BUSINESS BRIEFS
Fed in second auction of $20B in funds to banks
Associated Press
WASHINGTON — The Federal Reserve, working to combat the effects of a severe credit crunch, announced yesterday it had auctioned another $20 billion in funds to commercial banks at an interest rate of 4.67 percent. Fed officials pledged to continue with the auctions "for as long as necessary."
The central bank said it had received bids for $57.7 billion worth of loans, nearly three times the amount being offered, indicating continued strong interest in the Fed's new approach to providing money to cash-strapped banks.
It was the second of four scheduled auctions. The first auction, on Monday, of $20 billion resulted in loans being awarded at an interest rate of 4.65 percent. There were 93 bidders seeking $63.6 billion at the first auction and 73 at the second.
Two more auctions will occur in early January.
The new auction process was announced by the Fed last week in a coordinated action with central banks around the world trying to address a global credit crunch.
SINGAPORE MAY BAIL OUT BROKERAGE
NEW YORK — Singapore's state-owned investment fund is mulling a $5 billion investment in Merrill Lynch & Co., according to a report yesterday, potentially providing the nation's biggest brokerage with badly needed cash amid billions of dollars in credit losses.
The investment bank is said to be in advanced talks with Temasek Holdings about a capital injection, according to a report in The Wall Street Journal. It would become the latest major financial services firm to turn overseas for cash to bail it out of huge losses related to the subprime mortgage crisis.
A spokeswoman for Merrill Lynch declined to comment. Telephone calls to Temasek went unanswered.
Merrill has already taken $7.9 billion of writedowns from bad bets on risky mortgage-backed securities. Analysts have predicted that Merrill's mortgage writedowns may double with another $8 billion or more in the fourth quarter.
CIRCUIT CITY SEES STILL MORE LOSSES
RICHMOND, Va. — Holiday shopping might not be enough to save the fourth quarter for struggling electronics retailer Circuit City Stores Inc.
Executives with the Richmond, Va.-based company warned yesterday that they expect a modest loss in the period, despite America's traditional holiday hunger for televisions and other high-tech gadgets.
Coupled with a wider-than-expected third-quarter loss, the gloomy prediction prompted Wall Street to question whether Circuit City should give up trying to fix its numerous problems and hang out the for sale sign.
The nation's second biggest consumer electronics retailer saw shares tumble yesterday as investors reacted to a quarterly loss driven by lower extended warranty sales and business interruptions the company blamed on ongoing restructuring efforts.
Its shares closed down $1.91, or 29 percent, at $4.75, a 52-week low.
FITCH WARNS OF BONDS DOWNGRADE
NEW YORK — Deterioration in the credit cycle has taken a new twist, as Fitch Ratings warned yesterday a number of bonds might be downgraded — because the bonds' insurer is facing a downgrade from Fitch.
Standard & Poor's made the same move earlier this week, downgrading hundreds of municipal bonds after it had downgraded the insurer of those bonds, ACA Capital.
It is a cycle that could continue as rating agencies warn bond insurers, such as MBIA Inc. and Ambac Financial Group Inc., might not have enough capital to cover claims.
Earlier in the week, Fitch warned MBIA will need to raise an additional $1 billion on top of the $1 billion capital investment private equity firm Warburg Pincus pledged earlier in the month. The money is needed as a safety net in case insurance claims rapidly rise in 2008.
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