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  • Mon, Jan 26 2009
  • 10:32 AM » CRE: When the Reserve Runs Dry
    Published Mon, Jan 26 2009 10:32 AM by Calculated Risk Blog
    Bloomberg has an update on Manhattan’s largest apartment complex: (hat tip Brian) Tishman Speyer Properties LP and BlackRock Realty ... are relying on a reserve fund to pay debt on the property and have only six months of money left before it runs out, . ... The fund for the Stuyvesant Town and Peter Cooper Village apartments has declined to $127.7 million as of Jan. 15, from $400 million when it was established. This property was purchased in 2006 and has obviously not met income projections. When the reserve fund runs dry, the owner will need to put in more cash or possibly default on the loan. This is a common problem for office, retail and apartment properties that were purchased in 2005 or 2006, at prices that were based on overly optimistic pro forma income projections. A reserve fund was used to pay interest until the rents increased, a scenario that is now unlikely with a recession and declining rents. Many of these deals will blow up when the interest reserve is depleted - probably this year or in 2010.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:32 AM » Take out your aggression with the “Squeeze the Banker” dolls
    Published Mon, Jan 26 2009 10:32 AM by Google News
    Feeling a bit upset about the bailout? Well now you can extract some revenge (kinda) by taking out your frustration on the “Squeeze the Banker” dolls. (h/t ) From the site: A percent of all Squeeze the Banker sales are donated to Modest Needs. Founded in 2002, it’s an award-winning public charity with a simple but critical mission: work to stop the cycle of poverty BEFORE it starts for the low-income workers whom conventional philanthropy has forgotten. They safely and securely help hard-working, low-income households afford the kinds of short-term emergency expenses that can throw them into unhealthy situations: the unexpected car repair, the unanticipated visit to the doctor, or the unusually large heating bill. Ensuring no hard-working person is ever forced to choose between taking a child to the doctor and putting food on the table. I might just have to get me a set. They’ll be a collectors’ item if nothing else.
  • 10:01 AM » FTC Obtains $28 Million From Bear Stearns and EMC
    Published Mon, Jan 26 2009 10:01 AM by loanworkout.org
    The Federal Trade Commission today announced that the agency returned almost $28 million to consumers this week as a result of a settlement with The Bear Stearns Companies, LLC and EMC Mortgage Corporation. Using the defendants’ records, about 86,000 consumers who had mortgage loans serviced by EMC have been mailed redress checks.
    Click Here to Read the Full Article

    Source: loanworkout.org
  • Sat, Jan 24 2009
  • 10:24 PM » Merrill Lynch CEO Thain Spent $35,115 For Commode On Legs
    Published Sat, Jan 24 2009 10:24 PM by feeds.feedburner.com
    Extravagance has no bounds for some of the CEOs now being shown the door. Inquiring minds are looking into how When John Thain became Merrill Lynch’s CEO in early 2008, he hired Michael S. Smith Design to revamp his office suite, spending approximately $1.22 million according to documents. * Area Rug $87,784 * Mahogany Pedestal Table $25,713 * 19th Century Credenza $68,179 * Pendant Light Furniture $19,751 * 4 Pairs of Curtains $28,091 * Pair of Guest Chairs $87,784 * George IV Chair $18,468 * 6 Wall Sconces $2,741 * Parchment Waste Can $1,405 * Roman Shade Fabric $10,967 * Roman Shades $7,315 * Coffee Table $5,852 * Commode on Legs $35,115 Thain also paid his driver $230,000 for one years work, which included the driver's $85,000 salary and bonus of $18,000, and another $128,000 in over-time pay, documents show. Drivers of top executives are often paid about half that amount. $35,115 for a toilet on legs seems a bit pricey no matter what your tastes. “Spending company money on a lavish redo at a time when Merrill’s finances were rocky sends the wrong message,” said Amy Borrus, deputy director at the Council of Institutional Investors in Washington. “Given the dire straits that so many financial institutions are in, redecorating the corner office should be way down on their to-do lists.” Now Thain, a former Goldman Sachs Group Inc. and New York Stock Exchange executive who was hired to run Merrill in December 2007, joins about 35,000 employees that Lewis plans to eliminate over the next few years from the combined firms. Merrill had 58,500 employees at the end of last year, and Bank of America had 243,075. Being ousted by Lewis “isn’t the outcome Thain wanted,” said Roy Smith, a former Goldman partner who teaches at New York University’s Stern School of Business. “He’d rather be known as someone who saved the organization than someone who salvaged a little bit of money before it went over a cliff.” While Thain agreed to forgo a bonus for 2008, New York Attorney General...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 10:24 PM » Fifth Third, Huntington, Keycorp Report Huge Losses
    Published Sat, Jan 24 2009 10:24 PM by feeds.feedburner.com
    Fifth Third (FITB) and Huntington (HBAN) were crushed today after reporting huge losses. Fifth Third tried to reassure investors by noting the writeoffs were "goodwill", non-cash writeoffs. Keycorp (KEY) did the same. We will take a look at goodwill in just a bit, but first let's review the story: Shares of Firth Third Bancorp and Huntington Bancshares were down more than 30% in afternoon trading Thursday as investors reacted to more dismal quarterly results from banks. Fifth Third Fifth Third said it swung to a fourth-quarter net loss of $2.18 billion, or $3.82 a share from a profit of $16 million, or 3 cents a share, a year earlier. Wall Street analysts had been looking for a profit of 2 cents a share, according to a survey by FactSet Research. The result was affected by a $965 million goodwill impairment charge, as well as losses on loans transferred to its held-for-sale book of $800 million and provisions for loan losses of $729 million. During the quarter, Cincinnati-based Fifth Third sold $3.4 billion in preferred shares to the Treasury Department under the capital purchase program designed to give financial assistance to banks. The company slashed its quarterly dividend last month to a penny a share in order to conserve capital. "Economic conditions have deteriorated across our footprint and have placed both our consumer and commercial loan portfolios under significant stress, as evident in our bottom-line results for the year," Chief Executive Kevin Kabat said in a prepared statement. Fifth Third Bancorp has been dinged by its exposure to real estate loans in states such as Florida, Michigan where markets have been hit particularly hard. Huntington Bancshares Also Thursday, Huntington Bancshares of Columbus, Ohio, said its fourth-quarter loss widened to $440.4 million, or $1.20 a share, compared to a loss of $239.3 million, or 65 cents a share, in the year-earlier period. The consensus analyst estimate was a profit of 20 cents a share...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 10:24 PM » It's Never Enough: Citigroup $12 Billion, Freddie Mac $35 Billion
    Published Sat, Jan 24 2009 10:24 PM by Calculated Risk Blog
    From Bloomberg: (hat tip stockdog42) Citigroup Inc. sold $12 billion of notes guaranteed by the Federal Deposit Insurance Corp. ... The sale is the biggest offering of debt backed by the FDIC since banks began using the government’s Temporary Liquidity Guarantee Program on Nov. 25 From (hat tip Comrade Byzantine_Ruins): Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation) is in the process of preparing its financial statements for the fourth quarter of 2008 and the year ended December 31, 2008. Based on preliminary unaudited information concerning its results for these periods, management currently estimates that the Federal Housing Finance Agency, in its capacity as conservator of Freddie Mac (Conservator), will submit a request to the U.S. Department of the Treasury (Treasury) to draw an additional amount of approximately $30 billion to $35 billion under the $100 billion Senior Preferred Stock Purchase Agreement (Purchase Agreement) between Freddie Mac and Treasury. The actual amount of the draw may differ materially from this estimate as Freddie Mac goes through its internal and external process for preparing and finalizing its financial statements. See previous post for some comedy relief: "I Want some TARP".
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:08 PM » Citi Wholesale Update 1-23
    Published Sat, Jan 24 2009 10:08 PM by mrmortgage.ml-implode.com
    1-23-09 Story Update - while Citi was the headline my alert on Thursday ( link below), the report was more about the demise of large bank wholesale lending showing how Chase and others are leaving or significantly scaling back leaving a wide open playing field for regional and local mortgage bankers to flourish. Posted on January 23, 2009 1:00 AM I got word from my contact on Friday that the wholesale channel will remain open but cut back the numbers of brokers they have approved by 80%+-. Wells Fargo just did the same - word is 90% of brokers will be cut off due to ‘performance’ issues. They will implement strict controls over their brokers closely monitoring locking, pull-through and quality. This is all about getting back in control of their deal flow. As I outlined in many reports over the past two months — as the sector got busy again, wholesale lending emerged a sloppy, risky mess with a pull through rate of 25-35% across the large name lenders. This scaling back and focusing on the top 10-20% of brokers action will reduce Citi’s wholesale volume significantly but improve margins over time. Because of this they may be able to offer better pricing to their remaining approved ’special children’ brokers. In theory this will result in more volume out of each broker mitigating the loss of a large percentage of their brokers today. In a perfect world that is how it is supposed to work — the 80/20 rule…you get 80% of your business from 20% of your brokers so focus on the 20%. The problem with this is that good brokers, those that could become part of the 20% with a little work, and high volume brokers that are sloppy but could change with a little work get cut off. But in reality lenders do this because they are out of control and losing money. They want to downsize and lay off staff but can’t come out and say that. Once the volume eases up and they are back in control of their flow, what typically happens is the lender just pockets the extra margin, which upsets their...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • Fri, Jan 23 2009
  • 5:28 PM » Housing and "Ghost Inventory"
    Published Fri, Jan 23 2009 5:28 PM by Calculated Risk Blog
    From CNNMoney: (hat tip Larry) There is probably even more excess housing inventory gumming up the market than current statistics indicate, thanks to a wave of foreclosures that has yet to hit the market. ... The problem: Many foreclosed homes and other distressed properties that are now owned by banks have yet to be listed for sale. ... RealtyTrac looked at listings in four states, California, Maryland, Florida and Wisconsin, and found that they contained only a third of the foreclosures it has in its database. Usually most REOs (lender Real Estate Owned) are listed pretty quickly, although lenders typically clean up the properties and sometimes do minor repairs before listing the property, so there is some lag between foreclosure and the property being listed. The size of this "ghost inventory" is unknown. I've also heard a number stories of lenders delaying foreclosures, probably because they are overwhelmed right now. This is another type of potential "ghost inventory", although many of these properties might already be listed as short sales by the owner. There is also a substantial shadow inventory – homeowners wanting to sell, but waiting for a better market - so for all these reasons, existing home inventory levels will probably stay elevated for some time.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 2:36 PM » Wall Street Journal Says Demand For Reverse Mortgages Up
    Published Fri, Jan 23 2009 2:36 PM by feeds.feedburner.com
    The posted a new article about how the demand for reverse mortgages has climbed as retirement savings have plunged during the recession. WSJ writer Jilian Mincer describes how the market is expected to grow significantly as baby boomers with inadequate savings tap their home equity to fund retirement. "Americans have the bulk of their assets tied up in their homes, even now," says Greg McBride, senior financial analyst at Bankrate.com. "The demand for reverse mortgages is increasing by the day." According to HUD’s most recent FHA Outlook report, HECM applications are up about 14% for FY 2009 compared to this time FY 2008. "People who thought their retirements were set are finding out they don’t have the resource they thought they would," says Bronwyn Belling, reverse mortgage specialist at the AARP Foundation, an affiliated entity of AARP. "It’s a really valuable way to help make ends meet and to stay in their own homes." Technorati Tags: ,,,,,
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 2:36 PM » Countrywide Agrees To Modify Predatory Loans For Tennesseans
    Published Fri, Jan 23 2009 2:36 PM by loanworkout.org
    The lawsuit said Countrywide misled customers by offering low “teaser” rates or no closing costs to induce borrowers into loans they couldn’t afford and without disclosing the risk, leading to rising delinquencies and foreclosures. “(Countrywide’s) practices also have caused a decrease in home values and deterioration of neighborhoods throughout the country and including Tennessee,” the lawsuit [...]
    Click Here to Read the Full Article

    Source: loanworkout.org
  • 2:36 PM » Desperate Homeowners Call For Moratorium on Foreclosures
    Published Fri, Jan 23 2009 2:36 PM by ml-implode.com
    "Nearly 5,000 foreclosed homes were scheduled for auction in 2008 on Long Island alone. With that number likely on the rise in 2009, dozens of families, including some who believe they fell victim to "predatory lenders," rallied on the steps of the county's Supreme Court building Jan. 13, calling for an end to weekly foreclosure auctions and a moratorium on all home foreclosures in New York State to enable residents a grace period to seek refinancing options."
    Click Here to Read the Full Article

    Source: ml-implode.com
  • 2:19 PM » Top Three U.S. Banks Dominate Online Banking
    Published Fri, Jan 23 2009 2:19 PM by Seeking Alpha
    submits: The recent round of bank mergers spurred by the credit crisis has resulted in a major concentration of online banking activity, shows. In the third quarter of 2007, the top three online banks accounted for nearly 60 percent of all of the customers of the top 10 online banks. After accounting for the impact of these bank mergers, however, the top three banks increased their share to 80 percent.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 2:19 PM » Cram-Downs Will Drive MBS Downgrades, Analysts Say
    Published Fri, Jan 23 2009 2:19 PM by Google News
    Key industry analysts have been raising a red flag in the past few weeks regarding the possible impact of a plan that would allow bankruptcy judges to modify the terms of mortgages during debt restructuring, suggesting that allowing so-called cramdowns to take place will likely lead to further significant write-downs in an already battered secondary [...]
  • 12:34 PM » Fannie Mae Laying Off Hundreds
    Published Fri, Jan 23 2009 12:34 PM by Washington Post
    Fannie Mae, the District mortgage giant taken over by the federal government last year, is laying off several hundred employees locally as it reorients itself to focusing on preventing home foreclosures.
    Click Here to Read the Full Article

    Source: Washington Post
  • 9:38 AM » Florida Capital Bank says NO to Broker Mortgages
    Published Fri, Jan 23 2009 9:38 AM by ml-implode.com
    This came in as a tip: "mortgage brokers and loan officers are good enough to provide florida capital with product but not good enough to get a loan..." Click the link for the official announcement. So please send them your loans, but don't ask for one for yourself. The good news here is this only applies to "approved" Brokers.
    Click Here to Read the Full Article

    Source: ml-implode.com
  • 9:37 AM » Messages from the Large Regional Banks
    Published Fri, Jan 23 2009 9:37 AM by Seeking Alpha
    submits: Several large regional banks reported today and gave consistent messages. Cost of funds is increasing as they more conservatively shift from overnight borrowing to 90 day and longer paper, and their customers shift to higher cost CDs from money market accounts. Interest margins continue to be squeezed as asset rates fall more quickly than liability rates. Credit costs continue to rise along with unemployment. They are aggressively marking down real estate owned down to as low as 33% of loan values. Careening common stock prices has forced them to take major non-cash write downs of goodwill on their acquisitions, further eroding their capital. The banks are not looking to pursue any new large acquisitions. When asked about FDIC pressure to acquire troubled banks and the possibility of the FDIC stripping their prey clean of toxic assets, BB&T (BBT) said that the deposits left are fast money. Troubled banks have had to pay up for deposits and when the rates are “rationalized”, the fast money leaves, and the acquired branches would be unprofitable until the business is rebuilt. Thus a cheap bank becomes a costly investment.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:36 AM » Bank Failures and Commercial Real Estate
    Published Fri, Jan 23 2009 9:36 AM by Calculated Risk Blog
    As I've noted several times most regional banks avoided the residential real estate market (because they couldn't compete) and instead focused on CRE and C&D (construction & development) lending. This exposed many regional banks to excessive CRE and C&D loan concentrations, and now that CRE will implode in 2009, many of these banks will be in serious jeopardy. Eric Dash at the NY Times has some details: Most of these banks were never big players in credit cards, subprime mortgages or credit-default swaps. But they were major lenders to commercial real estate developers, home builders and small corporations. As the recession tightens, losses have started to surge. “There will not be the shock and awe factor” of the big bank losses, said Nancy A. Bush, a longtime banking analyst. But “small and midsize banks are up to their eyeballs in commercial real estate related to residential development and business loans. We are going to see a reckoning with how bad that got” in 2009. ... Gerard Cassidy, a veteran banking analyst, projected that 200 to 300 small banks might fail or be forced into mergers over the next year or so. While that is still a fraction of the industry’s 8,400 banks, it is up sharply from the 25 bank failures in 2008. Sounds like Bank Failure Fridays will be busy this year.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:36 AM » Nasdaq Government Relief Index Tracks Big TARP Recipients
    Published Fri, Jan 23 2009 9:36 AM by Seeking Alpha
    submits: The Nasdaq OMX has put together an equal weighted index (called the ) of 24 companies that have received over 1 billion in government relief in the form of TARP or other programs. Any index without volume numbers isn’t of much use to me from a trading perspective, but nonetheless it might be of interest to see how these companies perform collectively over the next couple years. Perhaps an ETF is in the pipeline that will follow this index, but for now any of the big financial ETFs such as the SPDR Financials ETF (XLF) will be a half way decent representation since most of the big banks have received government funds but this index would include companies like [[AIG]] and General Motors (GM) as well.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:36 AM » Citi to Follow Chase out of Wholesale - The ‘Rest’ Are Next
    Published Fri, Jan 23 2009 9:36 AM by mrmortgage.ml-implode.com
    It looks like Citi is following Chase’s lead and is shutting down their wholesale lending (broker) and much of their correspondent (banker) divisions (not verified by Citi). My source got word earlier this morning. Chase kept open correspondent by the way. For those of you that did not catch my Chase report and take on where the mortgage industry is headed over the near-term, please see… Posted on January 16, 2009 2:23 PM This move is not necessarily a statement about Citi’s health, rather the mess that is the mortgage market. On the other hand, this could also be a sign of something bigger coming than Citi simply exiting the highly unstable wholesale space. Chatter has it that the Obama administration will announce something big this weekend. Some think this ‘something’ is the nationalization of some of the nation’s most troubled financial institutions vs. letting them suck every penny thrown their way into their black liquidity trap holes. Some are saying that Obama will increase the size of the stimulus plan in addition to announcing TARP 2. There is even speculation that the National ‘Bad Bank’ of the USA will be brought to life to buy up distressed assets from the balance sheets of the nation’s most important banks. However, the latter would likely require much deeper pockets than most think…and I only track the residential side! Additionally, a bad bank buying distressed assets at ‘fair value’ as Sheila Bair said this week could do serious damage to the very distressed asset prices that they are buying and hit hard already battered balance sheets. Stay tuned. More banks will be shutting down wholesale lending over the near-term which will put a strain on the mortgage market. There is just not the excess capacity through retail or correspondent channels to absorb everyone ‘trying’ to refinance now. There isn’t the warehouse capacity on the mortgage banker side to make a dent either. At present, application to funding rates (pull-through) is being reported to range...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • Thu, Jan 22 2009
  • 5:06 PM » Alt-A Loans a Wild Card in 2009 US Mortgage Outlook
    Published Thu, Jan 22 2009 5:06 PM by Seeking Alpha
    submits: Not-quite-prime Alt-A loans will continue to perform poorly throughout 2009 as economy-wide payment shocks, such as job losses, and mortgage-specific shocks, such as amortizations, continue to stretch borrowers, according to CreditSights. The payment-flexibility common in such loans creates uncertainty about the current loan-to-values and the timing of when higher monthly payments will begin, CreditSights says in
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:47 PM » CMBS delinquencies rise as larger loans default
    Published Thu, Jan 22 2009 3:47 PM by blownmortgage.com
    “ What began as a weakness in the performance of smaller properties located in tertiary markets now includes larger collateral in secondary and primary markets,” said Susan Merrick, Managing Director and U.S. CMBS group head for Fitch Ratings. “Highly levered loans on transitional assets that were originated at the height of the market are proving particularly susceptible to performance default, as the deepening recession continues to make stabilizations according to schedule increasingly unlikely.” Commercial mortgage backed securities (CMBS) loan delinquencies rose to 0.88 percent in December 2008, according to Fitch Ratings. The increase is due in part to defaults on two loans with outstanding balances greater than $100 million, following a November reading which featured two defaults in excess of $70 million. The loan delinquency index currently includes 20 loans with balances of $25 million or more. Six of those 20 loans became delinquent in December. The December delinquencies included a $125.2 million loan secured by a retail property located in Corona, CA and a $104 million pari passu note backed by a portfolio of two hotel properties in Tucson, AZ and Hilton Head, SC. In each case, the respective loan sponsor was experienced with the property type, but cited economic hardship due to market deterioration as the cause of inability to meet debt obligations. Both loans were securitized in early 2008. Fitch does not provide additional details regarding the defaulting loans, however, at least one deal involving Tucson-area and South Carolina hotel properties has made the news recently. In late December, the Arizona Daily Star reported the Transwest Partners/NCH Corp. was close to defaulting on a $209 million loan involving the Westin La Paloma Resort and Spa and another resort in South Carolina. Transwest/NCH has already defaulted on a $21 million supplemental loan for the properties and has struggled to make payments on the loan because of cancellations. The average...
    Click Here to Read the Full Article

    Source: blownmortgage.com
  • 3:47 PM » PBS Interview with Warren Buffett
    Published Thu, Jan 22 2009 3:47 PM by Calculated Risk Blog
    Here is a partial transcript from Susie Gharib’s interview with Warren Buffett airing tonight on Nightly Business Report. You can check your SUSIE GHARIB, ANCHOR, NIGHTLY BUSINESS REPORT: Are we overly optimistic about what President Obama can do? WARREN BUFFETT, CHAIRMAN, BERKSHIRE HATHAWAY: Well I think if you think that he can turn things around in a month or three months or six months and there’s going to be some magical transformation since he took office on the 20th that can’t happen and wouldn’t happen. So you don’t want to get into Superman-type expectations. On the other hand, I don’t think there’s anybody better than you could have had; have in the presidency than Barack Obama at this time. He understands economics. He’s a very smart guy. He’s a cool rational-type thinker. He will work with the right kind of people. So you’ve got the right person in the operating room, but it doesn’t mean the patient is going to leave the hospital tomorrow. ... SG: But I know that during the election that you were one of his economic advisors, what were you telling him? WB: I was telling him business was going to be awful during the election period and that we were coming up in November to a terrible economic scene which would be even worse probably when he got inaugurated. So far I’ve been either lucky or right on that. But he’s got the right ideas. He believes in the same things I believe in. America ’s best days are ahead and that we’ve got a great economic machine, its sputtering now. And he believes there could be a more equitable job done in distributing the rewards of this great machine. But he doesn’t need my advice on anything. ... SG: What’s the most important thing you think he needs to fix? WB: Well the most important thing to fix right now is the economy. We have a business slowdown particularly after October 1st it was sort of on a glide path downward up til roughly October 1st and then it went into a real nosedive. In fact in September I said we were in an economic...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 1:37 PM » Bailed-out banks will have to disclose lending
    Published Thu, Jan 22 2009 1:37 PM by Market Watch
    Banks getting money from the government’s $700 billion bailout fund will have to explain in detail what they are doing with the money, the incoming head of the Treasury Department says.
  • 1:36 PM » The future of finance: Inside the banks
    Published Thu, Jan 22 2009 1:36 PM by www.economist.com
    Blank cheques, bankruptcy, nationalisation: the options are dire, but governments must choose between them “STARTING today,” President Barack Obama declared in his inaugural address from the Capitol, “we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.” In fact his first, urgent task is to remake finance. As Mr Obama spoke in Washington, DC, the markets in New York were sinking under the weight of failing banks despite the promise of a plan from his economic team. A day earlier Britain had put forward its second attempt to get its banks to lend. Others, such as Germany and Italy, may before long need to step in; France, Ireland and Denmark already have. The crisis has shown up flaws in financial markets and the global economy. Huge flows of capital into debtor nations like America and Britain pumped up asset markets (see article). These fed the instabilities of financial markets—which, as our special report explains in this issue, were themselves plagued by poor regulation, dangerous incentives and the reckless use of mathematical models. Fixing this will take a lot of work over the next 18 months or so, when legislation should be ready, but already a picture of a new finance is becoming clearer: smaller, better regulated, more conservative. ...
    Click Here to Read the Full Article

    Source: www.economist.com
  • 1:35 PM » Global banks: Another fine mess
    Published Thu, Jan 22 2009 1:35 PM by www.economist.com
    Fear of the unknown stalks the banking sector SOME blame the financial crisis on a misalignment of interests between banks’ executives, focused on short-term gains, and their longer-sighted shareholders. The problem now is that the goals of owners and managers are too well aligned. Both want to husband capital and lend carefully. That puts them at odds with everyone else. How else to explain another week of bail-outs, billion-dollar losses and brutal bank sell-offs? Start with the bail-outs. On January 15th the Irish government announced the full nationalisation of Anglo Irish Bank, the country’s third-largest lender. Four days later the British government unveiled a potpourri of measures to stimulate lending, including a guarantee scheme designed to protect banks against losses on bad assets and an increase in its stake in Royal Bank of Scotland (RBS) to 70%. On January 20th the French government agreed to provide another €10.5 billion ($13.6 billion) of capital to its biggest lenders. After its predecessor was forced to pump more money into Bank of America on January 16th, the new American administration is working on fresh plans to immunise banks from the effects of their infected assets (see Economics focus). ...
    Click Here to Read the Full Article

    Source: www.economist.com
  • 1:35 PM » Fallible mathematical models
    Published Thu, Jan 22 2009 1:35 PM by www.economist.com
    Mathematical models are a powerful way of predicting financial markets. But they are fallible ROBERT RUBIN was Bill Clinton’s treasury secretary. He has worked at the top of Goldman Sachs and Citigroup. But he made arguably the single most influential decision of his long career in 1983, when as head of risk arbitrage at Goldman he went to the MIT Sloan School of Management in Cambridge, Massachusetts, to hire an economist called Fischer Black. A decade earlier Myron Scholes, Robert Merton and Black had explained how to use share prices to calculate the value of derivatives. The Black-Scholes options-pricing model was more than a piece of geeky mathematics. It was a manifesto, part of a revolution that put an end to the anti-intellectualism of American finance and transformed financial markets from bull rings into today’s quantitative powerhouses. Yet, in a roundabout way, Black’s approach also led to some of the late boom’s most disastrous lapses. ...
    Click Here to Read the Full Article

    Source: www.economist.com
  • 1:35 PM » Why is finance so unstable?
    Published Thu, Jan 22 2009 1:35 PM by www.economist.com
    Why is finance so unstable? WHEN people look back on a bubble, they tend to blame the mess on crookery, greed and the collective insanity of others. What else but madness could explain all those overpriced Dutch tulips? With hindsight, today’s mortgage disaster seems ridiculously simple. Wasn’t it the fault of barely legal mortgage underwriting, overpaid investment bankers and the intoxication of easy credit? Yet there is an element of the madhouse in that explanation too. Cupidity, fraud and delusion were obviously part of the great bust. But if they are the chief causes of bubbles—which have repeatedly plagued Western finance since its origins in the Italian Renaissance—you have to suppose that civilisation is beset by naivety and manic depression. In fact, observes Abhijit Banerjee, an economist at the Massachusetts Institute of Technology, a little irrationality goes a long way. When reasonable, self-interested people trade with each other, optimism tends to breed optimism—until it subsides into corrosive pessimism. In the words of Willem Buiter, of the London School of Economics, “finance is a scary, inherently unstable, essential activity.” ...
    Click Here to Read the Full Article

    Source: www.economist.com
  • 9:58 AM » How Do You Recapitalize $1.8 Trillion in Bank Loan Losses?
    Published Thu, Jan 22 2009 9:58 AM by Seeking Alpha
    submits: I've been having a look at estimate of a total of $1.8 trillion of losses in the US banking system, compared to just $230 billion in TARP recapitalizations to date and $200 billion of new money from private-sector sources. And while I might niggle with a few of the numbers he uses to reach that $1.8 trillion number, there's nothing there which is obviously crazy: it's very much within the realm of possibility. There's no one huge number which accounts for most of the $1.8 trillion, although the single scariest one is probably the $295 billion that Nouriel reckons banks are going to lose on their commercial and industrial loans -- a number which doesn't even include another $35 billion in leveraged loan losses or $127 billion in mark-to-market losses on high-grade and high-yield corporate debt which ended up on US banks' balance sheets despite the fact that it was securitized.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:39 AM » Jim Collins: How great companies turn crisis into opportunity
    Published Thu, Jan 22 2009 8:39 AM by CNN
    As the author of such business classics as "Built to Last" and "Good to Great," management guru Jim Collins has made a career out of understanding why companies succeed. Yet for the past several years he's been deep at work with partner Morten Hansen on how companies manage to negotiate through turbulent times. It was a prescient choice, deeply relevant to today's environment, and a likely topic of a future book. Collins recently sat down with Fortune senior writer Jennifer Reingold to share some of what he's learned to far. Excerpts:
  • 8:39 AM » Don't bet on bank nationalization
    Published Thu, Jan 22 2009 8:39 AM by CNN
    Nothing seems to scare bankers, or their shareholders for that matter, more than the word "nationalization."
  • 8:39 AM » The True Scope of the Housing Bust
    Published Thu, Jan 22 2009 8:39 AM by feeds.feedburner.com
    .by Chip Hanlon "Below is the transcript of an interview I conducted just a few weeks ago with Fannie Mae’s first Chief Credit Officer, Edward Pinto. In our conversation, Ed painted a very clear picture as to why government policies were key in blowing up the housing bubble."
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • Wed, Jan 21 2009
  • 6:32 PM » Property market is shaken to its foundations
    Published Wed, Jan 21 2009 6:32 PM by www.ft.com
    Financial Times writers examine the state of the global commerical property market and the prospects for both tenants and investors during the year
  • 4:11 PM » Wrong Mall, Wrong Place, Wrong Time
    Published Wed, Jan 21 2009 4:11 PM by Calculated Risk Blog
    Imagine a home furnishing center - a "one-stop outlet for home remodelers" - built in Southern California at the end of the housing boom. Guess what happened ... Jeff Collins at the O.C. Register has the story: The South Coast Home Furnishings Centre in Costa Mesa — conceived as a one-stop outlet for home remodelers — has lost customers, tenants and finally ended up in receivership after rents failed to cover loan payments and operating expenses. The mall was almost 100% leased when it was sold to an investor in August 2007 for $98 million. Now almost half the tenants are gone: The Home Furnishings Centre had 32 tenants, filling almost all of the available space, when it sold ... in August 2007. [The buyer] put $18 million down and borrowed $84 million to cover the balance of the purchase price. As of December this year, tenants had fled, including the anchor: bankrupt Wickes Furniture. According to court records, just 18 tenants remained and 34% of the space was vacant. The receiver just accepted a $35 million offer for the 300,000-square-foot center - a price decline of 64% in about 18 months.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 3:24 PM » Foreclosures Account for More than Half of Bay Area Resales
    Published Wed, Jan 21 2009 3:24 PM by www.thetruthaboutmortgage.com
    Foreclosed properties accounted for more than half of all Bay Area resales during December, a first, according to real estate information provider DataQuick. That’s up from 46.8 percent in November and 14 percent a year ago. As a result, home sales increased 19.7 percent from November and 36 percent from December 2007. A total of 6,889 new [...]
    Click Here to Read the Full Article

    Source: www.thetruthaboutmortgage.com
  • 3:24 PM » Mortgage Job Losses Slow in Latest Quarter
    Published Wed, Jan 21 2009 3:24 PM by www.thetruthaboutmortgage.com
    While many industries still face massive layoffs, mortgage-related job losses seemed to have eased, according to employment data tracked by MortgageDaily.com. There were a total of 8,646 mortgage industry layoffs during the fourth quarter of 2008, down from 11,229 a quarter earlier. The net job loss was 7,721, thanks to 925 new hirings, potentially related to the [...]
    Click Here to Read the Full Article

    Source: www.thetruthaboutmortgage.com
  • 2:17 PM » Investors pull record $155 billion out of hedge funds
    Published Wed, Jan 21 2009 2:17 PM by Reuters
    BOSTON (Reuters) - Investors pulled a record $155 billion out of hedge funds last year, punishing the once red-hot asset class for delivering its worst-ever returns, according to numbers released on Wednesday.
  • 2:06 PM » Funding FHA’s HECM Upfront Premium – An Alternative
    Published Wed, Jan 21 2009 2:06 PM by feeds.feedburner.com
    One of the more interesting subtopics at the last NRMLA Convention was how to reduce the entry costs of HECM reverse mortgages. This certainly takes on more importance in early 2009 than at any time since the 1990s — as HECMs are the sole products available to reverse mortgage originators. Since the House Financial Services Committee announced its intent last year to reduce and cap HECM origination fees, reaction from originators has been swift and at times furious. Some attacked HUD, others leashed out at AARP, still others blamed Congress, and some even questioned NRMLA. The immediate reaction from many originators was to ask if FHA was taking a similar hit on their upfront fees. When the answer was negative, the response from RM originators at times was delivered with great anger. So at the NRMLA Convention it was interesting to see some of the meekest originators stepping up to the microphone to ask HUD/FHA officials if there was a way to lower the 2% upfront MIP or defer some part of it by increasing the rate of the monthly MIP fee from an annual 0.5% rate to say 1%. Many in the industry ask the question since the law generally mandates lenders (and thus the originators) to lower their fees, why was the FHA fee structure left in place so that it could increase to over $8,000 on a Maximum Claim Amount of over $400,000? Rumors abound that the HECM pool is greatly overfunded and could be severely cut back with little risk to the program. Others fear that the fund is being used to support the forward FHA insurance program. Some are concerned that politicians covet the excess and want it for their own pet projects. Seniors and their advisors are put off by the high upfront costs of HECMs. Originators find that some seniors would rather do without necessities than to incur such large upfront costs. As of yet there has been no recent, fundamentally sound actuarial study to determine if the pool is, in fact, overfunded. Looking at where most of the homes are located that...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 1:50 PM » Banks: Just a Shadow of Their Former Selves
    Published Wed, Jan 21 2009 1:50 PM by Seeking Alpha
    submits: Nice graphic of how the major banks are just a fraction of their former selves, at least as measured by market value ( click to enlarge ):
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 1:50 PM » Update: Wall Street Financial still in Retail Lending
    Published Wed, Jan 21 2009 1:50 PM by ml-implode.com
    We finally heard back from Wall Street Financial Corp. John F. Raffa, Managing Director called and sent an email confirming the shutdown of the Wholesale Division. Wall Street would like to make it very clear they are still in full Retail operation...
    Click Here to Read the Full Article

    Source: ml-implode.com
  • 10:41 AM » NAR: There’s Nowhere To Go But Up
    Published Wed, Jan 21 2009 10:41 AM by ml-implode.com
    "We’ve poked fun at the "statistics" used by the National Association of Realtors (NAR) in the past, but the NAR has hit new lows in a recent survey that they have sent out to agents"
    Click Here to Read the Full Article

    Source: ml-implode.com
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