The month Jennifer Galdes moved into her condo in the Albany Park section of Chicago, the local paper suggested that the area was up and coming. Six years later, she's still waiting for a Whole Foods.

The Financial Times reports that U.S. financial regulators are considering new ratios for banks to determine the dependence on short-term borrowing: ... “Capital is critical, but liquidity enhancement is a necessary piece of the puzzle,” said Kevin Bailey, deputy comptroller [OCC] ... One ratio would compare a bank’s assets to its stable sources of funding, such as deposits or longer-term unsecured debt. excerpted with permission These measures are intended to gauge the liquidity of banks - and prevent future banks runs like with what happened at Bear Stearns and Lehman Brothers. The Wall Street banks relied heavily on commercial paper, and when that market froze, the banks experienced a severe liquidity crisis. Some smaller regional and local have relied on brokered deposits to fund their short term needs. The NY Times had a article on brokered deposits back in July: To lure the money from brokers, banks typically had to offer unusually high rates. That, in turn, often led them to make ever riskier loans, leaving them vulnerable when the economy collapsed. ... Hot money has bedeviled regulators for three decades and they are starting to fight back, albeit tentatively, devising new restrictions to keep the practice from taking more banks down. But in one of the hidden lobbying battles in Washington this year, the banks are pushing hard to keep the money flowing. So far the banks are winning, and the hot money continues to fuel bank growth. It sounds like the regulators are pushing back.

In Delaware from The News Journal: In a risky strategy to move condominiums, the developers of the much-ballyhooed Justison Landing complex on Wilmington's Riverfront plan to auction off a third of the units in the waterfront community next month. ... Robert Buccini, a partner in Buccini/Pollin Group Inc. in Wilmington, said the auction of 38 condominiums and two town houses in a 120-condo building on the Christina River is designed to stimulate sales ... So far, about 25 condos have been sold in the building -- about two sales a month since the building was completed a year ago. "We're basically selling at discount so we can move on to our next project," Buccini said. From the Jacksonville Business Journal: Twenty-three condominiums in the Summer House in Old Ponte Vedra will go up for auction. From KUOW News in Seattle: This weekend, 40 units are up for auction and the minimum bids are typically less than half the listed price. ... there is a veritable glut of brand new condominiums on the market. A few years ago, it seemed, every parking lot in downtown Seattle was being turned into condos. Many of those projects are coming on line now, during the worst real estate market in decades. At Brix, which completed construction late last year, two thirds of the building's units are still unsold. And a twist in New Jersey, from the NY Times: At the Saffron, a nearly complete 76-unit condominium complex in the thick of this city’s downtown, the Fields Development Group is trying something new ... The first units — a minimum of 9, a maximum of 15 — will be auctioned off before the grand opening and the start of conventional marketing. ... Ending sales with an auction — after fair-market values for a building have already been well established — is a tried-and true-technique, of course. But the auctioneers for the Saffron, at Sheldon Good & Company, say they have never conducted a “jump-start” auction before. "Stimulate"? "Jump-start"...

From Peter Hong at the LA Times: (ht Ann). A few excerpts: For generations of Americans, a home was seen not simply as a dwelling, but as an engine of personal wealth. That view was promoted by the home-building and real estate sales industries as well as the U.S. government, which subsidized home loans and provided tax deductions for mortgage interest. ... Now, however, the worst housing crash since the Great Depression may mean that a home purchase ought to be considered with the same warning issued to investors in securities: Past performance is not indicative of future results. ... Leslie Appleton-Young, chief economist for the California Assn. of Realtors, said that the state's median home price used to rise and fall roughly in line with the national median. ... "It didn't really get out of whack until about four or five years ago," she said. "It was tied into financing." With lax mortgage standards a thing of the past, at least for now, Appleton-Young said, home price increases will be more moderate in the future, which should lead people to "a much more realistic assessment of why they're buying a home. They'll do so more for the consumption value; it's a place to raise your family, not your nest egg." ... "In the period post-World War II, you bought a home, gave your family a great place to live relative to the alternatives, and if all went well, in 20 years you didn't have a mortgage," said [Thomas Lawler, influential housing consultant and a former Fannie Mae official]. "That's what people ought to go back to." It makes sense for people to buy houses as a place to live, not as an investment. Perhaps Leslie Appleton-Young has lost track of time, but four years ago was 2005 - the peak of the housing insanity. She probably meant four or five years before 2006 (when prices peaked) as to when house prices in California started to detach from fundamentals.

submits: Standard & Poor’s has lowered its ratings on 770 classes of mortgage pass-through certificates from 705 U.S. residential mortgage-backed securities (RMBS) transactions. We downgraded 768 of these classes to ‘D’ and downgraded the remaining two to ‘CCC’. We removed 20 of the lowered ratings from CreditWatch with negative implications. In addition, we placed 183 other ratings from 21 of the affected transactions on CreditWatch with negative implications. The ratings on 158 additional classes from 19 of these transactions remain on CreditWatch with negative implications. Approximately 83.72% of the defaulted classes were from Alternative-A (Alt-A) or subprime transactions.

For graphs based on the new home sales report this morning, please see: The following graph is a turnover ratio for existing home sales. This is annual sales and year end inventory divided by the total number of owner occupied units. For 2009, sales were estimated at 4.8 million units, and inventory at the August level. Click on graph for larger image in new window. Although the turnover ratio has fallen from the bubble years, the level is still above the median for the last 40 years. This suggests 2009 is about a normal year for existing home turnover. That might seem shocking based on all the reports of weak existing home sales. But the problem isn't the number of sales (except as compared to the bubble years), but the type and price of sales. The reason turnover hasn't fallen further is because of all the distressed sales (foreclosures and short sales) primarily in the low priced areas. Distressed sales declined in August, and this is a major reason existing home sales declined. There is another wave of foreclosures coming, so existing home sales might stay elevated for some time. Plus, the "first-time" homebuyers tax credit might be extended (a poorly targeted an inefficient credit). Note: there is a substantial too. All this distressed sales activity has created a gap between new and existing sales as shown in the following graph that I've jokingly labeled the "Distressing" gap. This graph shows existing home sales (left axis) and new home sales (right axis) through August. As I've noted before, I believe this gap was caused primarily by distressed sales. Even with the recent rebound in new and existing home sales, the gap is still very wide. The third graph shows the same information, but as a ratio for existing home sales divided by new home sales. Although distressed sales will stay elevated for some time, eventually I expect this ratio to decline back to the previous ratio. The ratio could decline because of a further increase...

Press Release

New York Fed purchases $1.97 billion in agency coupons

Alan Grayson: I would like to know whether it is within the Federal Reserve's legal authority to try to manipulate the stock market or the futures market. Federal Reserve GC Scott Alvarez: I don't believe the Federal Reserve tries to manipulate the stock market... (Yoda: Do or do not, there is no try.) Alan Grayson: Does the Federal Reserve actually possess all the gold that's listed on their balance sheet. Scott Alvarez, doing a classic poker body language tell, and taking his time: Yes... Alan Grayson: Who actually executes the trades for the Federal Reserve in the markets? Scott Alvarez: The Federal Reserve Bank of New York, which executes trades through Primary Dealers. Alan Grayson: Can you name one Primary Dealer? Scott Alvarez: JP Morgan Chase Alan Grayson: Do you mind if we have a GAO audit to see if there has been front-running or insider trading by them? Do you mind? Is that ok with you? Scott Alvarez: I am not sure if I have that authority...

From the FDIC: from the Fed: A SNC is any loan and/or formal loan commitment, and any asset such as other real estate, stocks, notes, bonds and debentures taken as debts previously contracted, extended to borrowers by a supervised institution, its subsidiaries and affiliates. Further, a SNC must have an original amount that aggregates $20 million or more and either 1) is shared by three or more unaffiliated supervised institutions under a formal lending agreement or 2) a portion is sold to two or more unaffiliated supervised institutions with the purchasing institutions assuming their pro rata share of the credit risk. Some key findings: • Criticized assets, which included SNCs classified as special mention, substandard, doubtful, or loss, reached $642 billion, up from $373 billion last year, and represented 22.3 percent of the SNC portfolio compared with 13.4 percent in 2008. ... • Classified assets, which included SNCs classified as substandard, doubtful, or loss, rose to $447 billion from $163 billion and represented 15.5 percent of the SNC portfolio, compared with 5.8 percent in 2008. Classified dollar volume increased 174 percent from a year ago. • Special mention assets, which exhibited potential weakness and could result in further deterioration if uncorrected, declined to $195 billion from $210 billion and represented 6.8 percent of the SNC portfolio, compared with 7.5 percent in 2008. • The severity of criticism increased with the volume of SNCs classified as doubtful and loss rising to $110 billion, up from $8 billion in 2008. Loans in nonaccrual status also increased nearly eight times to $172 billion from $22 billion. Nonaccrual loans included $32 billion in credits classified as loss and $56 billion classified doubtful. ... • Criticized volume was led by the Media and Telecom industry group with $112 billion, Finance and Insurance with $76 billion, and Real Estate and Construction with $72 billion. These three groups also represented the highest shares of...

Recent media stories have chronicled in great detail the events of the last couple of years. A pair of conclusions might be fairly drawn from these early drafts of history. One is that the financial-market turmoil of the last year proved to be of significant consequence to the economy. The second is that the Federal Reserve distinguished itself from historical analogues by taking extraordinary actions to address risks to the economy. Commentators, however, tend to disagree as to whether the extraordinary actions undertaken were to the good or the detriment of the U.S. economy in the long-run.

In a piece originally titled “10 Bubbles in the Making,” Lawrence Delevingne, a writer for The Business Insider examines 10 current economic phenomena that he thinks are poised for fallout in coming years. While there are probably other less obvious economic issues waiting to burst, Lawrence has done a good job of picking out some [...]

Posted By: Existing home sales took a U-turn in August after four straight months of gains, and this is exactly what we were afraid of, as inventory at the low end of the market runs dry and the first time home buyer tax credit draws to a close. Topics: | | Sectors: |

VIENNA (Reuters) - Iran has told the U.N. nuclear watchdog that it has a second uranium enrichment plant under construction, a belated disclosure sure to heighten Western fears of a stealthy Iranian quest for nuclear arms capability.

The following is a submission by reader Kalpa who writes . While traveling this past weekend , I picked up a real estate booklet in the charming middle-of-the-U.S.A. town which I found myself in . Most interesting was the inside cover page note to prospective home buyers: First - time homebuyers who would otherwise qualify for the $ 8 , 000 tax credit , but don’t have the money for a down payment or closing fees , may now be able to get a loan to help cover those upfront costs . The U.S . Department of Housing and Urban Development ( HUD ) announced in May that the Federal Housing Administration ( FHA ) will allow state housing finance agencies to provide second mortgages “ monetizing ” the tax credit so that borrowers can use the funds toward their down payments and closing costs for the purchase of homes with FHA - insured mortgage loans . “ This is great news for thousands of families who want to take advantage of today’s low interest rates , competitive prices , great selection and the federal tax credit that is only available until Nov . 30 , but could not save enough money for a down payment and closing costs ,” said National Association of Home Builders Chairman Joe Robson . HUD also announced that FHA - approved lenders may purchase the tax credit from the home buyer in advance , so the home buyer can use the funds for closing costs or to make a down payment in addition to the 3.5 % minimum . Home buyers who go directly to FHA - approved lenders will still need to come up with the 3.5 % minimum down payment that is required for an FHA - insured loan . The National Council of State Housing Agencies has a list on their website ( ) of state offering first - time home buyers tax credit loan programs . For information on the $ 8 , 000 first - time homebuyer tax credit , go to . Now , admittedly , this is old news , and is dated June 11 , 2009 . But sometimes it pays to step back and look at what has just happened and is happening . We just had a near melt - down of...

Buying Wachovia was strategically astute but financially messy “TOGETHER we’ll go far.” Wells Fargo’s corporate slogan is a pledge to its customers, but it might just as well reflect the San Francisco banking giant’s optimism about its takeover of Wachovia, a teetering rival it snatched from under Citigroup’s nose last October. Losses from the acquisition are “still in the same zip code” as the sum envisaged at the time, says John Stumpf, Wells’s chief executive. In another sign of self-confidence, Kovacevich will step down as chairman at the end of the year, a move that would be hard to imagine if the bank’s hands-on former boss were worried about the future. Others are less convinced, suspecting Wells of understating Wachovia’s loan losses and questioning its accounting. Fuelling these worries, says Bove of Rochdale Securities, is “extraordinarily poor” communications and disclosure. Alone among big banks, Wells does not hold a quarterly call for analysts. ...

The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said. The “huge shadow inventory,” reflecting mortgages already being foreclosed upon or now delinquent and likely to be, compares with 1.27 million in 2005, the analysts led by Laurie Goodman wrote today in a report. Assuming no other homes are on the market, it would take 1.35 years to sell the properties based on the current pace of existing-home sales, they said.

Existing Home Sales totaled 5.1mm annualized, 250k less than expected and down from 5.24mm in July. The chief economist placed some blame for the shortfall in closings relative to expectations on “rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process.” The NAR said 30% of buyers were 1st time, where many took advantage of the tax credit, and 31% of sales were distressed. The median price fell 12.5% y/o/y and 2.1% m/o/m. The positive within the data was months supply which fell to 8.5 from 9.3 and is the lowest since Apr ‘07. The two key hurdles the industry must now face is an inevitable increase in foreclosures as many 1st half moratoriums have come to an end and the uncertain destiny of the tax credit which the industry is certainly begging but has become an expensive subsidy from the rest of us.

Leaders from Group of 20 countries will meet for the third time in less than a year this week in Pittsburgh to address the global crisis. The world economy and financial markets are finally showing signs of emerging from the worst slump since World War II, but the leaders are expected to vow to resist complacency and maintain measures to support growth, while starting to formulate exit strategies. In addition, deals still have to be hammered out on curtailing excessive bank compensation practices, raising bank capital standards and reforming international financial institutions. Here’s a progress report on major pledges G-20 leaders made in April when they last met in London: Fiscal stimulus to restore growth: The G-20 countries are pumping a lot of government spending into their economies. Discretionary stimulus is estimated at 2% of gross domestic product this year and 1.6% in 2010, according to the International Monetary Fund. The focus now is how and when to pull back on spending. Central banks to maintain expansionary policies, but debating when to phase out emergency programs: Many central banks are holding steady as they evaluate the strength of the recovery. The U.S. Federal Reserve has kept rates at a record-low near zero, but it’s gradually reining in a major Treasury-purchase program. The Bank of England’s policy-setting panel is also holding pat. After increasing the size of its bond-buying program in August, the BOE this month kept the bond program and its key interest rate unchanged. The European Central Bank this month also left its rate policy in tact. Repair financial sectors: While some government rescue measures have proven successful, others - such as those designed to help banks grapple with the toxic assets - have drawn little interest. In the U.S. the “stress tests” regulators conducted on large banks helped boost confidence. Moves in the U.S. and Europe last fall to inject cash into banks have been credited with helping to stem the crisis. Still...