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  • Wed, Oct 29 2008
  • 11:54 AM » New Home Sales: Shift to FHA Financing
    Published Wed, Oct 29 2008 11:54 AM by Calculated Risk Blog
    According to the Census Bureau, 17% of new homes sold in Q3 2008 were financed with FHA loans. This is up from an average of 4% in the 2005 through 2007 period. This huge percentage increase in FHA loans was partially driven by Downpayment Assistance Programs (DAPs). These programs allowed the seller to provide the buyer with the downpayment by funneling the money through a charity. DAPs have
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:39 AM » Principle Reductions: Wipe Out Your 2nd Mortgage With Bankruptcy
    Published Wed, Oct 29 2008 10:39 AM by loanworkout.org
    Millions of American homeowners are now underwater on their home mortgages and they are looking for a way out. In some areas like the Inland Empire of California, local homeowners have seen values drop 30-50% and many are making a “business” decision to walk away without ever exploring ways to save their home. If you have [...]
    Click Here to Read the Full Article

    Source: loanworkout.org
  • 10:38 AM » Treasury Continuing to Try to Talk Down Mortgage Rates
    Published Wed, Oct 29 2008 10:38 AM by mrmortgage.ml-implode.com
    The housing market is being dealt another blow. Fannie and Freddie mortgage backed debt has been under fire in recent days. Mortgage rates have risen considerably. A friend who deals in this space told me yesterday ‘there are very few new buyers’. As Agency debt is sold, interest rates rise. Agency spreads have been blown out despite the Treasury backing the paper in the big Fannie/Freddie bailout and Lockhart repeating the fact they were backed a couple of weeks ago. Now, Treasury is continuing their futile campaign of talking down mortgage rates with yet another statement from Treasury. Obviously they are frustrated that large Agency holders keep selling in favor of Treasuries when they both have the same backing, or so we are told. Perhaps investors just don’t like the word ‘effectively’. Remember, the operative word with respect to the GSE’s is ‘explicit’. Maybe they are refusing to use the word because there is no way Treasury can ‘explicitly’ guaranty $5.4 trillion in loan guarantees and debt. Foreign Central Banks know this. I wrote about is several times when it was happening a few months ago - see links at bottom of page. Perhaps investors just rather buy the debt of the nine favorite children banks and brokers that also have the same ‘effective’ backing. Now that everything is government backed, there is a lot of competition for dollars. Perhaps foreigners are sick and tired of anything US housing and mortgage related especially when they are also de-leveraging and raising capital. Whatever the case, Agency debt and mortgage backed debt is being shunned. And if this does not turn around, the housing market will become even less affordable forcing values down that much more setting off even more loan defaults due to the dreaded negative equity effect. Housing remains unaffordable enough without 8.5% rates coming into the picture. -Best, Mr Mortgage “Treasury: U.S. ‘Effectively Guarantees’ GSEs Source: In effort to reduce mortgage rates, the Treasury Department...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 10:37 AM » Why Banks Have Become Schizophrenic
    Published Wed, Oct 29 2008 10:37 AM by The Big Picture
    Its an understatement to say these are difficult times for banks. Between the mortgage collapse, the Treasury recapitalization, and the recession, they are trying to do business -- and that that involves some risk. But doing so without losing too much money involves doing less business. They have become utterly schizophrenic. Whether its the TARP or the credit crisis or deleveraging or something else entirely, I cannot tell you. But damn, these guys have gotten weird. Back in August, we that numerous banks and brokers were sending nastygrams to their HELOC clients telling them "Too Late!" Unused portions of equity lines were being withdrawn. Our own Citibank HELOC, which was about half unused, was withdrawn 2 months ago. Yesterday, we received a letter offering us a new HELOC from Citi -- for the same amount that was withdrawn in August. Our Visa via JPM/Chase went through the same process. A short while ago, I had a month of extensive business travel expenses. Before we even got the bill (which was paid off in full) came a sort-of-odd, borderline rude letter about our (high) credit use. It was "Thanks for the business, but please use credit responsibly, ya deadbeat." It was a strange letter. Any review of the charges could see it wasn't frivolous, but were all business T&E. My solution was to switch to an Amex card, and not use the Visa for business expenses. That was September, and last week, we got a JPM letter -- We want your business! We are raising our credit limit on the Visa. WTF? I understand the fear that firms have when they are lending these days. As the NYTimes writes this morning (), another credit crisis is on the horizon. But you guys better get a more coordinated message. You are confusing and self contradictory -- and its easy to see how you could alienate some, less understanding clients. NY Times Ubiq-cerpt:™ "First came the mortgage crisis. Now comes the credit card crisis. After years of flooding Americans with credit...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 10:36 AM » LIBOR Slowly Declines
    Published Wed, Oct 29 2008 10:36 AM by Calculated Risk Blog
    From Bloomberg: Libor Declines on Central Bank Cash Funding, Fed Rate Outlook The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell 5 basis points today to 3.42 percent, its 13th straight decline, according to the British Bankers' Association. ... "The strains in money markets are beginning to ease, but only at a glacial pace," said Nick
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:35 AM » TARP vs. Non-TARP: Investing with Uncle Sam at a 60% Discount
    Published Wed, Oct 29 2008 10:35 AM by Seeking Alpha
    Christopher Bryan submits: Under the U.S. Treasury's Capital Purchase Program ("TARP"), the federal government is investing at least $250 billion dollars in preferred shares of select financial institutions. The terms of TARP investments are mild for these harsh economic times: The preferred shares issued to the government under the program will rank on par with existing preferred shares, and dividends will be set to yield five percent on the investment for three years, nine percent thereafter. The five percent yield is at the low-end for preferreds generally, and about half the rate in recent private market deals, notably those involving Berkshire Hathaway (BRK.A), Goldman Sachs (GS) and General Electric (GE).
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 10:34 AM » Case Shiller Analysis October 2008 Release
    Published Wed, Oct 29 2008 10:34 AM by feeds.feedburner.com
    Inquiring minds are considering the for October 2008. New York, October 28, 2008 – Data through August 2008, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, shows continued broad based declines in the prices of existing single family homes across the United States, a trend that prevailed throughout the first half of 2008 and has continued into the second half. Once again, the indices have set new records, with annual declines of 17.7% and 16.6%, respectively. However, the acceleration in decline was only moderate in August. The July data reported annual declines of 17.5% and 16.3%, respectively. “The downturn in residential real estate prices continued, with very few bright spots in the data,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The 10-City Composite and the 20-City Composite reported record 12-month declines. Furthermore, for the fifth (5th) straight month, every region reported negative annual returns. Nine of the 20 regions have record annual declines. Phoenix and Las Vegas are now returning -30.7% and -30.6% versus August 2007, respectively. Each of the California markets- Los Angeles, San Francisco, and San Diego- are down more than 25% from their values 12 months ago. Miami and Tampa, the two Florida markets, are down 28.1% and 18.1%, respectively. click on chart for sharper image Case-Shiller Declines Since Peak The following charts were produced by my friend "TC" who has been monitoring Case-Shiller Data. Although individual cities topped at varying times, the top-10 and top-20 city composites peaked in a June-July 2006 timeframe. Case-Shiller Declines Since Peak Current Data click on chart for sharper image Case-Shiller Declines Since Peak Futures Data click on chart for sharper image "TC" writes: I've included data available from the CME Futures market so your viewers can see when people are betting the downturn...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 10:33 AM » Treasury Handouts Focus on Strongest Banks, Forcing Weaker to Fail or Sell
    Published Wed, Oct 29 2008 10:33 AM by Google News
    This Bloomberg article treats as a news item the fact that the Treasury is focusing its equity infusion efforts on strong banks, leaving the rest to find their own exit strategy. But this approach is not surprise; in fact, it is in a conference call to analysts exactly a month ago. In theory, this might not be a bad idea. The banking industry needs to be rationalized, since excessive leverage permitted the entire industry to grow well beyond sustainable levels. In 1980, financial firms accounted for 8% of S&P 500 earnings. At the industry's peak, they were 46% of S&P earnings. However, the way the Treasury is going about this assures that big firms will become even larger. That is not a plus for systemic stability. The only thing worse than firms to big to fail is firms too big to rescue. From : The U.S. government's $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say. ``This has the unintended effect of making the strong stronger and the weak weaker,'' said Gray Medlin, founder of Carson Medlin Co., a Raleigh, North Carolina, investment bank focused on banking deals. ``Banks that are getting bad exams and are under intense pressure from regulators won't be successful in applying.'' The government buying spree has so far targeted two dozen regional lenders. One, PNC Financial Services Group Inc., immediately bought a competitor, National City Corp. Another, Saigon National Bank, had almost four times the minimum level of capital before selling a $1.2 million stake. Treasury Secretary Henry Paulson is doling out cash to recapitalize lenders and jump-start takeovers. Besides PNC and Saigon National, regional lenders that have accepted government stakes in exchange for cash include SunTrust Banks Inc., Capital One Financial Corp. and KeyCorp. They also include City National Corp., in Beverly Hills,...
  • 10:33 AM » Credit Card Lenders Clamp Down Hard
    Published Wed, Oct 29 2008 10:33 AM by Google News
    Consumers are in a newly austere mood, and those who have lived beyond or at the edge of their means may be forced to retrench whether they want to or not. The New York Times reports that credit card issuers are cutting back on their lines of credit and special offers. Since debt-fueled consumer spending has been an economic mainstay, this again signals a deep and probably long contraction. From the : After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers. The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of heavy losses after an era in which it reaped near record gains from the business of easy credit that it helped create. Lenders wrote off an estimated $21 billion in bad credit card loans in the first half of 2008 as more borrowers defaulted on their payments. With companies laying off tens of thousands of workers, the industry stands to lose at least another $55 billion over the next year and a half, analysts say. Currently, the total losses amount to 5.5 percent of credit card debt outstanding, and could surpass the 7.9 percent level reached after the technology bubble burst in 2001. “If unemployment continues to increase, credit card net charge-offs could exceed historical norms,” Gary L. Crittenden, Citigroup’s chief financial officer, said... Big lenders — like American Express, Bank of America, Citigroup and even the retailer Target — have begun tightening standards for applicants and are culling their portfolios of the riskiest customers. Capital One, another big issuer, for example, has aggressively shut down inactive accounts and reduced customer credit lines by 4.5 percent in the second quarter from the previous period, according to regulatory filings... While such changes protect lenders, some can come back to haunt consumers. The result can be a lower credit score, which...
  • 10:33 AM » Pocketful of Multipliers (II): Options for Stimulus Packages
    Published Wed, Oct 29 2008 10:33 AM by www.econbrowser.com
    As the debate over the nature and size of a stimulus package wends its way through the Congress , , , I thought it would be useful to bring numbers into the debate, especially as we are considering fiscal stimulus in a time when the Bush Administration has constrained, by dint of previous profligacy, our options. In particular, I want to return to the issue of multipliers, discussed in . Here, I want to provide a little more specificity, regarding the impact depending upon the type of outlays. From the back in July (thanks to for the pointer): Chart from What is a multiplier? It's: ΔY/ΔZ where Y and Z are measured in real dollars. Note that in principle, one can re-write the multiplier in terms of percentage point change of income relative to baseline income for a given percentage point change of the Z -to- Y baseline ratio. What is apparent is that some tax cuts, or really rebates , can have a substantial effect. But in most cases, tax policies will have a relatively minor impact on aggregate demand , relative to increases in spending on goods and services. That's because the first round of injection of the dollar into the economy via tax reductions or transfer increases initially augments disposable income, and then, by indirectly increasing consumption, increases GDP over time. In other words, for an increase in transfers, the impact of one dollar increase in outlays by the government is: (c(1-t)) + (c(1-t)) 2 + (c(1-t)) 3 + .... = c(1-t)/(1-c(1-t)) Whereas for spending on goods and services: 1 + (c(1-t)) + (c(1-t)) 2 + (c(1-t)) 3 + .... = 1/(1-c(1-t)) Where c is the marginal propensity to consume (MPC) out of disposable income, and t is the marginal tax rate. Why is the increase in extending unemployment insurance so large (and similarly for increaseing food stamps), when these are increases in transfers, and not increases in spending for goods and services? Look back to first series, and notice that if on the first round, the marginal tax rate is zero (which...
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    Source: www.econbrowser.com
  • Tue, Oct 28 2008
  • 1:42 PM » White House Tells Banks to Stop Hoarding Money
    Published Tue, Oct 28 2008 1:42 PM by news.yahoo.com
    An impatient White House is serving notice on banks receiving billions of dollars in federal help to quit hoarding the money and start making more loans.
    Click Here to Read the Full Article

    Source: news.yahoo.com
  • 12:22 PM » Consumer Confidence Plunges to Record Low
    Published Tue, Oct 28 2008 12:22 PM by The Big Picture
    chart via , Bloomberg > The Conference Board reported Consumer Confidence Index for October hit a record low of 38. Is there any connection between weak consumer confidence readings and bullish reversals in the stock market? To decide, have a look at the following quick-and-dirty overview (which includes all data going back to the Feb-67 start of the confidence series): (*Note: Interim low - market was already in a secular upswing.) (#Note: Consumer confidence readings that were closest to the latest reading.) Table via From the Conference Board "The Conference Board Consumer Confidence Index™, which had improved moderately in September, fell to an all-time low in October. The Index now stands at 38.0 (1985=100), down from 61.4 in September. The Present Situation Index decreased to 41.9 from 61.1 last month. The Expectations Index declined to 35.5 from 61.5 in September. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. Says Lynn Franco, Director of The Conference Board Consumer Research Center: "The impact of the financial crisis over the last several weeks has clearly taken a toll on consumers' confidence. The decline in the Index (-23.4 points) is the third largest in the history of the series, and the lowest reading on record. In assessing current conditions, consumers rated the labor market and business conditions much less favorably, suggesting that the fourth quarter is off to a weaker start than the third quarter. Consumers' appraisal of current conditions deteriorated sharply in October. Those saying business conditions are "bad" increased to 38.3 percent from 33.4 percent, while those claiming business conditions are "good" declined to 9.2 percent from 12.8 percent. Consumers' assessment of the labor market was also much more negative. The percentage of consumers saying jobs are "hard to get" rose to 37.2 percent from 32.2 percent in September, while those claiming...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 12:22 PM » Phoenix and Las Vegas home prices fall 31%
    Published Tue, Oct 28 2008 12:22 PM by themessthatgreenspanmade.blogspot.com
    The August for the S&P Case-Shiller Home Price Index shows the 10-City and 20-City Composite Home Price Indices at new record annual declines of 17.7 percent and 16.6 percent, respectively. Price indices for all 20 cities are shown below. To aid in viewing this graphic, the order of the legend (upper left) reflects the top-to-bottom position of all 20 cities for the current month (far right). As such, the legend indicates which cities have managed to hold onto the largest real estate price gains since 2000. Not surprisingly, a number of cities have consistently moved down in the legend, notably, Phoenix and Las Vegas, both of which were near the top of the list late last year and earlier this year. The reason for their steady move down is clear to see when looking at the table below - both now sport year-over-year declines of more than 30 percent. Miami is not far behind, nor are San Francisco, Los Angeles, or San Diego. Regrettably, the curve for San Francisco in the first graphic above is somewhat obstructed - its recent decline has been remarkable, mirroring Las Vegas in declining sharply in 2008. David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, noted: The downturn in residential real estate prices continued, with very few bright spots in the data. The 10-City Composite and the 20-City Composite reported record 12-month declines. Furthermore, for the fifth (5th) straight month, every region reported negative annual returns. This started when Charlotte, NC, was the last region to turn negative back in April 2008. Both the 10-City and 20-City Composites have been in year-over-year decline for 20 consecutive months. Of the 20 regions, 13 of them had their annual returns worsen from last month’s report . As seen throughout 2008, the Sun Belt markets are being hit the most. Phoenix and Las Vegas are both reporting annual declines in excess of 30%, and Miami, San Francisco, Los Angeles and San Diego are all in excess of 25%. There was...
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 12:22 PM » More Improvement in Money Market Conditions
    Published Tue, Oct 28 2008 12:22 PM by Google News
    While none of the changes in interest rates were dramatic, and both interbank rates and stress levels remain elevated, improvement continues and all the metrics moved in the right direction. From : Money-market rates in London declined as cash injections by European central banks showed signs of easing the paralysis among lenders. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell 4 basis points to 3.47 percent today, its 12th straight drop, according to the British Bankers' Association. The comparable euro rate slid 5 basis points to 4.85 percent, the lowest level since April 28. Rates for the U.K. pound were also lower... The European Central Bank today lent financial institutions 325.1 billion euros ($408 billion), the most in 10 months. The Bank of England loaned $3 billion of overnight cash today, after allotting the same amount yesterday. Singapore's comparable rate for U.S. dollars fell 4 basis points to 3.48 percent, its 10th straight decline since reaching 4.8 percent on Oct. 13, the highest level this year. Hong Kong's three-month interbank lending rate, or Hibor, increased 10 basis points to 3.84 percent today, the highest since Oct. 17. While money-market rates have declined, the three-month Libor for dollars remains 197 basis points above the Federal Reserve's target rate for overnight loans of 1.5 percent and up from 81 basis points about three months ago. At the start of the year, the spread was 43 basis points. In a further sign some banks remain wary of lending to each other, financial institutions lodged 213.1 billion euros in the ECB's overnight deposit facility yesterday, up from 202.6 billion euros the previous day. The daily average in the first eight months of the year was 427 million euros. The Libor-OIS spread, a measure of cash scarcity, narrowed 5 basis points to 258 basis points today, down from 345 basis points two weeks ago. It was at 87 points before Lehman...
  • 10:21 AM » America Underwater: Growing Number of Homeowners “Upside Down” on Mortgages
    Published Tue, Oct 28 2008 10:21 AM by loanworkout.org
    With falling housing prices in nearly every market, the questions that homeowners are asking have shifted. Rather than asking “what is my home worth?”, they are now asking “Is my home worth it?” The problems are affecting the entire country, with nearly 1 in 6 homeowners owing more than their home is worth.For homeowners who owe [...]
    Click Here to Read the Full Article

    Source: loanworkout.org
  • 10:20 AM » Iceland Central Bank: 18% Rate!
    Published Tue, Oct 28 2008 10:20 AM by The Big Picture
    Gee, do you think they are trying to attract some capital? Iceland's central bank unexpectedly raised the benchmark interest rate to 18 percent, the highest in at least seven years, after the island reached an aid agreement with the International Monetary Fund. Policy makers raised the key rate by 6 percentage points, the Reykjavik-based bank said in a statement on its Web site today, taking the rate to the highest since the bank began targeting inflation in 2001. It will publish the reasons for today's move at 11 a.m. local time. The central bank is raising rates as Iceland, the first western nation to seek aid from the IMF since the U.K. in 1976, faces a prolonged contraction, coupled with possible hyperinflation and rising joblessness. The economy will shrink as much as 10 percent next year, the IMF forecasts. Iceland will receive about $2.1 billion in aid from the Washington-based fund, according to a deal struck on Oct. 24. The US Fed starts a two day meeting today . . . > Source: Tasneem Brogger and Helga Kristen Einarsdottir Bloomberg, Oct. 28 2008 http://www.bloomberg.com/apps/news?pid=20601068&sid=ay61s1zV3NCA&
    Click Here to Read the Full Article

    Source: The Big Picture
  • 10:19 AM » Vikram Pandit Rejects CitiSachs?
    Published Tue, Oct 28 2008 10:19 AM by Seeking Alpha
    submits: Yesterday's news is that Goldman Sachs (GS) approached Citigroup (C) last month to propose a merger. Citigroup CEO Vikram Pandit rejected the idea from Goldman Sachs CEO Lloyd Blankfein, , citing people it didn't identify. The deal, which was to have been structured as a takeover of Goldman by Citigroup, would have led to the firing of thousands of workers in the investment banking units of the two companies, and the loss of several senior executives, the newspaper said. However, uniting Goldman’s strengths in risk management, advisory services and proprietary trading with Citi’s large retail deposit base and huge corporate client network could have created a powerful financial giant.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 10:18 AM » Ain't Globalization Grand?
    Published Tue, Oct 28 2008 10:18 AM by Seeking Alpha
    submits: Two familiar names from the US deleveraging debacle are spreading their joy to little ol’ New Zealand. Where the wise virgins (OK, maybe not so wise; those yields were probably a clue) have taken it in the privates over the last year or so with the collapse of a dozen or so finance companies caught with, among other things, failed real estate developments and dodgy consumer loans. But at least some of the crooks are already getting . To put things in perspective, Bridgecorp’s loss of $NZ 460 million affecting 14,500 investors would, in the U.S., be roughly equivalent to just over 1 million investors being taken for roughly $26.5 billion (based on the mid-2007 exchange rate of NZD=USD 0.77). Just a flesh wound. NZ Press Association via The NZ Herald Oct. 24 2008
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 10:17 AM » Moyers: James K. Galbraith on Finacial Crises
    Published Tue, Oct 28 2008 10:17 AM by The Big Picture
    Bill Moyers talks about the economic future with with James K. Galbraith, Lloyd Bentsen, Jr. Chair in Government/Business Relations at the LBJ School of Public Affairs at the University of Texas at Austin. Galbraith is the author of six books, the most recent, . click for video Source: PBS, October 24, 2008 http://www.pbs.org/moyers/journal/10242008/watch2.html BILL MOYERS: Watching Alan Greenspan testify before Congress this week, I tried, I tried very hard not to keep thinking of Ayn Rand. I failed. The philosopher and novelist Ayn Rand was Alan Greenspan's ideological guru, his intellectual mentor. She was also one of the most amazing fantasists of the last century, the author of two of the most influential books of my generation THE FOUNTAINHEAD and ATLAS SHRUGGED, both timeless best-sellers. Rand was a hedonist, an exponent of radical self-interest, who so believed in unfettered, unbridled capitalism that she advocated the abolition of all state regulations except those dealing with crime. In the gospel according to Rand, the business community was constantly beleaguered by evil forces practicing, are you ready for this? Altruism! Yes, the unselfish regard for the welfare of others was a menace to greed, and Rand would have none of it. Alan Greenspan met her as a much younger man in New York and, like so many blossoming capitalists, was smitten. He has since downplayed her influence on him, but as Chairman of the Fed for nearly 19 years he seemed quite Rand-like as he watched Wall Street run wild. Yesterday, like an old warrior still in a fog after his armies have been routed from the field of battle, he expressed shock at how his ideology has failed him. He didn't see it coming, he told the House Oversight Committee. The extent of the meltdown is, "Much broader than anything that I could have imagined," a "Once-in-a-century credit tsunami." The wondrous glories of a free market with no need of pesky oversight had somehow gone wrong....
    Click Here to Read the Full Article

    Source: The Big Picture
  • 10:17 AM » IMF Nuclear Option: "Print Money"
    Published Tue, Oct 28 2008 10:17 AM by feeds.feedburner.com
    Eastern Europe, Latin America, and parts of Asia are in a massive currency contagion. Talk has surfaced that the . The International Monetary Fund may soon lack the money to bail out an ever growing list of countries crumbling across Eastern Europe, Latin America, Africa, and parts of Asia, raising concerns that it will have to tap taxpayers in Western countries for a capital infusion or resort to the nuclear option of printing its own money. The Fund is already close to committing a quarter of its $200bn (£130bn) reserve chest, with a loans to Iceland ($2bn), Ukraine ($16.5bn), and talks underway with Pakistan ($14.5bn), Hungary ($10bn), as well as Belarus and Serbia. Neil Schering, emerging market strategist at Capital Economics, said the IMF's work in the great arc of countries from the Baltic states to Turkey is only just beginning. "When you tot up the countries across the region with external funding needs, you get to $500bn or $600bn very quickly, and that blows the IMF out of the water. The IMF, led by Dominique Strauss-Kahn, has the power to raise money on the capital markets by issuing `AAA' bonds under its own name. It has never resorted to this option, preferring to tap members states for deposits. The nuclear option is to print money by issuing Special Drawing Rights, in effect acting as if it were the world's central bank. This was done briefly after the fall of the Soviet Union but has never been used as systematic tool of policy to head off a global financial crisis. Hungary was forced to raise interest rates last week by 3 percentage points to 11.5pc to defend its currency peg in Europe's Exchange Rate Mechanism. Even Denmark has had to tighten by a half point, raising fears that every country on the fringes of the eurozone will have resort to a deflationary squeeze. The root problem is that Eastern Europe and Russia have together borrowed $1,600bn from foreign banks in euros and dollars to fund their catch-up growth spurt over the...
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    Source: feeds.feedburner.com
  • Mon, Oct 27 2008
  • 1:42 PM » The Great Panic of 1873
    Published Mon, Oct 27 2008 1:42 PM by The Big Picture
    Here's something you probably haven't yet read: The New York Times article on The Great Panic of 1873, as written by Roger Babson. Fascinating stuff > Source: Roger W. Babson, the Well Known Statistician, Tells of the Business Epochs That Followed That Period of Depression The New York Times, April 9, 1911 PDF
    Click Here to Read the Full Article

    Source: The Big Picture
  • 11:53 AM » Remember When the ABX and CMBX Were In Vogue?
    Published Mon, Oct 27 2008 11:53 AM by mrmortgage.ml-implode.com
    You don’t hear much about the ABX and CMBX indices any longer. The last ruckus over these came about six months ago when the spinners tried to tell us that they really did not portray the true value of the market bla bla bla. Well, it looks as though Markit was accurate after all. To be honest, I haven’t looked at the ABX and CMBX in about a month. I used to post ABX prices regularly because they seemed to be a leading indicator to credit market disruptions. So I went back and reviewed this weekend in order to see what impact that the $700bb TARP bailout had on the values. One would assume that if Treasury was really planing on overpaying for distressed assets, then perhaps the ABX and CMBC would have gotten a bounce. They have bounced many times over the past year and a half for much less. What I found was what I would expect…that ABX indices are at all time lows and CMBX spreads all all-time wide levels. This surely does not look like a market about to be bought. This looks like a market continuing its downward trajectory as all asset are being repriced lower during the deleverging process. -Best, Mr Mortgage ABX AAA rated Second Half 2007 below. They are at all-time lows at just 41 cents. ABX BBB rated Second Half 2007 below. They are near all-time lows at just 5.5 cents. CMBX A rated, at all time wide levels at 700. This is one of the highest grades. CMBX BB rated, at all time wide levels at 3405. This is the lowest rated. More Mr Mortgage Posted on October 24, 2008 10:29 AM Posted on October 21, 2008 11:11 AM Posted on October 20, 2008 2:00 PM Posted on October 20, 2008 12:32 AM Posted on October 15, 2008 10:07 PM Posted on October 13, 2008 7:51 PM
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 11:53 AM » Let’s Use Fannie to Clean Up the Mess It Made
    Published Mon, Oct 27 2008 11:53 AM by loanworkout.org
    Earlier this week, James Lockhart, the director of the Federal Housing Finance Agency and the government conservator of Fannie Mae and Freddie Mac, said that the two companies need to begin writing down the principal on mortgages they hold or acquire. This could be an important step in slowing the housing slump. It also suggests that while [...]
    Click Here to Read the Full Article

    Source: loanworkout.org
  • 10:53 AM » Insurers Line Up for the Government Bailout
    Published Mon, Oct 27 2008 10:53 AM by dealbook.blogs.nytimes.com
    The chase for a piece of the Treasury Department’s $700 billion bailout program intensified Friday as the government considered extending it to include insurance companies as well as banks, and the auto industry stepped up efforts to secure a share of the money, The New York Times’s Edmund Andrews and Eric Dash reported. Even as the [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 10:53 AM » Credit remains crunched
    Published Mon, Oct 27 2008 10:53 AM by CNN
    With financial institutions and individual investors worried that a worldwide economic slowdown will pose a risk to their investments, lending remained constricted and U.S. Treasurys rose.
  • 10:46 AM » Will Equity Markets Gain Traction as TARP Begins Implementation?
    Published Mon, Oct 27 2008 10:46 AM by Seeking Alpha
    submits: In recent weeks there has been plenty of talk about the Treasury's TARP initiative, but little progress on its actual implementation. On Friday we got news that PNC Financial (PNC) was the first bank to get a capital infusion from the TARP, and would use much of the cash to help fund its acquisition of troubled banking competitor National City (NCC). I have previously written highly of PNC stock and this deal only furthers my bullish long-term view on the company. It is paying about $2 per share for a bank that traded at nearly $40 last year and fits its geographical footprint very well. PNC's track record on successful acquisition integration is outstanding.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 10:45 AM » Fed lending program open for business
    Published Mon, Oct 27 2008 10:45 AM by CNN
    The Federal Reserve started buying so-called commercial paper on Monday to jumpstart a critical but faltering lending market used by banks and big businesses.
  • 10:44 AM » Yen strength continues
    Published Mon, Oct 27 2008 10:44 AM by CNN
    The Japanese yen continued to rise Monday and the dollar held firm against other currencies despite signs that a government intervention in the currency market may be on the horizon.
  • 10:43 AM » Credit Is Likely to Ease This Week: Pimco's Gross
    Published Mon, Oct 27 2008 10:43 AM by CNBC
  • 10:42 AM » Capital One, Sun Trust Sell Preferred to Government
    Published Mon, Oct 27 2008 10:42 AM by Calculated Risk Blog
    From the WSJ: Capital One, SunTrust to Sell Government Preferred Stock A host of financial firms announced they will sell preferred stock and warrants to the federal government ... The biggest morning disclosure was Capital One Financial Corp.'s $3.55 billion sale of preferred stock and warrants to the Treasury Department, followed by SunTrust Banks Inc. at $3.5 billion. ... Other firms
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:41 AM » Treasury: first 9 banks to get funds this week
    Published Mon, Oct 27 2008 10:41 AM by Reuters
    WASHINGTON (Reuters) - The U.S. Treasury will begin sending $125 billion to the first nine banks to sign up for its capital program early this week, and is willing to listen to other industries seeking government assistance, a senior Treasury official said.
  • 10:40 AM » Recession Reality Setting In — Slowly
    Published Mon, Oct 27 2008 10:40 AM by CNBC
  • 10:39 AM » The Broker Rebellion
    Published Mon, Oct 27 2008 10:39 AM by dealbook.blogs.nytimes.com
    David B. Armstrong was proud for a long time to be part of Merrill Lynch’s thundering herd — the brokers in the storefronts and office buildings who are the face of Wall Street to many Americans. But he struck out on his own in May, relieved, he said, that he would no longer have to explain [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 10:38 AM » General Motors, Driven to the Brink
    Published Mon, Oct 27 2008 10:38 AM by dealbook.blogs.nytimes.com
    As General Motors tries to salvage its future through a possible merger with Chrysler, the possibility of bankruptcy looms for G.M. and perhaps for Chrysler as well, The New York Times’s Bill Vlasic and Nick Bunkley wrote in an article Sunday that looked at the effects of plunging S.U.V. sales on Detroit automakers. On Monday, [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 10:37 AM » Goldman called Citi for merger in September: source
    Published Mon, Oct 27 2008 10:37 AM by Reuters
    LONDON (Reuters) - Goldman Sachs Chief Executive Lloyd Blankfein called Citigroup Inc head Vikram Pandit last month about a possible merger, but Pandit rejected the proposal, a source familiar with the matter said on Monday.
  • 10:36 AM » Tech companies offer loans as defaults rise: report
    Published Mon, Oct 27 2008 10:36 AM by Reuters
    (Reuters) - Big tech companies are filling the void left by banks and specialty lenders that are retrenching and making financing more difficult for smaller tech firms, the Wall Street Journal said.
  • 10:36 AM » Mortgage Threat From Hedge Funds Irks Democrats
    Published Mon, Oct 27 2008 10:36 AM by dealbook.blogs.nytimes.com
    Several Democratic lawmakers lashed out Friday at hedge funds that have threatened to block attempts to renegotiate mortgages for struggling homeowners, The New York Times’s Barry Meier reported. At least two funds, Greenwich Financial Services and Braddock Financial, have told banks that they may take legal action if loans are renegotiated in a way that hurts [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 10:36 AM » So When Will the Banks Give Loans?
    Published Mon, Oct 27 2008 10:36 AM by dealbook.blogs.nytimes.com
    The dirty little secret of the federal government’s $700 billion bailout plan is that many recipients of Treasury’s largess won’t be using the money primarily to make new loans. Instead, The New York Times’s Joe Nocera writes in his latest column, executives from the likes of JPMorgan Chase will use it to acquire other banks. After having [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 10:08 AM » Currency Crisis Meltdown in Europe, Japan, Australia
    Published Mon, Oct 27 2008 10:08 AM by feeds.feedburner.com
    Currency interventions don't work but that does not stop countries from wasting money trying. A massive unwinding of the Yen carry trade is in progress and in response the . The Group of Seven warned on Monday the yen's wild swings threatened financial stability, fanning speculation central banks may intervene to halt a rally in the currency driven by a Japanese exodus from emerging markets. G7 finance ministers and central bank governors said they were prepared to act, if necessary, but market reaction was muted, reflecting doubts over the will for co-ordinated action and whether Tokyo could succeed acting on its own. "We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability," the brief statement said. On Monday, the yen traded near an all-time high against the Australian dollar and near a 13-year peak against the U.S. dollar, as a 6 percent slump in Tokyo shares spurred a renewed wave of selling of higher-yielding currencies. The yen climbed nearly 19 percent so far this year against the U.S. currency, which itself has gained substantially against many emerging markets currencies and the euro, despite the grim outlook for the U.S. economy. Europe on the brink of currency crisis meltdown The Telegraph is reporting . The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump. Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992. “This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon. Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 10:08 AM » NY Times Lending Conspiracy Madness
    Published Mon, Oct 27 2008 10:08 AM by feeds.feedburner.com
    At least a dozen people asked me to comment on the New York Times article Most seem to believe the bank bailout package is part of some complicated scheme by the treasury and Fed to give banks taxpayer money explicitly for takeovers. Indeed that is the very essence of the tale the New York Times is spreading. The Times article is a bit disjointed, so I rearranged paragraphs slightly for ease in understanding. My insertions are in braces. From the New York Times .... It was Oct. 17, just four days after JPMorgan Chase’s chief executive, Jamie Dimon, agreed to take a $25 billion capital injection courtesy of the United States government, when a JPMorgan employee asked [on a conference call] “Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?” [Dimon Responded] “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.” Read that answer as many times as you want — you are not going to find a single word in there about making loans to help the American economy. On the contrary: at another point in the conference call, the same executive explained that “loan dollars are down significantly.” He added, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” In other words JPMorgan has no intention of turning on the lending spigot. It is starting to appear as if...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
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