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  • Wed, May 20 2009
  • 5:19 PM » Retail REITs: Tough but Stabilizing
    Published Wed, May 20 2009 5:19 PM by Seeking Alpha
    submits: In his first note released in the post Sakwa world, Craig Schmidt continues to attempt to restore confidence in retail REITs. It would, after all, seem prudent to bang clients' heads into their desks until they see the light at the end of the tunnel (oncoming bullet train?) at a time when the only cash, and equity value, REITs can create is by raising expensive, dilutive equity in order to repay the cheapest form of capital (that of secured loans previously held by Mr. Schmidt uber parent, Bank of America). This is especially true, after these same clients have plunked down about $20 billion in new equity in companies that at this point exist on fumes of hope, speculation and short covering. not surprisingly, the report comes just prior to Realtors's release which indicates that Commercial Real Estate activity in Q1 fell 4.8% from Q4 of 2008 and 12.9% year over year, while vacancy rates are poised to rise to 12.1% from 9.7% last year. While the title is expected, even Mr. Schmidt is at a loss to present the REIT "green shoots" that would substantiate his note. Amsuingly, Schmidt quotes favorable restaurant trends to back up the stabilization thesis:
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 4:01 PM » New Economic Data: Commercial Leading Indicator
    Published Wed, May 20 2009 4:01 PM by Google News
    The general economic downturn, complicated by a severe credit crunch in commercial real estate, is dampening commercial real estate activity.
  • 3:49 PM » Federal Reserve Summary of Economic Projections
    Published Wed, May 20 2009 3:49 PM by Federal Reserve
    In conjunction with the April 28-29, 2009, FOMC meeting, the members of the Board of Governors and the presidents of the Federal Reserve Banks, all of whom participate in deliberations of the FOMC, submitted projections for output growth, unemployment, and inflation in 2009, 2010, 2011, and over the longer run
    Click Here to Read the Full Article

    Source: Federal Reserve
  • 2:44 PM » Minutes of Federal Open Market Committee, April 28-29, 2009
    Published Wed, May 20 2009 2:44 PM by Federal Reserve
    Minutes of Federal Open Market Committee, April 28-29, 2009
    Click Here to Read the Full Article

    Source: Federal Reserve
  • 2:44 PM » FOMC Forecasts: The Pessimism Worsens
    Published Wed, May 20 2009 2:44 PM by WSJ
    There may be green shoots appearing for the economy, but to much of the Federal Reserve they appeared to be light green. Central bank officials in recent months grew more pessimistic about their prospects for the economy, expecting a worse 2009 and 2010 than they forecast in January. , provided for the April 28-29 Federal Open Market Committee meeting, show central bankers getting closer to private economists’ expectations for the unemployment rate. The central tendency of the forecasts (excluding the three highest and three lowest among 17 policymakers) puts the unemployment rate at between 9.2% and 9.6% in the fourth quarter, down from the earlier projection of 8.5% to 8.8% made in January. The fourth-quarter 2010 forecast worsened to 9% to 9.5%, compared with a projection of 8% to 8.3% submitted in January. Even the 2011 forecast went up a full percentage point to between 7.7% and 8.5% in the fourth quarter of that year. Fed officials still expect a recovery in sales and production to begin in the second half of this year, but the forces weighing on the economy were “likely to abate only slowly,” a summary released with the minutes said. Gross domestic product was projected to decline by 1.3% to 2% in the fourth quarter of 2009 from the year-earlier period, worse than the January projection of a decline between 0.5% and 1.3%. The forecast for 2010 was also downgraded a bit: the central tendency projection is now 2% to 3% growth, down from the January forecast of 2.5% to 3.3% for 2010. The Fed said officials expected that “recoveries in consumer spending and residential investment initially would be damped by further deterioration in labor markets, still-tight credit conditions, and a continuing, if less pronounced, decline in house prices. Moreover, they anticipated that very low capacity utilization, sluggish growth in sales, and the high cost and limited availability of financing would contribute to further weakness in business fixed investment this year.” Projections...
  • 2:44 PM » St. Louis Fed Paper Rebuts Bernanke’s Treasury-Purchase Views
    Published Wed, May 20 2009 2:44 PM by WSJ
    Is Ben Bernanke wrong about the potential effects of the Federal Reserve ’s purchases of longer-term Treasurys on yields? released this week by the St. Louis Fed suggests he might be. Bernanke “seems to suggest that the purchase of a large quantity of longer-term government securities might reduce longer-term rates,” St. Louis Fed economist Daniel Thornton wrote in a research note posted on the St. Louis Fed’s Web site. And with short-term rates near zero, the yield curve would presumably flatten under that hypothesis, Thornton observed. That, however, is “inconsistent” with the “commonly held view” that long-term rates are influenced by what’s known as the expectations hypothesis, Thornton wrote. “Under the expectations hypothesis, long-term rates are equal to the market’s expectation of the short-term rate over the term of the long-term asset plus a risk premium,” Thornton wrote. Therefore, the Fed “cannot permanently affect the shape of the yield curve by purchasing securities in one end of the market,” he wrote. In March, the Fed announced that it would buy up to $300 billion in longer-term Treasury securities in addition to more than $1 trillion in agency and agency-backed mortgage backed securities. The announcement, on March 18, led to a stunning rally in Treasurys and flattening of the yield curve that appeared to support Bernanke’s statement in December 2008 that buying longer-term Treasurys or agencies in large quantities “might influence the yields on these securities, thus helping to spur aggregate demand.” But the yield-curve flattening, Thornton noted, “has vanished” since March. So while the Fed has boosted longer-term Treasury purchases and expanded its balance sheet, “these actions appear to have had no permanent effect on the yield curve,” he wrote.
  • 12:10 PM » Dollar falls to 5-month low on euro
    Published Wed, May 20 2009 12:10 PM by CNN
    Read full story for latest details.
  • 12:10 PM » WaMu asks bankruptcy court to rule on dispute with JPMorgan
    Published Wed, May 20 2009 12:10 PM by Reuters
    NEW YORK (Reuters) - Washington Mutual Inc has asked a bankruptcy court to rule on its dispute with JPMorgan Chase & Co over more than $4 billion in deposits, according to court documents on Wednesday.
  • 12:10 PM » A Portrait of the Mortgage Ax, Not Falling
    Published Wed, May 20 2009 12:10 PM by Seeking Alpha
    submits: Edmund Andrews’ in the NYT ended with the following line: Eight months after my last payment to the bank, I am still waiting for the ax to fall.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 10:53 AM » Where Is TARP Money Going? How Much Is Left?
    Published Wed, May 20 2009 10:53 AM by WSJ
    In congressional this morning, Treasury Secretary Tim Geithner outlined where TARP money has been allocated and how much is left. Here is Treasury’s estimate: Projected Use of TARP/Financial Stability Plan Funds by Administration as of May 18, 2009 Programs Announced Under Previous Administration AIG $40 billion Citi/Bank of America (TIP and Guarantees) $52.5 billion Autos $24.9 billion Capital Purchase Program $218 billion TALF 1.0 $20 billion Subtotal $355.4 billion Programs Announced Under Obama Administration Housing $50 billion AIG (Second Investment) $30 billion Auto Suppliers $5 billion Additional Autos $10.9 billion Expansion of Consumer and Business Lending Initiative * TALF Asset Expansion (New Issuance) * TALF for Legacy Securities $25 billion Other PPIP Programs for Legacy Assets $75 billion Subtotal $245.9 billion Total Committed (Without Potential Repayments) $601.3 billion Total Remaining (Without Potential Repayments) $98.7 billion Conservative Estimate of Potential Repayments $25 billion Total Committed (Including Potential Repayments) $576.3 billion Total Remaining (Including Potential Repayments) $123.7 billion Additional Funding Additional Support for the Auto Industry Capital Assistance Program * The Consumer and Business Lending Initiative also includes the $20 billion committed to TALF under the previous administration and the $25 billion committed to TALF for legacy securities under the PPIP, amounting to an overall total of $80 billion under TALF and $95 billion under the CBLI. * The Public-Private Investment Program was announced at a level of $75 to $100 billion, which includes $75 billion in additional resources for the PPIP program on top of $25 billion devoted to TALF for Legacy Securities.
  • 10:53 AM » Geithner says making headway in battling crisis
    Published Wed, May 20 2009 10:53 AM by Reuters
    WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner said on Wednesday the Obama administration's was making headway in settling financial markets and said a program to cleanse so-called toxic assets from banks' balance sheets will start operating over the next six weeks.
  • 10:53 AM » New Mortgage Loan Reset / Recast Chart
    Published Wed, May 20 2009 10:53 AM by Calculated Risk Blog
    Matt Padilla at the O.C. Register presents a new reset / recast chart from Credit Suisse: Credit Suisse is using recast dates for Option ARMs and reset dates for all other loans. As Tanta : "Reset" refers to a rate change. "Recast" refers to a payment change. Resets are not a huge problem as long as interest rates stay low, but recasts could be significant. Note that Wells Fargo only a small percentage of their $115 billion "pick-a-pay" Option ARM portfolio they acquired via Wachovia (originally from World Savings / Golden West) to recast by 2012 (because Golden West had very generous NegAM terms). I'm not sure how that fits with this chart.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:37 AM » Recall Why TARP Funds Were Necessary
    Published Wed, May 20 2009 10:37 AM by The Big Picture
    Now that the bulk of the crisis has passed, and the panic has subsided, the banks want to return the money, no strings attached. Return the cash, leave the regulatory environment alone, write downt h warrants, and move on with our lives. My response is, “Not so fast.” Let’s not forget how this occurred: A radical deregulatory scheme let these companies operate with little or no oversight. Without adult supervision, they promptly blew themselves up, destroyed billions of dollars in shareholder value, cost the global economy trillions, and scared the beejesus out of everyone else. When these companies were circling the drain, nobody but Uncle Sam (and the Taxpayers) — and for only Goldman Sachs and GE, Warren Buffett — was willing to fund these companies. The risk levels were extremely high, the potential damage to the dollar, the taxpayer, inflation, and the US credit rating was also very high. As is, the US is still out of pocket trillions of dollars, and are likely to see major losses. Prudent well managed firms are seeing their expenses go thru the roof — especially FDIC insurance. This is not money that you get to return and say, Thanks, but we no longer need this. Instead, there are several things that should happen, if our elected officials and regulators have any savvy: 1) The Warrants should be placed into a Trust for the benefit of taxpayers, where it will be held for 5 or 10 years. Then, it can be liquidated for the benefit of the Treasury. 2)Re-instate Glass Steagall, revert the leverage rules, repeal CFMA; 3) Adequately fund and staff the SEC; 4) Remove the incentives for excess risk taking (i.e., private profits but socialized losses) 5) Align compensation systems with actual risk adjusted profits. Lastly, I would like to see a bi-partisan, Blue Ribbon panel put together analyzing why this occurred. Put an Elizabeth Warren or a Paul Volcker in charge, and give them 6 months to create a comprehension assessment of what went wrong, along with recommendations...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 9:07 AM » Have We Gained Anything from the Housing Bubble?
    Published Wed, May 20 2009 9:07 AM by Seeking Alpha
    submits: We are in the middle of a Great Recession, but someday we will be out of it. It is very easy to focus on the losses, but what did we gain? where he says: There have been three big banking booms in modern U.S. history. The first began in the late nineteenth century, during the Second Industrial Revolution, when bankers like J. P. Morgan funded the creation of industrial giants like U.S. Steel and International Harvester. The second wave came in the twenties, as electrification transformed manufacturing, and the modern consumer economy took hold. The third wave accompanied the information-technology revolution. Each wave, Philippon shows, was propelled by the need to fund new businesses, and each left finance significantly bigger than before. In all these cases, it wasn’t so much that the bankers had changed; the world had.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:06 AM » U.S. Markets Propped Up by Delirious Toxicity
    Published Wed, May 20 2009 9:06 AM by Seeking Alpha
    Jean-Paul Cassone submits: With the Obama administration now showing a complete "do nothing" approach to the oversight crisis in US banking, it appears Goldman Sachs (GS) not only has succeeded in gaining a set of personal keys to the US Treasury Department, but has its tentacles in a complete squeeze of the entire government itself. This feat has been blessed by the Federal Reserve Bank; who together have created an even larger bubble in bank stocks, since before the crash! In any other country in the world today, this would be known as "a conspiracy". I'd like to take this time to thank one Mr. Phil Grandy who has been one of the most diligent and brave Americans I know on this subject, who has refused to just sit on his hands like the rest of us; showing outstanding courage in his weekly broadcasts of the "Phil's Gang" radio broadcast to educate the public on these injustices now taking place. I join him in his plea to all investors to write every Senator, Congressperson and government representative you know to urge an investigation, make arrests and put a stop to the fraudulent activities between certain members of the US Treasury and Goldman Sachs and to the grossly inflated bank stock prices they are causing through criminal manipulation! I would further state that it is my sincere opinion that these activities are creating a bubble in the markets that will be worst than the one which has already popped and crashed!
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:05 AM » The New Regulatory Structure Begins to Emerge
    Published Wed, May 20 2009 9:05 AM by Seeking Alpha
    submits: The WaPo all-star team of Zachary Goldfarb, Binyamin Appelbaum and David Cho this evening that of a Financial Product Safety Commission is likely to become reality, thanks to the Obama administration. The WSJ’s then did a fantastic job with his follow-up (although weirdly Warren’s name is nowhere to be seen): Under the patchwork of regulation that presently exists, oversight of financial products is now split between a myriad of state and federal agencies, including the Fed, the Securities and Exchange Commission, the Federal Trade Commission, and others.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:05 AM » Federal Reserve announces that certain high-quality commercial mortgage-backed securities will become eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF)
    Published Wed, May 20 2009 9:05 AM by Federal Reserve
    Federal Reserve announces that certain high-quality commercial mortgage-backed securities will become eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF)
    Click Here to Read the Full Article

    Source: Federal Reserve
  • 9:05 AM » Quarterly Revenue Down 51% at Toll Brothers
    Published Wed, May 20 2009 9:05 AM by NY Times
    But the luxury homebuilder said it sees signs the real estate market is recovering.
  • Tue, May 19 2009
  • 7:38 PM » Median Price Mix Example
    Published Tue, May 19 2009 7:38 PM by Calculated Risk Blog
    The following table shows how the mix of units can skew the median price. This is just an example (not based on actual data). In this example, from 2002 to 2005 low priced homes doubled in price, and high priced homes increased by two-thirds. The mix remained the same (50 units of each), and the median price increased 75%. Median Price Example Item 2002 2005 2007 2009 2010 Low Price $100 $200 $200 $100 $100 High Price $300 $500 $500 $400 $300 Low End Units Sold 50 50 40 40 30 High End Units Sold 50 50 50 10 20 Median Price $200 $350 $367 $160 $180 Change in Low Price -- 100% none -50% none Change in High Price -- 67% none -20% -25% Change in Median Price -- 75% 5% -56% 12% Now look at what happened in 2007. Since subprime imploded first, the number of units sold at the low end decreased to 40 from 50. Everything else stayed the same - and just the change in the mix (higher percentage of high end homes) pushed up the median price! Note that the median price (light blue) increased WITHOUT any actual prices increasing. This happened at the beginning of the housing bust in many areas. In the period I marked as 2009, the low end prices have fallen all the way back to 2002 prices. However the high end prices have only fallen 20%. The low end is seeing fairly high activity (40 units), but at the high end sales activity has collapsed (10 units). Look at the median price (in orange) - it has fallen more than the prices have declined for even the low end! And finally, in 2010, prices fall further at the high end - and have stabilized at the low end. As prices fall, the volume picks up at the high end. And what happens to the median price? It increases by 12% (marked in red)! This illustrates why we need to be very careful with median prices (like from NAR, DataQuick or other sources). The mix can distort the price, and I expect to read about median prices increasing later this year or in 2010, even though actual prices are still falling!
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 4:49 PM » Economists React: Good News ‘Lost in the Commotion’ on Housing Starts
    Published Tue, May 19 2009 4:49 PM by WSJ
    Economists and others weigh in on . Wrong direction: starts and permits stalled along their upward path for the month in a downside surprise miss that’s going to leave some investors wondering why they were so excited about this whole recovery thing. Taken in concert with last week’s retail sales numbers, it’s starting to appear that the entire month is a bit of a lost cause. Behind the headlines (interestingly, the same was the case with retail sales), the numbers didn’t look as terrible. The entire drop in starts was the result of weaker multifamily activity, while single-family starts actually increased nearly 2.8% during the month –Guy LeBas, Janney Montgomery Scott Obviously, the condo market is in bad shape — and has been for quite awhile. We suspect that much of the latest decline in the multi-family sector deflects a pullback in construction of rental properties as rents sare coming under significant downward pressure in many areas across the country. Also, the recent problems in the [commercial mortgage backed securities] market are probably helping to restrain starts of both apt and condo construction. There was one interesting quirk in the April starts report — the volume of housing completions rose for the second straight month. This seems quite bizarre in the face of the steady downturn in new homebuilding seen over the past couple of years. However, our analysis of the regional data, suggests that all of the recent increase is tied to the completion of some projects in NYC. These projects were undertaken last year just before a significant tightening of building codes went into effect (see our June 2008 data bulletin for more details). –David Greenlaw, Morgan Stanley The headline says “record low housing starts in April”, but somewhat lost in the commotion is that the single family segment of the housing market is indeed exhibiting signs of stabilizing while the multi-family segment has gone into the tank… What is likely happening is that the single family...
  • 4:48 PM » WL Ross, Carlyle Group Said to Make BankUnited Bid
    Published Tue, May 19 2009 4:48 PM by
    WL Ross & Co. and private-equity firms including Carlyle Group made a bid to buy BankUnited Financial Corp.
    Click Here to Read the Full Article

  • 4:48 PM » Your Money: A Consumer’s Guide to the New Credit Card Rules
    Published Tue, May 19 2009 4:48 PM by NY Times
    A primer on the new restrictions that credit card companies face, and some reassurances on those rewards programs.
  • 4:48 PM » Federal Reserve to Widen Commercial Real Estate Lending Program
    Published Tue, May 19 2009 4:48 PM by Washington Post
    The Federal Reserve said today that it will expand a key lending program to support existing commercial real estate loans, broadening the central bank's rescue of the financial system to deal directly with some of the assets weighing down banks.
    Click Here to Read the Full Article

    Source: Washington Post
  • 4:02 PM » Realtors® Explore Land Use Challenges
    Published Tue, May 19 2009 4:02 PM by Google News
    Smart growth, military base development, disaster insurance, and pine beetle infestation were among issues Realtors® shared at the Land Use, Property Rights and Environment Forum.
  • 2:45 PM » Senate Passes Bill to Restrict Credit-Card Practices
    Published Tue, May 19 2009 2:45 PM by
    The Senate voted overwhelmingly on Tuesday to put new restrictions on the credit card industry, passing a bill whose backers say will make card issuers spell out their terms in fewer words, using plain English, and treat customers more fairly.
    Click Here to Read the Full Article

  • 2:45 PM » TARP Repayment Restrictions
    Published Tue, May 19 2009 2:45 PM by Calculated Risk Blog
    From CNBC: Among the conditions: no bank will be allowed to repay the TARP until after June 8, when 10 of the 19 biggest banks must present plans to boost their capital under the government's stress tests. ... The government also won't allow any one bank to repay the TARP first but will approve them in batches. ... The banks face other restrictions: they still have to pass another stress test, issue debt that isn't government guaranteed, demonstrate the ability to self-fund in the market and win the approval of their banking supervisor. ... The Treasury will also announce a process for auctioning TARP warrants ... I'm not sure what "another stress test" means or why they will only be approved in batches. Being able to issue non-government guaranteed debt makes sense.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 2:45 PM » Barriers to Household Risk Management: Evidence from India.
    Published Tue, May 19 2009 2:45 PM by NY Fed
    Shawn Cole, Xavier Gine, Jeremy Tobacman, Petia Topalova, Robert Townsend, and James Vickery. Barriers to Household Risk Management: Evidence from India. Federal Reserve Bank of New York Staff Reports Staff Report Number 373, May 2009.
  • 2:38 PM » A Primer on the Secondary Mortgage Market
    Published Tue, May 19 2009 2:38 PM by FHFA
    A secondary mortgage market consists of financial institutions and individuals that buy and sell residential mortgages and mortgage-backed securities (MBS), which are financial assets whose cash flows are derived from groups of mortgages.
  • 2:10 PM » Banks Returning TARP Facing Another Stress Test
    Published Tue, May 19 2009 2:10 PM by
    The banks face other restrictions: they still have to pass another stress test, issue debt that isn't government guaranteed, demonstrate the ability to self-fund in the market and win the approval of their banking supervisor. Several big banks have announced plans to repay the TARP as soon as possible, including Goldman Sachs, JP Morgan Chase, Morgan Stanley and American Express. None of them were told to come up with more capital under the stress tests conducted earlier this month.
    Click Here to Read the Full Article

  • 12:57 PM » Genworth climbs after insurer says it repays debt
    Published Tue, May 19 2009 12:57 PM by Market Watch
    Genworth Financial shares climb after the life insurer says it repaid half of its long-term debt that was maturing this year.
  • 12:57 PM » The Randomizer
    Published Tue, May 19 2009 12:57 PM by Google News
    Another day, another trip through the grist-mill of seemingly random (and certainly erratic) price action. In some ways, it doesn't seem to matter if you are bullish or bearish; if you're trading tactically, it's very, very easy to get caught out by the seeming randomness of it all.So easy, in fact, that Macro Man wonders if it is even possible to tell the difference between current price action and a random number generator. So he's determined to find out. There are six charts below. Three are actual financial market prices, and three are the product of the random number generator function in excel. Your mission, should you choose to accept it, is to determine which three are real....and which three are the figments of Bill Gates' imagination. Good luck. Originally published at and reproduced here with the author's permission.
  • 12:24 PM » FRBSF: U.S. Household Deleveraging and Future Consumption Growth
    Published Tue, May 19 2009 12:24 PM by Google News
    How will household deleveraging affect consumption? According to this Economic Letter by Reuven Glick and Kevin Lansing of the San Francisco Fed, it "could result in a substantial and prolonged slowdown in consumer spending."The large increase in the leverage ratio for US households over the last ten years is shown in Figure 3. The question is how far the ratio will fall, and how long will it take for it to reach its new level. I believe the fall in this ratio will be slow, and this is one of the reasons I believe the recovery from the recession will be a long, drawn out process (another reason to expect a slow recovery is that unlike some recent recessions, this time the economy cannot go back to where it was prior to the recession, and the structural change that must occur to move resources out of housing and the financial sector and into other, productive uses will take time to bring about): : U.S. household leverage, as measured by the ratio of debt to personal disposable income, increased modestly from 55% in 1960 to 65% by the mid-1980s. Then, over the next two decades, leverage proceeded to more than double, reaching an all-time high of 133% in 2007. That dramatic rise in debt was accompanied by a steady decline in the personal saving rate. The combination of higher debt and lower saving enabled personal consumption expenditures to grow faster than disposable income, providing a significant boost to U.S. economic growth over the period. In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes. For many U.S. households, current debt levels appear too high, as evidenced by the sharp rise in delinquencies and foreclosures in recent years. To achieve a sustainable level of debt relative to income, households may need to undergo a prolonged period of deleveraging, whereby debt is reduced and saving is increased. This Economic Letter discusses how a...
  • 12:24 PM » Wherever the Fed goes, credit markets thaw
    Published Tue, May 19 2009 12:24 PM by Google News
    Credit markets are thawing. The headline items - LIBOR (London Interbank Lending Rates) and commercial paper - have improved substantially. But corporate bond spreads, although improved, are still wide. As such, there is a very strong correlation between Fed's asset purchases and the associated credit market's health. It is unlikely that credit markets could stand on their own without continued Fed support at this time. LIBOR: Improving but still above trend From : Lower interbank lending rates indicated reduced strains in the financial system, as seen from the three-month dollar, euro and sterling LIBOR rates declining to record lows. After having peaked at 4.82% on October 10, the three-month dollar LIBOR rate declined to 0.83% on Friday. LIBOR is therefore trading at 58 basis points above the upper band of the Fed’s target range - a great improvement, but still high compared to an average of 12 basis points in the year before the start of the credit crisis in August 2007. It should be noted that as of , banks are sitting on $777 billion of excess reserves that are not being lent out, up roughly $775 billion since April 2008: that's massive federal funding of the interbank lending market. Commercial Paper: Substantial Improvement The commercial paper market is returning to "normal" across the financial (green) and non-financial (purple) sectors. The chart illustrates the term lending spread on commercial paper (the 90-day money market rate minus the 90-day T-bill). The spreads have dropped sharply, which is good news for firms wanting to roll over their debt. The Fed is likely very proud of the outcome of its ; and in light of the commercial paper market's improved health, the Fed is unwinding its asset holdings. , the Fed had $167 billion in commercial paper on balance, down from $350 billion in January. The commercial paper market can stand on its own now, but of course, one must remember the FDIC program - that insures senior unsecured...
  • 9:02 AM » Parts of the Sub-Prime Market are Normalizing
    Published Tue, May 19 2009 9:02 AM by Seeking Alpha
    submits: The 2006 vintages of subprime loans, reflected in the price of the Markit ABX index for AAA tranches, have shown a sharp improvement over the past couple of weeks. 2006 Subprime AAA’s Up 20%
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:47 AM » Treasury prices continue retreat
    Published Tue, May 19 2009 8:47 AM by CNN
    Treasury prices ticked lower Tuesday morning as Wall Street geared up for another stock rally.
  • 8:47 AM » Secondary Sources: Painful Deleveraging, California, Property
    Published Tue, May 19 2009 8:47 AM by WSJ
    A roundup of economic news from around the Web. In an Economic Letter, San Francisco Fed economists Reuven Glick and Kevin J. Lansing look at the U.S. consumption problem. “Going forward, it seems probable that many U.S. households will reduce their debt. If accomplished through increased saving, the deleveraging process could result in a substantial and prolonged slowdown in consumer spending relative to pre-recession growth rates. Alternatively, if accomplished through some form of default on existing debt, such as real estate short sales, foreclosures, or bankruptcy, deleveraging could involve significant costs for consumers, including tax liabilities on forgiven debt, legal fees, and lower credit scores. Moreover, this form of deleveraging would simply shift the problem onto banks that hold these loans as assets on their balance sheets. Either way, the process of household deleveraging will not be painless.” Kim Rueben of the Tax Policy Center’s TaxVox blog looks at California’s budget ballot initiatives. “Asking voters to approve propositions that temporarily increase revenues but limit future spending growth isn’t new — California has done it before with numerous initiatives and three special elections just since 2000. The state set up a rainy day fund and tried to limit spending in 2004, during the last fiscal crisis. You remember that recession: the boom busted, the governor tried to reinstate a tax that had been temporarily cut when times were good and got recalled and replaced by a Hollywood star. The new governor made up the shortfall through borrowing but proposed (and voters passed) a new rainy day fund and balanced budget rules that would fix the state budgetary process and keep the state from going off the rails again. That was 2004… Rather than further complicating the ballot, maybe its time for California to start over by enacting a new constitution that handles the big issues and possibly lets legislators legislate. Lawmakers may not want this...
  • 8:47 AM » Home Depot Profit Rises on Cost Cuts
    Published Tue, May 19 2009 8:47 AM by CNBC
  • Mon, May 18 2009
  • 8:34 PM » FHFA Report Details Examinations of Fannie, Freddie, and Federal Home Loan Banks
    Published Mon, May 18 2009 8:34 PM by FHFA
    The report includes information being reported for the first time, including conclusions from the examinations of the FHLBanks, information about the compensation of FHLBank directors, and housing mission and goals information for all 14 GSEs. As required by HERA, the report also includes an assessment of the regulated entities by the Federal Housing Finance Oversight Board comprised of the Secretary of the Treasury, Secretary of Housing and Urban Development, Chairman of the Securities and Exchange Commission, and the FHFA Director, who serves as Chairman.
  • 8:28 PM » NewsWatch: Stocks seek housing-market floor
    Published Mon, May 18 2009 8:28 PM by Market Watch
    U.S. stock investors zero in on the housing market to gauge economic growth, with better-than-anticipated earnings from Lowe's and improving spirits among home builders helping boost sentiment.
  • 8:12 PM » Fed: Delinquency Rates Surged in Q1 2009
    Published Mon, May 18 2009 8:12 PM by Calculated Risk Blog
    The Federal Reserve that delinquency rates rose sharply in Q1 in all categories. Click on graph for larger image in new window. This graph shows the delinquency rates at the commercial banks for residential real estate, commercial real estate and consumer credit cards. Commercial real estate delinquencies (6.4%) are rising rapidly, and are at the highest rate since the early '90s (as delinquency rates declined following the S&L crisis). Residential real estate (7.91%) and consumer credit card (6.5%) delinquencies are at the highest levels since the Fed started tracking the data (since Q1 '91). Although there is credit deterioration everywhere, the rise in these three categories is especially significant. There was also a significant increase in C&I delinquencies (commerical & industrial). Note: The Fed defines commercial as "construction and land development loans, loans secured by multifamily residences, and loans secured by nonfarm, nonresidential real estate", and many of the problems are probably in the C&D loans. These are the loans that will probably lead to the closure of many regional banks. Also check out the . The charge-off rate for residential real estate increased from 1.58% to 1.8, and for consumer credit cards from 6.33% to 7.49%. Just more evidence of severe credit problems at the commercial banks.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
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