Looming Legislation Hits Financial Sector

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MarketWatch

June 24, 2010 Thursday 2:38 PM EST

SECTION: NEWS & COMMENTARY; Markets; Financial Stocks

LENGTH: 429 words

HEADLINE: Looming legislation hits financial sector

BYLINE: Sam Mamudi, MarketWatch mailto:smamudi@marketwatch.com.

Sam Mamudi is a reporter for MarketWatch, based in New York.

NEW YORK (MarketWatch) — Shares of leading financial companies trimmed some of their losses Thursday afternoon, but worries over final negotiations on financial legislation remained.

Among the big decliners was M&T Bank Corp. (MTB) , down about 3.5%, and asset managers Janus Capital Group. Inc. (JNS) , Invesco Ltd. (IVZ) , T. Rowe Price Group Inc. (TROW) and Legg Mason Inc. (LM) — all down more than 2%.

J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C) were both down close to 2%. J.P. Morgan and Wells Fargo & Co. (WFC) had earlier been down 3.5%.

Negotiators on Capitol Hill have said that the legislation governing the financial sector will be finalized Thursday.

One measure agreed to on Thursday morning was that smaller banks will be able to continue to count existing trust preferred securities toward their capital standards. But banks with $15 billion or more in assets would not be able to do so, though they will have five years to phase out use of trust preferred securities.

That had been concern earlier Thursday that included in final legislation would be a provision or banks to pay for Fannie Mae (FNM) and Freddie Mac (FRE) if either agency needed a bailout.

However, Barney Frank, chair of the House Financial Services Committee, later denied the reports, saying big banks should not be responsible for the total cost of losses.

At the latest, the Financial Select Sector SPDR exchange-traded fund (XLF) was down 0.9%, after falling close to 2% earlier in the day.

Leading the slide Thursday were real estate investment trusts ProLogis (PLD) , CB Richard Ellis Group Inc. (CBG) and Host Hotels & Resorts Inc. (HST) . As well as looming legislation, weighing on REITS were the 1.1% fall in durable-goods orders, though the economy also saw a bigger-than-expected drop in weekly jobless claims.

Genworth Financial Inc. (GNW) , down about 4% in the morning, was down about 2% at the latest.

The biggest financial gainer in afternoon trading was Marshall & Ilsley Corp. (MI) , up more than 4.5%. Also rising was Discover Financial Services (DFS) . The credit-card lender said Thursday its fiscal second-quarter profit was up 14% to $258.1 million, or 33 cents a share, from $225.8 million, or 43 cents a share in the year-earlier period. Net income in the year-ago quarter included roughly $295 million related to a litigation settlement. Analysts surveyed by FactSet Research had expected, on average, profit of 11 cents a share.

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