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Luby’s Inc. said Thursday that a regulatory panel has ordered Credit Suisse Securities (USA) LLC to buy back certain auction rate securities from the company.

An arbitration panel of the Financial Industry Regulatory Authority, or FINRA, ruled Credit Suisse was liable to Luby’s and would have to repurchase the securities and accrued interest.

Houston-based Luby’s (NYSE: LUB) had asserted it had been unable to liquidate its auction rate securities as a result of Credit Suisse’s actions.

Auction-rate securities are debt investments issued by municipalities, student-loan agencies, closed-end funds and others, with interest rates that are reset at weekly or monthly auctions run by the investment firms.

As of Feb. 10, the company’s most recent quarterly filing, Luby’s held $7.1 million par value or $5.2 million fair value in auction rate securities. As a result of the award, Luby’s expects to record a pre-tax gain of approximately $1.8 million, net of expenses, on the sale of investments in its fourth quarter fiscal 2010.

Luby’s filed the FINRA claim against Credit Suisse in October 2008. Luby’s asserted that Credit Suisse knew but failed to disclose to Luby’s that auction rate securities were only liquid at the time because broker-dealers and others were artificially supporting and manipulating the auction market to maintain the appearance of liquidity and stability.

Multiple lawsuits were filed in 2008 by various companies and authorities in Texas, New York and Massachusetts, as well as the U.S. Securities and Exchange Commission, related to the sale of auction-rate securities at the peak of the credit crunch and financial system meltdown.

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The banking industry in St. Louis isn’t quite over the recessionary hump, but it’s heading in the right direction, industry observers say.

Overall, the 78 banks headquartered in St. Louis turned a small profit — $15 million — in the first quarter after losing $433 million in 2009. Only nine banks lost money from January through March.

"These are the best numbers we’ve seen since the first quarter of 2008," said Julie Stackhouse, chief bank regulator at the Federal Reserve Bank of St. Louis. "It is a turning point, and that’s a good thing to see."

That doesn’t mean that it’s easier to get a loan. As of March, loans were down 4 percent from last December and down 9 percent from March of last year.

That drop isn’t solely due to fearful bankers’ becoming tight-fisted. Bankers say their best business borrowers are hoarding cash and not ready to borrow to fund expansions.

"They’re still waiting," said Rick Sems, regional president for PNC Bank, which owns National City Bank in St. Louis. Local business have seen their profits rise, but that’s because of cost cutting.

"They’ve completely rationalized their organizations, and now we’re seeing a little bit of top line growth," Sems said. That revenue growth should lead to more borrowing over time.

The Fed’s national survey of lenders shows that bankers have at last stopped tightening their lending standards for business loans, although they haven’t begun to loosen. "We expect that credit is going to continue to be tight," said Craig Fehr, financial services analyst for the Edward Jones brokerage.

The count of problem loans held steady at local banks from December through March, although it’s still up 43 percent from March 2008.

"Unless we have an economic shock, it’s reasonable to expect that we’ll see stabilization," says Stackhouse.

About 4.6 percent of loans are troubled at local banks — more than double the figure that banks see in normal times. The count includes loans where payments are far behind, foreclosed loans and loans that were modified because borrowers couldn’t pay.

The wild card involves commercial real estate. Loans for office buildings, apartment complexes and the like make up 36 percent of loan portfolios at local banks.

Commercial real estate loans go bad with a lag — landlords can keep up their loan payments for a while even after tenants have moved out payday loans no faxing. The Congressional Oversight Panel, set up to monitor the federal bank bailout, warned in February that "a wave of commercial real estate loan failures could threaten America’s already-weakened financial system."

Meanwhile, banks are benefitting from a widening profit spread between the interest they must pay depositors and what they can charge borrowers, says Joe Stieven of Stieven Capitol Advisors, a longtime St. Louis bank analyst.

The recession killed off much competition from non-banks — insurance firms, business finance companies and other lenders who often undercut the interest rates offered by banks. "They had destroyed rational loan pricing for about five years," said Stieven.

The local bank numbers exclude banks with big St. Louis operations but that are based elsewhere — such as U.S. Bank and Bank of America. They generally don’t break out their results by region.

Among local banks, nearly all of last year’s loss came from a single player, First Bank of Clayton. The bank lost $405 million last year, much of it on development loans made in California. First Bank lost money in this year’s first quarter, but the loss was down dramatically to $23 million.

First Bank has been selling off pieces of its business, including some loans, to raise cash and improve its capital levels. Only about a third of the bank’s operation is in St. Louis. Excluding First Bank, loans by St. Louis banks are down only 3 percent from a year ago.

Three small locally based banks — Westbridge, First Advantage and People’s Bank & Trust — failed to meet the federal standards as "well capitalized" as of March. A spokesman for First Advantage said it climbed back to the well-capitalized level in April. David Thompson, president of Peoples, called it a "temporary setback" and said the bank had a plan to improve capital.

Westbridge was below the level of "adequate" capital under federal guidelines. A bank without adequate capital is considered in danger of failure. Westbridge CEO Rick Hummell said that a group of investors still planned to buy and rescue the bank, and that they hoped to get regulatory approval in June.

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Gov. Bev Perdue confirmed late Thursday afternoon that American Express will build a new data center in eastern Guilford County.

American Express had sought a location for a new $400 million data center that would employ up to 150 people.

“The decision today by American Express is great news for Guilford County and for North Carolina,” Perdue said in a statement. “I spoke recently to the American Express CEO, during the company’s final decision-making process, and emphasized North Carolina’s outstanding work force and business-friendly environment. We clearly made a compelling case to land this important project, bolstering our already-strong reputation as an excellent location for data centers, which bring sustainable jobs and significant investment.”

American Express already employs more than 2,000 people in Greensboro at a customer service center.

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Federal Reserve Chairman Ben Bernanke said Wednesday he has concerns about a signature piece of Senate Democrats’ Wall Street reform package that cracks down on complex financial products.

Bernanke wrote about the consequences from a congressional ban preventing banks from trading the complex financial products, called derivatives, in a letter to key lawmakers.

"Forcing these activities out of insured depository institutions would weaken both financial stability and strong prudential regulation of derivative activities," Bernanke wrote to an author of the measure, Sen. Christopher Dodd, D-Conn.

Dodd worked with Sen. Blanche Lincoln, D-Ark., on the measure, including the swaps ban, which ranks among the top hang-ups that could threaten final passage for the overall Wall Street reform bill.

Progress on the bill has been slow going, and the Senate will continue debating amendments at least through early next week, Dodd said Thursday.

The Fed chair’s concerns about the swaps ban are similar to those raised by other high profile regulators — former Fed chairman Paul Volcker and Federal Deposit Insurance Corp. Chairman Sheila Bair. They all stopped short of blasting the measure.

The tough crackdown in question is the brainchild of Sen. Lincoln, who is facing a contentious Democratic primary in Arkansas on Tuesday in her bid for re-election. The Senate isn’t expected to propose changes to the measure until after Tuesday, congressional aides and lobbyists say.

Congress generally wants to get tougher on derivatives, which are currently traded with no oversight and were a key reason for the taxpayer bailout of American International Group (AIG, Fortune 500). But lawmakers disagree about how much to regulate them.

The measure banning bank swaps goes farther than the so-called Volcker rule, named for the former Fed chief, that would only block some banks from doing such trades for their own purposes and accounts, called "proprietary trading."

The Lincoln proposal blocks banks from all derivatives if the banks want access to cheap emergency loans that the Federal Reserve can make as lender of last resort.

Bernanke said in the letter that banks use derivatives to shed risk that can arise in deals they make over interest rates, currency and other credit risks.

"Use of derivatives by depository institutions to mitigate risks in the banking business also provides important protection to the deposit insurance fund and taxpayers as well as to the financial system more broadly," Bernanke wrote.

A House bill that passed in December would allow all banks to trade derivatives in a more transparent way. However that bill also allows some trades between some banks and certain companies, such as airlines, to continue without regulation.

But Senate Democrats are tougher on derivatives, in the aftermath of fraud charges that the Securities and Exchange Commission levied against Goldman Sachs (GS, Fortune 500) for selling a complex mortgage-related derivative to investors while failing to tell them that a hedge fund was betting against the product.

When asked about negotiations on the derivatives piece on Thursday, Dodd said he understood that discussions were ongoing, but he wasn’t involved in them. 

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If you can’t fight the federal government, you may as well pay ‘em. Especially if you’re Goldman Sachs.

In recent days, Wall Street has been abuzz with speculation that Goldman attorneys have entered preliminary talks with the Securities and Exchange Commission with the hopes of settling the outstanding federal fraud charges now facing the company.

Executives at the New York City-based investment bank have offered similar hints.

"There are a myriad of opportunities out there and I won’t rule any of them out," Gary Cohn, the company’s president and chief operating officer, said at the conclusion of the firm’s annual shareholder meeting last week.

A settlement with the SEC would likely bring to an end at least some of the negative publicity Goldman has had to endure since regulators charged the company and one of its employees with defrauding investors in the sale of a complex mortgage investment dubbed "Abacus."

Determining just how much Goldman (GS, Fortune 500) might be on the hook for however, is not simple.

Some legal experts said that a settlement could exceed the $1 billion the SEC claims that investors lost on the deal. That’s due to the high-profile nature of the case and the lack of bargaining power Goldman may have with regulators.

"As a principal regulator, [the SEC] can negatively impact Goldman’s ongoing businesses," said David Desser, managing director of the Chicago-based Juris Capital, a privately-held fund that invests in commercial litigation. "That is a big hammer that no other litigant has against an adversary in court."

A penalty of more than $1 billion would rank as the largest SEC settlement in the post-Sarbanes-Oxley era, eclipsing the $800 million AIG (AIG, Fortune 500) paid to the agency to settle claims related to misstatement of financial results in 2006, according to NERA Economic Consulting.

Others suggest that the SEC may be willing to accept just a fraction of that amount, citing some of its recent settlements as well as the mountain of other enforcement cases the agency has to deal with.

But what Goldman ultimately pays may prove to be of secondary importance.

After all, for a company that is expected to earn $13 billion in pre-tax profits in the next three quarters, according to Thomson Reuters, any fine will likely be quite manageable, especially if a settlement allows Goldman to avoid being in the public spotlight as much it has during the last year.

Instead, legal experts suggest that Goldman may be particularly fearful of any additional demands the SEC may have as part of a settlement.

The agency could, for example, require the company to create greater distance between its mortgage underwriting and trading operations or provide greater transparency to clients about its different investment products.

"Part of it was the difficulty in valuing these derivatives," said Elizabeth Nowicki, a securities law professor at Boston University, who formerly served as a staff attorney for the SEC. "It might be reasonable for the SEC to insist on some best practices disclosures regarding valuation."

Such a move would not be a major departure for the SEC. In the high-profile settlement it reached earlier this year with Bank of America (BAC, Fortune 500) over bonuses paid to Merrill Lynch employees, the banking giant was required to implement a number of corporate governance measures through 2013, including giving its shareholders an advisory vote on the pay of its executives.

Any deal that is struck between Goldman and the SEC might also resolve the fate of Fabrice Tourre, the 31-year-old French trader who helped broker the now infamous investment deal.

Most experts agree that if Tourre is included in a settlement, chances are he could face a fine as well as a suspension from the securities industry for as much as a year.

Goldman Sachs, which has already moved to distance itself from the London-based employee, will most certainly be looking for ways to insulate itself from any future legal action.

Experts said Goldman could also push the SEC to include language in any settlement that Goldman neither "admits nor denies" the SEC charges.

James Cox, a securities law professor at Duke University, said that the company might also attempt to seek a so-called "global settlement," which would absolve the company of any outstanding current or future federal or state lawsuits over the 2007 Abacus transaction or similar mortgage deals.

That would at least alleviate some of the legal headaches the firm is currently facing.

In two separate securities filings this month, Goldman acknowledged it now faces a variety of related lawsuits, as well as investigations from a number of international regulatory agencies, including Britain’s Financial Services Authority, over the sale of mortgage-related investments.

"[Goldman] wants peace and assurance going forward," said Cox.  

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Consumer borrowing posted an unexpected increase in March, only the second gain in the last 14 months. It could be a sign that households are feeling more confident about boosting spending, a key development needed to support a sustained economic recovery.

The Federal Reserve reported Friday that consumer borrowing rose by $1.95 billion in March, better than the $3.85 billion drop that economists had expected.

Consumer credit was also up in January, but other than those two gains, it has been falling steadily since February of last year as households have cut back on their borrowing to repair their battered balance sheets.

The March gain represented a 1 percent rise at an annual rate following a 3 percent drop in February and a 3.2 percent January increase savings account payday loans.

The strength came from a 3.9 percent jump in nonrevolving credit, which includes auto loans. Revolving credit, which covers credit card debt, actually fell by 4.5 percent, the 18th consecutive decline.

The overall increase of 1 percent pushed total credit up to $2.45 trillion at the end of March, down 3.4 percent from a year ago.

Economists are hoping that consumer borrowing will soon stabilize and resume growing, although they caution that the rebound will be restrained by tighter credit conditions imposed by many banks in the wake of the financial crisis.

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Stocks plunged around the world Tuesday as fear spread that Europe’s attempt to contain Greece’s debt crisis would fail. The euro fell to its lowest point against the dollar in a year.

The Dow Jones industrial average lost 225 points, its biggest drop in three months. The Dow and broader indexes each fell more than 2 percent. Meanwhile, Treasury prices rose on increased demand for safe investments.

Stocks have seesawed in the past week as European countries’ efforts to agree on a bailout package for Greece proceeded in fits and starts. An agreement finally came together over the weekend, but its ballooning size of $144 billion has investors worried that Europe would have an even tougher time assembling an aid package if a larger country such as Spain or Portugal were to get in trouble. Traders are concerned that problems in Greece and other countries could spill over to the rest of Europe and in turn, the U.S.

The stock drop was a reminder that it doesn’t take much to rattle investors who are on alert for anything that could disrupt the recovery. The avalanche of selling could continue while investors await answers on Greece. But analysts said most drops were likely to be mild because buyers had been using pullbacks as opportunities to buy.

Tuesday’s slump marked the fifth time in six days that the Dow rose or fell by triple digits. The market’s moves are reminiscent of the fearsome swings in the fall of 2008 and early in 2009 when investors panicked over how bad the recession would get.

Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, said sudden turns in the market were to be expected as traders wrestled with concerns that stocks were overheated. "The market has kind of gotten itself into a volatile trading range," Fullman said.

Investors are worried that other cash-strapped European governments could also ask for emergency loans while the economy of the entire region is still recovering.

"It’s not as though even the strongest economies of Europe are doing particularly well," Mike Shea, managing partner at Direct Access Partners LLC in New York, said. "Why is a plumber in Germany going to bail out Greece or Portugal?"

Investors rushed to safer holdings such as Treasurys, pushing interest rates sharply lower. The yield on the benchmark 10-year Treasury note fell to 3.61 percent from 3.69 percent late Monday.

The Chicago Board Options Exchange’s Volatility Index, which is known as the market’s fear gauge, soared 18 percent. That is a signal that more investors are betting on big drops in the market.

The euro again fell against the dollar as traders turned away from the currency used by 16 European Union countries including Greece. When investors start doubting a country’s economic strength, they tend to sell its currency.

Anthony Chan, chief economist at J.P. Morgan Private Wealth Management in New York, said that Greece’s troubles weren’t enough to spoil a global rebound but that investors were concerned that this small hole in the world economy would become bigger.

"My suspicion is that this won’t end up being large enough to really cause the kind of problems that the market is obsessed with," he said.

The dollar rose against other major currencies, especially the euro. The euro sank as low as $1.2994 in New York, its weakest point since April 2009. It was worth $1.3212 late Monday and had traded as high as $1.51 last November.

The stronger dollar is a negative for investors because it would cut into profits for U.S. companies with sizable foreign operations. When the dollar is up, overseas profits translate into less money. The rising dollar also makes it more expensive for foreign buyers to purchase commodities like oil. That hurts demand.

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The Hawaii Convention Center has won another Prime Site Award from Facilities & Destinations magazine.

This is the center’s 12th consecutive award from the trade publication. It is one of 27 convention facilities managed by SMG nationwide to receive the award.

The award is determined by members of the meetings and conventions industry — promoters, booking agents and event planners — directly involved in site selection. Voting is based on convenience of location, attractiveness and maintenance of the facility, professionalism of staff, cuisine, and technological capabilities.

SMG markets and manages the Hawaii Convention Center under the direction of the Hawaii Tourism Authority, the state’s tourism agency.

“We are extremely pleased with our continuous success and share our excitement with our 26 sister facilities of the SMG ohana,” said Joe Davis, SMG general manager for the Hawaii Convention Center, in a prepared statement. “This award not only recognizes the facility but highlights Hawaii as a great destination for meetings and the hard work of our staff and destination partners.”

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