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  • Mon, Aug 17 2009
  • 8:16 AM » Capital One US Credit Card Defaults Rise in July
    Published Mon, Aug 17 2009 8:16 AM by CNBC
  • Sat, Aug 15 2009
  • 3:19 PM » Hotel Owners Walking Away
    Published Sat, Aug 15 2009 3:19 PM by Calculated Risk Blog
    From Kris Hudson at the WSJ: ... From San Diego to Dearborn, Mich., an increasing number of hotel owners in the U.S. market are simply walking away ... Distressed noncasino hotel loans now cover more than 1,000 properties with a cumulative loan value of $16.8 billion, according to Real Capital Analytics .... Delinquencies of loans on casinos that have hotels adds 31 properties and $8.6 billion in distressed loans to the mix. ... According to Trepp LLC, the delinquency rate for CMBS tied to hotels was 4.75% in the second quarter, up from 0.5% a year earlier. Debt-rating provider Fitch Ratings predicts that rate will jump to between 10% and 15% by year end. There is much more in the article. A few points on hotels: The occupancy rate has already peaked for the year (see graph below), and hotels that are struggling will be crushed in the Fall. So it is no surprise that Fitch expects the delinquency rate to soar. Many hotels were purchased with too much debt based on optimistic pro forma income projections, and the owners are now far underwater. RevPAR (Revenue per available room) is running about according to . And there is more inventory coming (). Click on graph for larger image in new window. The peak occupancy rate for 2009 was probably three weeks ago at 67%. And that is far below normal ... and it is all downhill for the rest of the year. Note: Graph doesn't start at zero to better show the change. Occupancy rates are far below historical levels, room rates are falling, there is more supply coming online - and many properties have too much debt. That spells Jingle Mail!
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 3:18 PM » Regional Banks: Toxic Loans Leading to More Toxic Problems
    Published Sat, Aug 15 2009 3:18 PM by Seeking Alpha
    submits: It will be interesting to see what banks get shuttered tonight with the news of the Colonial () and BB&T () deal. We will count the Colonial as a failed bank early and will post the details about it later, as in the potential cost the FDIC, etc. The main problem will more than likely be the so called ‘hot money’ or broker sold CD’s combined with riskier loans and defaults, we are working on a detailed post about this very issue. However, Bloomberg had an article today about problem loans reaching 5% of capital for banks, which can pose major problems or failures.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:17 PM » High Leverage May Lead Moody's to Downgrade Some REITs
    Published Sat, Aug 15 2009 3:17 PM by Seeking Alpha
    submits: Differences in leverage as measured by the current market value of a real estate portfolio versus its book value may lead Moody’s to consider a small number of rating downgrades among U.S. REITs. In a new report, Moody’s says it has identified a number of REITs across the major REIT sectors whose leverage based on market value exceeds their leverage based on book value by a meaningful amount. For the first time in several years, REIT portfolio book values for several issuers exceed their market values by a significant margin – Moody’s Vice President Chris Wimmer.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:17 PM » Outstanding Contraction: Commercial Paper Outstanding (8/13/09)
    Published Sat, Aug 15 2009 3:17 PM by Seeking Alpha
    submits: The Commercial Paper (CP) market is essentially a private debt market used by corporations as a cheaper means of funding typical recurring operations than drawing on a line of bank credit. Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters ).
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:17 PM » The Next Bubbles to Go
    Published Sat, Aug 15 2009 3:17 PM by llenrock.com
    It’s every investor’s dream — buy into an asset class on the rise before any one else has caught on. . . ride it all the way up until it gets bubbly. . . and then sell it to suckers. Whether it was buying houses in 2004 (as we did), only to sell and go short [...]
  • 9:54 AM » Bank Failures #75 - #77: Union Bank, National Association, Gilbert, AZ, Community Bank of Nevada, Las Vegas, NV, Community Bank of Arizona, Phoenix, A
    Published Sat, Aug 15 2009 9:54 AM by Calculated Risk Blog
    Four small minnows passed A "whale" also sleeps on beach Sharks circle for more by Soylent Green is People : MidFirst Bank, Oklahoma City, Oklahoma, Assumes All of the Deposits of Union Bank, National Association, Gilbert, Arizona Union Bank, National Association, Gilbert, Arizona, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ... As of June 12, 2009, Union Bank, N.A. had total assets of $124 million and total deposits of approximately $112 million. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $61 million. ... Union Bank, N.A. is the 75th FDIC-insured institution to fail in the nation this year, and the second in Arizona. The last FDIC-insured institution to be closed in the state was Community Bank of Arizona, Phoenix, also today. : MidFirst Bank, Oklahoma City, Oklahoma, Assumes All of the Deposits of Community Bank of Arizona, Phoenix, Arizona Community Bank of Arizona, Phoenix, Arizona, was closed today by the Arizona Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ... As of June 30, 2009, Community Bank of Arizona had total assets of $158.5 million and total deposits of approximately $143.8 million. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $25.5 million. ... Community Bank of Arizona is the 76th FDIC-insured institution to fail in the nation this year, and the first in Arizona. The last FDIC-insured institution to be closed in the state was NextBank, Phoenix, on February 7, 2002. : FDIC Creates a Deposit Insurance National Bank to Facilitate the Resolution of Community Bank of Nevada, Las Vegas, Nevada Community Bank of Nevada, Las Vegas, Nevada, was closed today by the State Commissioner, by Order of the Nevada Financial Institutions Division, which then appointed Federal Deposit Insurance Corporation (FDIC) as receiver...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:39 AM » As of Friday August 14, 2009, FDIC is Bankrupt
    Published Sat, Aug 15 2009 9:39 AM by Google News
    Bank Failure Friday is in full swing. Tonight there were 5 more failures, numbers 73 through 77 on the year. In the biggest failure since WaMu, . Colonial BancGroup Inc., the Alabama lender facing a criminal probe, had its banking operations closed by regulators and taken over by BB&T Corp. in the biggest bank failure since Washington Mutual Inc. collapsed last year. Branches and deposits of Colonial, Alabama’s second-largest bank, were turned over to Winston-Salem, North Carolina-based BB&T in a deal brokered by the Federal Deposit Insurance Corp., the regulator said today. The failure of Montgomery-based Colonial followed a Florida expansion that saddled the lender with more than $1.7 billion in soured real-estate loans. Colonial’s failure will deplete the FDIC’s deposit insurance fund by $2.8 billion, the agency said. The fund, which the agency uses to pay customers of a failed bank for deposit losses up to a $250,000 limit and is generated by fees paid by banks, stood at $13 billion at the end of the first quarter, according to the FDIC. The agency has set aside an additional $25 billion for bank failures, agency spokesman David Barr said. Is There Any Money Left In The Fund? Tonight, inquiring minds are asking "Is There Any Money Left In The Fund?" For clues, please consider Saxo Bank Research . As late as in the end of April just before the release of the bank stress tests, Ms. Bair Chairman of the FDIC said they would not need any additional bailouts from the U.S Treasury within the immediate future according to The Bulletin. After three new bank failures last Friday, the FDIC’s Deposit Insurance Fund (DIF) diminished by another $185 million for a total remaining balance of $648.1 million. Below is a graph showing the DIF capital as a percentage of total bank deposits insured by the FDIC. Note that this graph is based on the old insurance limit with a maximum coverage of $100.000/account. This limit has been changed to cover up to $250.000/account...
  • 9:39 AM » Colonial Bank Fails, Biggest Since WaMu
    Published Sat, Aug 15 2009 9:39 AM by Google News
    I have generally not posted on Friday night bank seizures, unless there is a noteworthy element to them. The US has around 8000 banks, and with 70% of the deposits in the 19 banks that participated in the dubious stress tests, we can have a lot of little banks get merged into slightly less little banks without having much impact. Bigger banks are another matter. First, dispatching of them in the normal "get someone to take this over" manner increases concentration at the top end, which is not a good development from a systemic risk standpoint. Second, a big bank going down suggests, contra the loud cheerleading of the Treasury and Fed, that something may indeed be rotten in bankland. The bank that went under tonight was Colonial Bank, of Montgomery. Alabama, which we'll turn to shortly. Consider this example of another less than sound bank in the same state. The stunning difference is that this one, Regions Bank, is considered well capitalized when it has just broadcast that it has a negative net worth. As : Check out the footnotes to Regions Financial Corp.’s latest quarterly report, and you’ll see a remarkable disclosure. There, in an easy-to-read chart, the company divulged that the loans on its books as of June 30 were worth $22.8 billion less than what its balance sheet said. The Birmingham, Alabama-based bank’s shareholder equity, by comparison, was just $18.7 billion. So, if it weren’t for the inflated loan values, Regions’ equity would be less than zero. Meanwhile, the government continues to classify Regions as “well capitalized.” Now to tonight's FDIC special, . And notice that Regions, at roughly $140 billion in assets, is bigger than the bank being taken out tonight, a "mere" $25 billion institution: Regulators seized Colonial Bank on Friday after reaching a deal to sell its branches, deposits and most of its assets to rival BB&T Corp. in the sixth-largest bank failure in U.S. history. The demise of Colonial, a regional bank...
  • Fri, Aug 14 2009
  • 3:53 PM » Lenders shun bonus income
    Published Fri, Aug 14 2009 3:53 PM by traxfer.ft.com
    Mortgage lenders are taking little notice of the reappearance of bonuses in the City, with many banks only willing to accept a fraction of bonus income and some tightening lending criteria further in the past few months.
    Click Here to Read the Full Article

    Source: traxfer.ft.com
  • 3:53 PM » First-time Home Buyer Frenzy
    Published Fri, Aug 14 2009 3:53 PM by Calculated Risk Blog
    Yesterday I posted some data from Campbell Communications () Here is a repeat of the graph by buyer type: According to the Campbell survey first-time buyers accounted for 43% of sales in Q2 (investors another 29%). Source: , Campbell Communications, June 2009 (excerpted with permission) These numbers are higher than the numbers by NAR for Q2: "An NAR practitioner survey in June showed first-time buyers accounted for 29 percent of transactions, unchanged from May ..." However I believe the Campbell numbers are closer to actual. I've talked with several people - and there is a buying frenzy right now. First-time homebuyers, especially those with a limited downpayment, are desperate. From the Chicago Tribune: With a growing sense of urgency, first-time buyers are searching for homes, worried that time is running out on an $8,000 federal tax credit. Real estate agents say they're seeing a surge of first-timers who want to close on a property by Nov. 30, the deadline for the credit. The rush has set off bidding wars and stirred up a normally quiet August market. "We're inundated," said Paula Clark, an agent with Coldwell Banker. To meet the Nov. 30 deadline, buyers need to have a contract by around Sept. 30, because inspections, mortgage approvals and other details typically take about two months. Also from Reuters: "I am willing to settle for something" to finish buying quickly, said 20-year old Kielar, who works at the Denver County Jail, and is a part-time student. The tax credit carrot "is speeding up the process," she said, adding that "$8,000 could help remodel the house, redo carpets and cabinets." For loans backed by the Federal Housing Administration (FHA), which require a minimum 3.5 percent downpayment, the $8,000 can be also be applied upfront toward the purchase rather than later on tax returns like other mortgages. In addition $8,000 to the Federal tax credit, there are some state programs, as a nexample...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 1:30 PM » FDIC to seize Colonial, sell assets to BB&T: report
    Published Fri, Aug 14 2009 1:30 PM by Reuters
    (Reuters) - The Federal Deposit Insurance Corp is taking Colonial BancGroup Inc into receivership and will sell the struggling lender's branches and deposits to BB&T Corp, Dow Jones said, citing a person familiar with the situation.
  • 12:40 PM » BB&T to buy Colonial bank - report
    Published Fri, Aug 14 2009 12:40 PM by CNN
    Troubled Colonial BancGroup appeared to be on the verge of failure Friday as a federal judge ordered a freeze of its assets and a wire service reported that its deposits and branches were to be purchased by rival BB&T.
  • 12:10 PM » New York Fed purchases $1.784 billion in agency coupons
    Published Fri, Aug 14 2009 12:10 PM by bit.ly
    New York Fed purchases $1.784 billion in agency coupons
  • 12:10 PM » Federal Housing Finance Agency Report Shows Refinance Volumes on the Rise for Fannie Mae and Freddie Mac
    Published Fri, Aug 14 2009 12:10 PM by FHFA
    August 13, 2009: Federal Housing Finance Agency Report Shows Refinance Volumes on the Rise for Fannie Mae and Freddie Mac
  • 8:02 AM » California to Stop Issuing IOUs a Month Early
    Published Fri, Aug 14 2009 8:02 AM by Calculated Risk Blog
    Update: Actual statement from Chiang: " ... to stop issuing IOUs on September 4, almost one month earlier than expected. ... the Controller will ask the board to approve a redemption date of September 4, which is almost one month earlier than the October 2 maturity date printed on the IOUs." From Tom Petruno at the LA Times: California expects to begin redeeming outstanding IOUs on Sept. 4, a month earlier than expected, thanks to cash savings from budget cuts, state Controller John Chiang announced today. He said the state also will need $10.5 billion in short-term loans from investors to get through the fiscal year ending next June 30. ... The borrowing plan and the savings from the slashed state budget "should provide sufficient cash to meet all of California’s payment obligations through the fiscal year," Chiang said in a . And by popular request ... Click on graph for larger image in new window. Instead of comparing the markets from the peak (See: the ), matched up the market bottoms for four crashes (with an interim bottom for the Great Depression). Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:01 AM » American CoreLogic: More than 15.2 Million Mortgage Holders Underwater
    Published Fri, Aug 14 2009 8:01 AM by Calculated Risk Blog
    The First American CoreLogic for June 2009 is available on line. You have to sign up to read the report. More than 15.2 million U.S. mortgages or 32.2 percent of all mortgaged properties were in negative equity position as of June 30, 2009 according to newly released data from First American CoreLogic. June’s negative equity share was slightly lower than the 32.5 percent as of the end of March 2009 and it reflects the recent flattening of monthly home price changes. As of June 2009, there were an additional 2.5 million mortgaged properties that were approaching negative equity and negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage nationwide. The aggregate property value for loans in a negative equity position was $3.4 trillion, which represents the total property value at risk of default. In California, the aggregate value of homes that are in negative equity was $969 billion, followed by Florida ($432 billion), New Jersey ($146 billion), Illinois ($146 billion) and Arizona ($140 billion). Los Angeles had over $310 billion in aggregate property value in a negative equity position, followed by New York ($183 billion), Miami ($152 billion), Washington DC ($149 billion) and Chicago ($134 billion). ... Nevada (66 percent) had the highest percentage with nearly two‐thirds of mortgage borrowers in a negative equity position. In Arizona (51 percent) and Florida (49 percent), half of all mortgage borrowers were in a negative equity position. Michigan (48 percent) and California (42 percent) round out the top five states. Click on graph for larger image in new window. This graph shows the percent of households with mortgages underwater by state (and near negative equity defined as with less than 5% equity). UPDATE: States with no data from CoreLogic: Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia, Wyoming. The high population states of California and Florida account for...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:01 AM » Judge Rules for BofA Against Colonial Bank, New Cease & Desist Disclosed
    Published Fri, Aug 14 2009 8:01 AM by Calculated Risk Blog
    Form Bloomberg: U.S. District Judge Adalberto Jordan in Miami issued the order after Bank of America sued Colonial yesterday in Miami, claiming Colonial is holding the cash and loans as a custodian for Ocala Funding Inc. The order notes that the suit relates to more than 6,000 mortgages worth more than $1 billion. “To the extent that the interests of the public are implicated in this case, they weigh in favor of requiring Colonial to honor its contractual obligations and avoiding what would amount to a $1 billion heist,” the judge said in an order posted online today. In another action, from Ocala.com: [Henley Holdings LLC] filed suit in the U.S. District Court for the Middle District of Florida, accusing Taylor Bean of breach of contract. It also sought temporary injunctive relief, asking the court to force Taylor Bean to immediately deposit the $4.7 million into an account at a separate bank. Henley was worried because Taylor Bean had essentially shut its doors, and because if Colonial failed, only $250,000 of Henley money would be covered by FDIC insurance. That same day, a federal judge granted Henley's request and ordered at least $4.4 million of the company's funds put into an interest-bearing account within the court registry. Court records show that Taylor Bean turned over that amount the next day. What is interesting about the second action is that apparently Colonial Bank disclosed a new FDIC Cease & Desist order dated Aug. 11th. I'm told the FDIC order instructs Colonial to obtain FDIC approval for most activities, requires "prompt and unrestricted access" to all bank documents and employees, and requires proceduces to prevent the destruction of any bank documents.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:01 AM » Real Estate Has Hit Bottom? Not Even Close
    Published Fri, Aug 14 2009 8:01 AM by Seeking Alpha
    submits: Correct me if I am wrong, but hasn’t real estate hit its bottom? According to CNBC, TV, Cramer said that real estate hit its bottom, ‘early’, in June and all other reports yesterday said everything is fine and prices will go up,up,up! However, as usual, CNBC.com has conflicting stories. For example, CNBC TV says it' bull market with hot economic growth and there is no risk in this bull market, but CNBC.com is awash with stories saying the global markets are in trouble and real estate is in pretty bad shape. This is what makes me question the integrity of CNBC commentators, who I once respected.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 7:30 AM » Toward Greater Bank Transparency: FASB Considering Expanded Mark-to-Market Rules
    Published Fri, Aug 14 2009 7:30 AM by Seeking Alpha
    submits: The FASB, or Financial Accounting Standards Board, is considering expanding its mark-to-market rules with loans instead of only securities. I bet you thought this issue was dead n April when Congress forced the FASB to relax on this rule for securities, but this is an entirely new issue as they want loans priced to market instead of just securities. This is a major problem for banks, which oppose this rule. The banks blame the mark-to-market rules for the financial crisis itself, when in fact it was their own bad decisions that caused the problem, not the rule, which is absurd. However, I am not sure about this new proposed rule as it could cause a major problem within banks themselves. I am not sure what the FASB is really thinking, but it is safe to assume that they think that there is a problem with the way loans are currently valued.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • Thu, Aug 13 2009
  • 6:51 PM » A Look Inside Fed’s Balance Sheet — 8/13/09 Update
    Published Thu, Aug 13 2009 6:51 PM by WSJ
    You need to upgrade your Flash Player The Fed’s balance sheet expanded in the latest week, but remained below $2 trillion. Direct-bank lending edged up a bit, but remains below $275 billion. The makeup of the balance sheet continued to shift out of emergency facilities and into debt holdings. Treasurys and agency debt continued their upward march, though holdings of mortgage-backed securities were flat. The Fed started a program in March to ramp up such acquisitions in order to push down long-term interest rates low. Central-bank liquidity swaps declined again, as overseas demand for dollars continues to abate. The commercial paper and money market facilities dropped again and at their lowest levels since inception, as companies decide to take their funds out and tap investors directly as sentiment in the market improves. In an effort to track the Fed’s actions, Real Time Economics has created an interactive graphic that will mark the expansion of the central bank’s balance sheet. Every Thursday afternoon, the chart will be updated with released by the Fed. In an effort to simplify the composition of the balance sheet, some elements have been consolidated. Portfolios holding assets from the Bear Stearns and AIG rescues have been put into one category, as have facilities aimed at supporting commercial paper and money markets. The direct bank lending group includes term auction credit, as well as loans extended through the discount window and similar programs. Central bank liquidity swaps refer to Fed programs with foreign central banks that allow the institutions to lend out foreign currency to their local banks. Repurchase agreements are short-term temporary purchases of securities from banks, which are looking for liquidity and agree to repurchase them on a specified date at a specified price. Click and drag your mouse to zoom in on the chart. Clicking the check mark on categories can add or remove elements from the balance sheet.
  • 6:51 PM » HUD announces posting of frequently asked questions on new RESPA rule
    Published Thu, Aug 13 2009 6:51 PM by www.hud.gov
    WASHINGTON - U.S. Department of Housing and Urban Development Assistant Secretary for Housing-Federal Housing Commissioner David Stevens today announced the first release of frequently asked questions (FAQs) concerning implementation of the new Real Estate Settlement Procedures Act (RESPA) rule. The FAQs were compiled from questions received from industry since the publication of the Rule.
  • 12:37 PM » BofA Sues Colonial for $1 Billion
    Published Thu, Aug 13 2009 12:37 PM by Calculated Risk Blog
    From Reuters: Bank of America Corp sued Colonial BancGroup Inc for more than $1 billion in loans and cash ... Bank of America, which was the collateral agent for certain loans of Ocala Funding LLC, said Colonial refused to return more than $1 billion of loans and cash which it held as a custodian, agent and bailee. Ocala Funding was a commercial paper vehicle sponsored by Taylor, Bean & Whitaker Mortgage Corp (TBW).... Bank of America sought an emergency injunctive relief in a complaint filed with a U.S. federal court in Florida on Wednesday. ... The case is In re : Bank of America National Association vs Colonial Bank and John Doe, U.S. District Court, Southern District of Florida, Miami Division 1:09-cv-22384-AJ. It appears the FDIC is doing a little housekeeping (): Colonial Bank ... received notice on August 10, 2009 from the Federal Deposit Insurance Corporation ... directing CBG Florida REIT Corp., an indirect subsidiary of the Bank, to exchange all outstanding shares of its Fixed-to-Floating Rate Perpetual Non-cumulative Preferred Stock, Class A, Series A ... for an equal amount of Fixed-to-Floating Rate Perpetual Non-cumulative Preferred Stock, Series A of BancGroup Colonial appears to be in tatters, and my guess is the FDIC will seize the bank, before they find a buyer for the assets, and operate the bank as conservator. (like with last year).
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 12:37 PM » Cash For Clunkers For Housing Market Is 'No Brainer'
    Published Thu, Aug 13 2009 12:37 PM by Google News
    Caroline Baum sent me the following Bloomberg clips. 14:58 *TOLL BROTHERS CHIEF ROBERT TOLL MAKES COMMENTS ON CONF CALL 14:57 *CASH FOR CLUNKERS FOR HOUSING MARKET WOULD JUMPSTART ECONOMY 14:57 *CASH FOR CLUNKERS FOR HOUSING MARKET IS `NO BRAINER,' TOLL SAYS 14:57 *U.S. SHOULD DO `CASH FOR CLUNKERS' FOR HOUSING, TOLL SAYS Caroline also had this comment on the record that I heartily endorse: " Yeah, no brainer. You have to have no brains to think this is answer! " For more on the brainless nature of such proposals please see . One might wonder if Robert Toll is really as brain dead as he sounds or if he is simply speaking about what is good for Robert Toll, not the economy. A timely Exodus Inquiring minds are reading . Fifteen corporate chieftains of large home-building and financial-services firms each reaped more than $100 million in cash compensation and proceeds from stock sales during the past five years, according to a Wall Street Journal analysis. Four of those executives, including the heads of Lehman Brothers Holdings Inc. and Bear Stearns Cos., ran companies that have filed for bankruptcy protection or seen their share prices fall more than 90% from their peak. The study, which examined filings at 120 public companies in such sectors as banking, mortgage finance, student lending, stock brokerage and home building, showed that top executives and directors of the firms cashed out a total of more than $21 billion during the period. Some experts say huge paydays inevitably coincide with economic booms. In the tech bubble of the late 1990s, more than 50 individuals each made more than $100 million from selling shares just prior to the crash. Many had just founded companies that had never turned a profit. "The system tends to reward people for participating in bubbles," says Roy C. Smith, a finance professor at New York University's business school. Dwight Schar, chairman of NVR Inc., a Reston, Va., home builder best known as the parent...
  • 10:37 AM » Next Bubble to Burst Is Banks’ Big Loan Values: Jonathan Weil
    Published Thu, Aug 13 2009 10:37 AM by Bloomberg
    Check out the footnotes to ’s latest quarterly report, and you’ll see a remarkable disclosure. There, in an easy-to-read chart, the company divulged that the loans on its books as of June 30 were worth $22.8 billion less than what its balance sheet said. The Birmingham, Alabama-based bank’s shareholder equity, by comparison, was just $18.7 billion.
  • 8:13 AM » Treasury Purchase Program Extended, But Not Increased
    Published Thu, Aug 13 2009 8:13 AM by Seeking Alpha
    submits: From the released a few minutes ago by the Fed: The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:12 AM » More Signs of a Housing Bottom
    Published Thu, Aug 13 2009 8:12 AM by Seeking Alpha
    submits: The National Association of Realtors (NAR) released its quarterly metropolitan home sales report yesterday, and I found some bullish undertones in it. While most people are focusing on the continued large year/year price drops, I have not heard anyone focusing on the fact that most cities showed sequential (qtr/qtr) price gains for the first time in roughly 2 years !
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:12 AM » U.S. home foreclosures set another record in July
    Published Thu, Aug 13 2009 8:12 AM by Reuters
    NEW YORK (Reuters) - U.S. home loans failed at a record pace in July despite ongoing federal and state programs to avoid foreclosures, which have severely strained housing and the economy.
  • 8:12 AM » Another looming housing crisis
    Published Thu, Aug 13 2009 8:12 AM by CNN
    Karen Weaver, global head of Deutsche Bank's securitization research division -- responsible for analyzing credit default swaps, collateralized mortgage obligations, and other exotic Wall Street products -- said last week that 48% of U.S. mortgage owners will end up owing more than their home is worth by 2011.
  • 8:08 AM » 2nd Quarter Existing-Home Sales Rise in Most States, Helped by Affordable Metro Prices
    Published Thu, Aug 13 2009 8:08 AM by Realtor.Org
    Existing-home sales in the second quarter showed healthy gains from the first quarter in the vast majority of states, and price declines have increased affordability in most metro areas, according to the latest survey by the National Association of Realtors®.
  • 7:41 AM » National Data: Distressed Sales and Types of Buyers
    Published Thu, Aug 13 2009 7:41 AM by Calculated Risk Blog
    Here is some national data on the number of distressed sales in Q2, and the types of homebuyers. This is from a survey by Campbell Communications (excerpted with permission). Source: , Campbell Communications, June 2009 Click on graph for larger image in new window. The Campbell survey broke REOs down into damaged and move-in ready. According to this national survey of real estate agents, over 63% of sales were distressed sales in Q2. This is higher than the numbers reported by NAR. : Distressed properties ... accounted for 31 percent of sales in June ... Distressed properties, which declined to 33 percent of all sales in May from 45 percent in April ... The Campbell numbers seem high to me. In Sacramento over 70% of sales in June were distressed, and I'd expect that area to well above the national level. But the NAR numbers seem low. The second graph breaks out sales by buyer type. According to the Campbell survey over 70% of sales in Q2 were to first-time buyers and investors. Although we don't have historical data for distressed properties - or buyer types - this does suggest a market that is far from normal with few move-across or move-up buyers.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 7:41 AM » California AG Cracks Down on Loan Modifiers
    Published Thu, Aug 13 2009 7:41 AM by Calculated Risk Blog
    From California AG Jerry Brown: (ht ) Threatening possible criminal and civil prosecution, Attorney General Edmund G. Brown Jr. today ordered 386 mortgage foreclosure consultants to post $100,000 bonds and register with his office. He also ordered more than two dozen companies to justify suspicious loan modification claims made in "slick advertising," online and through the mail. ... Brown has sent letters directing 386 mortgage foreclosure consultants to register with his office within 10 days and post $100,000 bond, or demonstrate why they are not required to. If the consultants are required to register and have failed to do so, they are subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation. Eighty-five of these consultants are based in Los Angeles County, 133 in Orange County, 47 in the Inland Empire, 68 in San Diego County and seven in the Bay Area. ... The State Bar of California today announced that it has obtained resignations from two lawyers and filed charges against a third for their loan modification activities. And check out some of this advertising that Brown demanded loan consultants substantiate: · Brown directed Irsfeld, Irsfeld & Younger, LLP as corporate counsel for JL Richman, doing business as Home Retention Programs of Glendale, Calif. to substantiate its claims including: "Our team has 10 years of success in negotiating 90% of all mortgage loan modification requests to a successful outcome….For the modification requests we accept, our modification failure rate is less than 1%." · Brown directed 21st Century Real Estate Investment Corporation of Rancho Cucamonga to substantiate its written solicitations including: "[y]our proposed loan modification is a 30 year fixed/3.5% interest rate with a monthly payment of $495. Your monthly savings is $705. Total savings over a 30-year period is $253,800. . . . Your first payment will be negotiated to begin March 2009 - payable...
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    Source: Calculated Risk Blog
  • Wed, Aug 12 2009
  • 4:43 PM » Social Safety Nets Mask Deflationary Depression
    Published Wed, Aug 12 2009 4:43 PM by Google News
    In a recent video Robert Prechter says the and that a deflationary depression is coming. According to Prechter, the Elliott Wave pattern in the US dollar confirms we recently hit the fifth wave down. Next stop is up. He also notes that sentiment has reached an extreme: "The Dollar Sentiment Index for the Dollar Index reports just 3% bulls among traders, an extreme level only five times in the past 20 years, usually near an important low," Prechter wrote on Aug. 5. "The last time we saw readings like this was March-July 2008, just before the dollar soared." In other words, the "short the dollar" trade is overly crowded. I mentioned the wave pattern on July 31 in . Here is an updated chart. US$ Weekly Chart click on chart for sharper image Note that bearish sentiment on the dollar is at an all time high even though the dollar index is substantially higher than it was in April and July of 2008. That's bullish for the dollar. I still show two "?" on the chart because technically wave 5's can extend. However, fundamentally and technically I do not expect expect it to extend, at least by much. Social Safety Nets Mask Deflationary Depression Prechter is looking for a "major economic depression". I think it is clear we are already in one. The only reason it is not more readily visible is people are living in foreclosed houses unable or unwilling to pay their mortgage, one in nine living in the US is on food stamps, and unemployment insurance has been extended twice. Congress is now debating extending it a third time. If Congress does not act . Although the official unememployment rate is a mere 9.5% alternative measures show it is over 16%. Moreover, an unprecedented 4.4 million workers have been unemployed and looking for work for 26 weeks or longer. Please see and for details about jobs. In simple terms, more social safety nets are in place now than during the great depression. Steepest Credit Contraction in Over Five...
  • 4:42 PM » Commercial Loan Losses Cast Shadow over Regional Banks
    Published Wed, Aug 12 2009 4:42 PM by Seeking Alpha
    submits: Excerpted from Despite some hopeful signs of relief for U.S. banks in second-quarter 2009, the next several quarters likely will continue to be a struggle, especially for small regional institutions, Standard & Poor’s Ratings Services analysts said during a quarterly conference call on Aug. 6. Overall, the industry outlook remains predominantly negative, in part because of banks’ lower profit margins related to still-heavy provisioning required for increased reserve building. Asset-quality deterioration shifted to commercial lending, both commercial and industrial and commercial real estate (CRE), from consumer-related loans.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 4:41 PM » Congressional Oversight Panel Releases Oversight Report on the Continued Risk of Troubled Assets
    Published Wed, Aug 12 2009 4:41 PM by cop.senate.gov
    Financial Stability is at Risk if the Underlying Problem of Troubled Assets Remains Unresolved WASHINGTON, D.C. — The Congressional Oversight Panel (COP) today released its August oversight report, "The Continued Risk of Troubled Assets," which examines the economic implications of troubled assets and assesses Treasury's strategy for removing these assets from bank balance sheets. The Panel found that the future performance of the economy and the performance of the underlying loans, as well as the method of valuation of the assets, are critical to the continued operation of the banks. Last fall, as increasing numbers of subprime mortgage-holders defaulted on their loans, the financial markets for these assets effectively ceased to function. In response to the crisis, Treasury proposed a major government program to move hundreds of billions of dollars in troubled assets off the banks’ books. But by the time the Troubled Asset Relief Program (TARP) was signed into law in early October, Treasury had decided to use TARP funds to pursue a different strategy: providing banks with a capital buffer to write-down many of their troubled assets and to build reserves for the future. Today, ten months later, substantial troubled assets remain on banks' balance sheets. Treasury has launched the new Public-Private Investment Program (PPIP) in an effort to restart the mortgage-backed asset market. The Panel's report raises several questions about the program, including whether accounting rules that allow banks to carry assets at higher valuations will diminish their willingness to sell, and whether potential buyers may decline to participate due to concerns about political interference or government restrictions. PPIP could help to jump-start the troubled asset market, but serious questions remain about its effectiveness. For smaller banks, those not among the 19 stress tested bank holding companies, troubled assets pose special challenges that have not been acknowledged...
    Click Here to Read the Full Article

    Source: cop.senate.gov
  • 4:40 PM » Statement Regarding Purchases of Treasury Securities
    Published Wed, Aug 12 2009 4:40 PM by NY Fed
    Statement Regarding Purchases of Treasury Securities
  • 4:39 PM » Administration’s Regulatory Reform Agenda Reaches New Milestone
    Published Wed, Aug 12 2009 4:39 PM by US Treasury
    To view or print the PDF content on this page, download the free . August 11, 2009 TG-261 Administration’s Regulatory Reform Agenda Reaches New Milestone: Final Piece of Legislative Language Delivered to Capitol Hill For the legislative language, visit . Acting on its commitment to restoring stability in our financial system, the Administration delivered legislative language to Capitol Hill today focusing on the regulatory reform of over-the-counter (OTC) derivatives. One of the most significant changes in the world of finance in recent decades has been the explosive growth and rapid innovation in the markets for credit default swaps (CDS) and other OTC derivatives. These markets have largely gone unregulated since their inception. Enormous risks built up in these markets – substantially out of the view or control of regulators – and these risks contributed to the collapse of major financial firms in the past year and severe stress throughout the financial system. Under the Administration's legislation, the OTC derivative markets will be comprehensively regulated for the first time. The legislation will provide for regulation and transparency for all OTC derivative transactions; strong prudential and business conduct regulation of all OTC derivative dealers and other major participants in the OTC derivative markets; and improved regulatory and enforcement tools to prevent manipulation, fraud, and other abuses in these markets. Today's delivery marks an important new milestone, as the Administration has now delivered a comprehensive package of financial regulatory reform legislation to Capitol Hill. Less than two months since the release of its white paper, "Financial Regulatory Reform: A New Foundation," on June 17, the Administration has successfully translated all of its proposals into detailed legislative text – a remarkable effort in both speed and scope. The Administration looks forward to working with Congress to pass a comprehensive regulatory...
  • 4:39 PM » Creating a Central Foreclosure and Mortgage Database: The Urgent Need to Centralize Housing Data.
    Published Wed, Aug 12 2009 4:39 PM by Google News
    There is an urgent need to centralize important pieces of housing data. I view this on the level of employment data or even calculating GDP. Housing has become such a crucial component of our nation’s economy that I am stunned, nearly two years into this crisis that we have not spent any money in a concerted effort to bring housing data under one umbrella. We spend trillions in bailouts yet will not allocate what, a few million to create a central hub of this information? When we investigated Southern California we used three different sources to come up with our estimate that . Some argue that this issue is minor and will have a minor impact on the overall market. Others argue that shadow inventory is much larger than many would expect and this will have an effect on the overall market. In searching for for example, we have to rely on multiple sources of data including the Federal Reserve and independent studies. We have a raw number of loans and average balances yet this data is not connected in any easy format to foreclosures: I view this as an urgent need. If we are to conduct any thorough analysis it would be useful to have the multiple data providers under one central hub. Take for example California and two large data providers in RealtyTrac and DataQuick. Let us look at distress property data for Q2 of 2009: DataQuick (Q2 2009): Notice of Defaults: 124,562 Trustee Deeds Recorded: 45,667 RealtyTrac (Q2 2009): Notice of Defaults: 124,275 Notice of Trustee Sale: 45,419 At least with these two data points, we realize that both sources are nearly on the same page. Yet this is where a lot of darkness begins to emerge. We know that many banks are taking properties back as REOs. How many? To figure this out we would first need to have banks reporting to one central hub and ideally providing data on the properties they have on their books. Some would argue that this data is proprietary. I would argue that since banks are using trillions in taxpayer bailouts they really...
  • 4:39 PM » Where Exactly Are Home Prices Rising?
    Published Wed, Aug 12 2009 4:39 PM by CNBC
    Posted By: Amid the ever-growing number of real estate tracking reports, I've recently seen a few that claim home prices have hit bottom, and therefore the housing crash is not only over, but housing is now suddenly a cash cow again. These reports infuriate me, because as much as I'd like to see healthy home price appreciation (yes, I own a home), it's just not true. Topics: | | Sectors: | MEDIA:
  • 11:28 AM » Kass’s Summary of Bearishness
    Published Wed, Aug 12 2009 11:28 AM by The Big Picture
    Doug Kass very publicly made a prescient bottom call in early March. He has now flipped Bearish, and explains why: 1. Cost cuts are a corporate lifeline and so is fiscal stimulus, but both have a defined and limited life. 2. Cost cuts (exacerbated by wage deflation) pose an enduring threat to the consumer, which is still the most significant contributor to domestic growth. 3. The consumer entered the current downcycle exposed and levered to the hilt, and net worths have been damaged and will need to be repaired through higher savings and lower consumption. 4. The credit aftershock will continue to haunt the economy. 5. The effect of the Fed’s monetarist experiment and its impact on investing and spending still remain uncertain. 6. While the housing market has stabilized, its recovery will be muted, and there are few growth drivers to replace the important role taken by the real estate markets in the prior upturn. 7. Commercial real estate has only begun to enter a cyclical downturn. 8. While the public works component of public policy is a stimulant, the impact might be more muted than is generally recognized. There may be less than meets the eye as most of the current fiscal policy initiatives represent transfer payments that have a negative multiplier and create work disincentives. 9. Municipalities have historically provided economic stability — no more. 10. Federal, state and local taxes will be rising as the deficit must eventually be funded, and high-tax health and energy bills also loom. Doug points to the animal spirits in full force, shorts scrambling to cover, and a crowded bullish sentiment as additional reasons for the tactical shift. He believes a “self-sustaining economic recovery appears doubtful” That fits in well with my 1973/74 parallel of the current market environment. > Source : Doug Kass The Street.com, 08/10/09 http://www.thestreet.com/story/10569021/1/kass-a-summary-of-my-bearishness.html
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    Source: The Big Picture
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