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Saturday, June 6, 2015

Fed's CEO Talks Rate Hike Timing, Consumer Credit Up 7.25% & SEC Charges $CSC

William C. Dudley, President and Chief Executive Officer of the Federal Reserve, gave remarks at the Economic Club of Minnesota’s June Luncheon in Minneapolis on Friday. In his remarks he provided his views on the timing and pace of rate hikes over the short- and long-term. It's clear that Dudley is less optimistic about growth, but he's still hopeful about the future in terms of inflation and labor trends. 

"Putting this all together," he says, "I still think it is likely that conditions will be appropriate to begin monetary policy normalization later this year." Dudley also takes some time to address concerns that the Fed has the ability to control the fed funds and the impact of a rate hike on asset prices. 

"We have the appropriate tools to push up short-term interest rates," Dudley says. "However, lift-off may not go so smoothly in terms of the impact on financial asset prices. After all, lift-off will represent a regime shift after more than six years at the zero lower bound." Only time will tell.

The SEC charged Computer Sciences Corporation (NYSE: CSC) and its executives with manipulating financial results. Former finance executives involved with the company's international businesses were also charged for ignoring basic accounting standards. CSC agreed to pay $190 million, former CEO Michael Laphen agreed to return more than $3.7 million under the clawback provision and pay a $750,000 penalty, and former CFO Michael Mancuso will return $369,100 and pay a $175,000 penalty. Allegedly items were added to the company's accounting models that artificially increased profits leading to significant reductions in company earnings in 2010 and 2011. 

“When companies face significant difficulties impacting their businesses, they and their top executives must truthfully disclose this information to investors,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. 

The SEC also found that finance executives in Australia and Denmark manipulated financial results of the company’s businesses in those regions. "They overstated CSC’s operating results by more than 5 percent in the first quarter of fiscal year 2009 and allowed the company to meet analysts’ earnings targets during that period," the report said.The stock currently trades at $67.69 and is up 41.67% in the last 5 years.

According to the Federal Reserve, consumer credit increased at an annual rate of 7.25% in April. Revolving credit is up 11.5%, while non-revolving credit increased at 5.75%.