27 pm |