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Reuters – It would be hard for many to imagine hedge funds buying stock in a U.S. company with the word "home" in its name in the worst housing downturn since the Great Depression — let alone speak admiringly of its solid cash flow and growth prospects.
But to a number of hedge funds, Brink’s Home Security Holdings Inc is just such a company, benefiting from long-term solid cash flow and more security-conscious consumers who fear rising crime as the nation’s economic slump drags on.
"With its very predictable cash flow, this stock is the Rock of Gibraltar," said a principal at a hedge fund that has owned Brink’s shares for years. He said he could not be quoted on the record, in part because the fund was considering raising its stake in the home-security system provider.
Bloomberg – Federal Reserve Chairman Ben S. Bernanke said American International Group Inc. operated like a hedge fund and having to rescue the insurer made him “more angry” than any other episode during the financial crisis.
“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke told lawmakers today. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company.”
Bernanke’s comments foreshadow tougher oversight of systemically important financial firms, and come as President Barack Obama seeks legislative proposals within weeks for a regulatory overhaul. The U.S. government has had to deepen its commitment to prevent AIG’s collapse three times since September as the company accumulated the worst losses of any U.S. company.
The company “made huge numbers of irresponsible bets, took huge losses, there was no regulatory oversight because there was a gap in the system,” Bernanke said. At the same time, officials “had no choice but to try and stabilize the system” by aiding the firm.
AIG is getting as much as $30 billion in new government capital and relaxed terms on its bailout announced yesterday.
In another sign of tighter regulation to come, Bernanke said supervisors should have authority to bar new financial products that may be destabilizing to markets.
Bernanke made the AIG comments in response to a question from Senator Ron Wyden, an Oregon Democrat, at a Senate Budget Committee hearing today in Washington.
Bloomberg – General Motors Corp. said its European Opel unit risks running out of cash next quarter, threatening three factories with closure and imperiling as many as 300,000 jobs across the region.
Opel, based in Ruesselsheim, near Frankfurt, is struggling with 30 percent overcapacity as sales slide, GM’s European chief, Carl-Peter Forster, said today in a press briefing at the Geneva International Motor Show. He didn’t specify which sites might close. The U.S. company has major plants in Germany, Spain, Poland, Belgium and the U.K.
GM expects European governments to reach decisions in “days or weeks” on aid the carmaker is seeking to help save operations in the region, Chief Operating Officer Fritz Henderson said. Any interest in the Saab brand depends on a bailout from the Swedish government, according to the executive, who said GM is determined to eliminate failing units in order to channel resources toward more successful models.
“GM will be global, we think,” Henderson said in an interview earlier. “But we have to be realistic, and the environment today requires us to take a lot of tough measures. We need to focus our brand portfolio. We need to get down to fewer brands that can focus very clearly on the market.”
Hummer, Saturn and Saab may all be surplus to requirements and will play “a diminished role,” Henderson said, while Pontiac will be reduced to a niche brand in the U.S. GM, already relying on $13.4 billion in government loans to survive, said Feb. 17 it needs as much as $16.6 billion in additional funds to avoid bankruptcy, including $2 billion by the end of this month.
“We’re quite confident that we can execute a product program and build a brand to be successful going forward,” Henderson said. “After all, it’s about revenue.”
FierceFinance – The government is committed to keeping the wheels of consumer credit greased. To that end, it has launched a $200 billion effort to support the market for consumer receivables.
The Fed announced it will "offer low-cost three-year funding to any U.S. company investing in securitized consumer loans under the Term Asset-backed Securities Loan Facility (TALF)," reports the Financial Times.
"This includes hedge funds, which have never been able to borrow from the U.S. central bank before." The TALF will likely be expanded to cover mortgage-backed securities next year. We’ll have to see if this really adds liquidity to the secondary markets.
