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  • Mon, Aug 31 2009
  • 8:38 AM » FDIC risks $80 Billion in Loss Share Agreements
    Published Mon, Aug 31 2009 8:38 AM by Calculated Risk Blog
    Every Friday, in just about every bank failure press release, the FDIC mentions a loss share agreement with the acquiring bank. As an example, in the regarding Mutual Bank of Harvey, Illinois on July 31st: As of July 16, 2009, Mutual Bank had total assets of $1.6 billion and total deposits of approximately $1.6 billion. In addition to assuming all of the deposits of the failed bank, United Central Bank agreed to purchase essentially all of the assets. The FDIC and United Central Bank entered into a loss-share transaction on approximately $1.3 billion of Mutual Bank's assets. emphasis added For those interested in every detail, the Single Family Loss Share Agreement (page 54) and Commercial Loss Share Agreement {page 89) between the FDIC and United Central Bank (the acquirer). From the WSJ: [T]he Federal Deposit Insurance Corp. has agreed to assume most of the risk on $80 billion in loans and other assets. The agency expects it will eventually have to cover $14 billion in future losses on deals cut so far. ... So far, the FDIC has paid out $300 million to a handful of banks under the loss-share agreements. ... The agency estimates the loss-share deals cut will cost it $11 billion less than if the agency seized the assets and sold them at fair-market value. ... In most cases, the FDIC agrees to cover 80% of future losses on a big portion of the assets, and 95% on the rest. The FDIC says it doesn't anticipate facing the 95% loss-coverage scenario on any deal. ... Many of the loss-share deals will be in place for up to 10 years. These agreements definitely make the deals more attractive to potential buyers because the limit the downside. The article notes that the FDIC "had just $10.4 billion in its deposit-insurance fund at the end of June", but that includes reserves for future losses. And since the FDIC expects losses of $14 billion from these loss share agreements, they should have already reserved for those losses. Still many of these agreements will...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:22 AM » Fed Can Avoid Inflation Danger: NY Fed President
    Published Mon, Aug 31 2009 8:22 AM by CNBC
    Fears of inflation because of the Federal Reserve's massive quantitative easing measures are overblown, because the Fed can pull the liquidity out of the market to prevent price increases, says New York Fed President William Dudley.
  • 8:22 AM » Commercial Real Estate Portends Crisis
    Published Mon, Aug 31 2009 8:22 AM by WSJ
    Fed and Treasury officials are scrambling to prevent the commercial-real-estate sector from delivering a roundhouse punch to the U.S. economy as it struggles to recover.
  • 8:22 AM » Property taxes: How to beat 'em
    Published Mon, Aug 31 2009 8:22 AM by CNN
    You know that your home's value has tanked. So why doesn't the blasted tax man? Home prices fell 27% from the 2006 peak to the end of 2008, according to the S&P/Case-Shiller Index, while the amount municipalities collected in property taxes rose 12% from 2006 to 2008.
  • Sun, Aug 30 2009
  • 1:55 PM » Party Time! Wall Street Back to Its Old Highly Levered Ways
    Published Sun, Aug 30 2009 1:55 PM by Google News
    Bloomberg reports that Wall Street is back to its free-wheeling, high-levered ways. This is a classic example of moral hazard in action. Why worry about blowing up the bank when you know the taxpayer will bail you out? From (hat tip DoctoRx): Banks are increasing lending to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since the credit-market debacle began in 2007. Credit Suisse Group AG and Scotia Capital, a unit of Canada’s third-largest bank, said they’re offering credit to investors who want to purchase loans. SunTrust Banks Inc., which left the business last year, is “reaching out to clients” to provide financing, said Michael McCoy, a spokesman for the Atlanta-based bank. JPMorgan Chase & Co. and Citigroup Inc. are doing the same for loans and mortgage-backed securities, said people familiar with the situation. “I am surprised by how quickly the market has become receptive to leverage again,” said Bob Franz, the co-head of syndicated loans in New York at Credit Suisse. The Swiss bank has seen increasing investor demand for financing to buy loans in the past two months, he said. Federal Reserve data show the 18 primary dealers required to bid at Treasury auctions held $27.6 billion of securities as collateral for financings lasting more than one day as of Aug. 12, up 75 percent from May 6. The increase suggests money is being used for riskier home- loan, corporate and asset-backed securities because it excludes Treasuries, agency debt and mortgage bonds guaranteed by Washington-based Fannie Mae and Freddie Mac of McLean, Virginia or Ginnie Mae in Washington. Broader data on loans for investments isn’t available. Yves here. That is a big increase in repo lending. Greenspan used to look at repos as a proxy for hedge fund leverage. And when repo lending contracts, as it did in the crisis, it tends to do so across a wide range of collateral as banks increase haircuts, leading to synchronized downturns. And we get these tidbits...
  • 1:40 PM » Survival Of The Biggest
    Published Sun, Aug 30 2009 1:40 PM by Google News
    On account of Fed sponsorship, . When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system. Today, the biggest of those banks are even bigger. J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show. "It is at the top of the list of things that need to be fixed," said Sheila C. Bair, chairman of the Federal Deposit Insurance Corp. "It fed the crisis, and it has gotten worse because of the crisis." Fresh data from the FDIC show that big banks have the ability to borrow more cheaply than their peers because creditors assume these large companies are not at risk of failing. That imbalance could eventually squeeze out smaller competitors. Already, consumers are seeing fewer choices and higher prices for financial services, some senior government officials warn. Officials waived long-standing regulations to make the deals work. J.P. Morgan Chase, Bank of America and Wells Fargo were each allowed to hold more than 10 percent of the nation's deposits despite a rule barring such a practice. In several metropolitan regions, these banks were permitted to take market share beyond what the Department of Justice's antitrust guidelines typically allow, Federal Reserve documents show. "There's been a significant consolidation among the big banks, and it's kind of hollowing out the banking system," said Mark Zandi, chief economist...
  • 12:43 PM » Bankruptcy Filings and Mortgage Delinquencies by State
    Published Sun, Aug 30 2009 12:43 PM by Calculated Risk Blog
    Here is a graph of bankruptcy filings vs. mortgage delinquencies (including homes in foreclosure process) by state for Q2 2009. Click on graph for larger image in new window. The bankruptcy filings data is from the . The mortgage delinquency data is from the . No surprise - there is a clear correlation, although each state has different bankruptcy laws that can impact the relationship (see Florida). Here is a sortable table to find the data for each state (use scroll bar to see all data).
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 12:42 PM » Houses: Cash Buyer Percentages in Orlando, Tampa and Knoxville
    Published Sun, Aug 30 2009 12:42 PM by Calculated Risk Blog
    Here is some data from the Atlanta Fed on cash buyers in the southeast. This is part of the the Atlanta Fed puts out weekly. Click on graph for larger image in new window. From the Economic Highlight: Orlando and Tampa Realtor data [earlier] showed an increase in the share of cash buyers, but in recent months that share has weakened somewhat. In the Knoxville market, where home sales and prices did not accelerate as much as in Orlando and Tampa, the share of cash buyers had peaked earlier in the year but has tapered off since March. The percentages for Orlanda and Tampa are similar to the percentages in the lower priced areas of the California Bay Area: see the table in Carolyn Said's recent article in the San Francisco Chronicle I suspect many of these cash buyers are investors buying for cash flow (not the speculators we saw during the boom). Frequently these investors are buying in the same areas as first-time home buyers (some motivated by the $8K tax credit) - and the competition is pushing up prices and reducing supply. Now if we just had better first-time home buyer data ...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 12:42 PM » Article: "The HAMP Mirage"
    Published Sun, Aug 30 2009 12:42 PM by Calculated Risk Blog
    Andy Kroll at Mother Jones discusses problems with the Home Affordable Modification Program (HAMP): Industry experts are now questioning how many of the program’s estimated 235,000 modifications will actually benefit homeowners in the long term, and say that homeowners clamoring to participate in HAMP have created an industrywide logjam for mortgage servicers, resulting in substantial delays and backed-up customer service support. The Treasury’s first servicer performance report (), covering March to July 2009, found that servicers had offered modifications to just 15 percent of eligible delinquent homeowners, and initiated them for just 9 percent of that group. I've heard from servicers who've said they are just overwhelmed and are staffing up to meet the demand. And it appears the administration is trying to make improvements: Despite its flaws, HAMP is a good-faith effort by the government to address the foreclosure crisis, and there are signs of improvement. In June, HAMP officials began conducting much more rigorous reviews of servicers, and have started a "second look" program, in which servicers’ decisions to approve or deny HAMP modifications are scrutinized. Compliance officials are also analyzing samples of HAMP-modified loans to track error rates with servicers. And government officials have on several occasions tried to light a fire under HAMP servicers to speed up the modification process. Some believe HAMP will fall far short of the goals: The Treasury has set a target of modifying 4 million mortgages by 2012, but Moody's estimates HAMP will in fact modify only 1.5 to 2 million. The Treasury : More than 400,000 modification offers have been extended and more than 230,000 trial modifications have begun. This pace of modifications puts the program on track to offer assistance to up to 3 to 4 million homeowners over the next three years, our target on February 18. Actually the stated the program " will help up to 3 to 4 million at...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 12:42 PM » Quarterly Housing Starts and New Home Sales
    Published Sun, Aug 30 2009 12:42 PM by Calculated Risk Blog
    The Census Bureau has released the "" report for Q2 2009 a few days ago. Monthly housing starts (even single family starts) cannot be compared directly to new home sales, because the monthly housing starts report from the Census Bureau includes apartments, owner built units and condos that are not included in the new home sales report. However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis. The quarterly report shows that there were 82,000 single family starts, built for sale, in Q2 2009 and that is less than the 102,000 new homes sold for the same period. This data is Not Seasonally Adjusted (NSA). This suggests homebuilders are selling more homes than they are starting. Note: new home sales are reported when contracts are signed, so it is appropriate to compare sales to starts (as opposed to completions). This is not perfect because homebuilders were stuck with “unintentional spec homes” during the housing bust because of the high cancellation rates, but cancellation rates are now much closer to normal. Click on graph for larger image in new window. This graph provides a quarterly comparison of housing starts and new home sales. In 2005, and most of 2006, starts were higher than sales, and inventories of new homes rose sharply. For the last seven quarters, starts have been below sales – and new home inventories have been falling. The second graph shows the NSA quarterly starts intent for four categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale. Condo starts in Q2 tied the all time record low for Condos built for sale set in Q1 (5,000); the previous record was 8,000 set in Q1 1991 (data started in 1975). Owner built units are above the record low set last quarter (38,000 units compared to 24,000 units in Q1 2009), however the pickup in starts was probably mostly seasonal (this is NSA data)....
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • Fri, Aug 28 2009
  • 6:23 PM » Moody's Expects Faster Decline in EMEA CMBS Performance
    Published Fri, Aug 28 2009 6:23 PM by Seeking Alpha
    submits: Ratings firm sees no signs of a slowdown in the pace of performance deterioration in the EMEA commercial real estate loan universe in the second quarter. Excerpted from
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 6:23 PM » Is the Savings Trend Dead, Or Sleeping?
    Published Fri, Aug 28 2009 6:23 PM by Seeking Alpha
    submits: So, is that it then? Are we already deciding that this whole “savings” this is just not that much fun? Two data points make a trend, as that hoary journalistic saying goes, and we have now had two months in the U.S. of declining monthly personal savings (according to BEA data).
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 2:15 PM » Reflections on the Causes and Consequences of the Debt Crisis of 2008
    Published Fri, Aug 28 2009 2:15 PM by Google News
    From in the by and : In late 2008, the world's financial system seized up. Billions of dollars worth of financial assets were frozen in place, the value of securities uncertain, and hence the solvency of seemingly rock solid financial institutions in question. By the end of the year, growth rates in the industrial world had gone negative, and even developing country growth had declined sharply. This economic crisis has forced a re-evaluation of deeply held convictions regarding the proper method of managing economies, including the role of regulation and the ideal degree of openness to foreign trade and capital. It has also forced a re-assessment of economic orthodoxy that touts the self-regulating nature of free market economies. The precise origin of this breathtaking series of events is difficult to identify. Because the crisis is such an all-encompassing and wide-ranging phenomenon, and observers tend to focus on what they know, most accounts center on one or two factors. Some reductionist arguments identify "greed" as the cause, while others obsess about the 1990s era amendments to the 1977 U.S. Community Reinvestment Act that was designed to encourage banks and other financial institutions to meet the needs of the entire market, including those of people living in poor neighborhoods. They also point to the political power of government-sponsored entities such as Fannie Mae and Freddie Mac, agencies designed to smooth the flow of credit to housing markets. In our view, such simple, if not simplistic, arguments are wrong. Rather, we view the current episode as a replay of past debt crises, driven by profligate fiscal policies, but made much more virulent by a combination of high leverage, financial innovation, and regulatory disarmament. In this environment, speculation and outright criminal activities thrived; but those are exacerbating, rather than causal, factors. Figure 2: Current account to GDP ratio (blue, left axis) and end-year net international...
  • 2:14 PM » $9 Trillion-- What, Me Worry?
    Published Fri, Aug 28 2009 2:14 PM by Google News
    may not be that concerned by the Obama administration's that the unified federal budget deficits will sum to $9 trillion dollars over the next 10 years. But I am. Here's the argument gave for why $9 trillion maybe isn't as huge a sum as it sounds: even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II. It will also be substantially less than, say, debt in several European countries in the mid to late 1990s. (hat tip: ) takes a closer look at Paul's first comparison: implicit in his observation is the concept that since we did fine after WWII, we'll do fine now. But the years after WWII saw drastic reductions in the inflation-adjusted debt driven by drastic reductions in spending. Mr. Krugman points to no similar possibility in the post-Obama world.... Back in 1945, at the height of the spending that saw our national debt rise so dramatically, entitlement spending and interest on the national debt made up a meager 5% of our total budget. Source: . And whereas in 1945 Americans could reasonably look ahead to a huge decrease in military expenditures, in 2009 when I look ahead what I see is a . I also believe it is relevant to compare these deficits not just with GDP but also with current federal tax revenues. is approximately the total personal income tax receipts of the federal government in 2006. My preferred metric for what each additional trillion dollars would require from me personally is to take what I paid in federal income taxes in 2006 and double that amount. To pay off $9 trillion, I'd have to do that for 9 years. Unfortunately, $9 trillion may not be the whole iceberg. highlights the that current policy would imply a cumulative $14.4 trillion deficit over the next ten years. You also can't ignore the , such as the $5 trillion in debt and loan guarantees from Fannie and Freddie. A quarter trillion dollars worth of those loans we've guaranteed . That's...
  • 2:13 PM » 2002-06: An “Unhealthy Dependence on Construction”
    Published Fri, Aug 28 2009 2:13 PM by Google News
    It is clear in retrospect that in parts of the Sun Belt, the economic dependence on construction reached unhealthy levels in recent years. - File that sentence under “stating the obvious.”. The reporter seems to have overlooked the fact that some people found it obvious — not in retrospect, mind you, but in real time. One only needed to have looked at the data and then compared it to historical metrics to reach the obvious conclusion that housing was way off kilter. What was taking place was a . Here’s an excerpt from the Times: “In a little more than three years, the Phoenix area has gone from the hottest of Sun Belt hot spots to one of the nation’s economic disaster areas. It is not alone in its rapid fall. After riding high during the boom, the Las Vegas area, parts of southern Florida, and Southern California’s inland counties have also been brought low by plunging payrolls, billions lost in housing wealth, a continuing epidemic of foreclosures, record government budget deficits and stagnating populations. These areas share one thing besides their warm climates. To a degree unmatched in the rest of the country, their recent prosperity was built not on manufacturing, technology or natural resources, but on construction and real estate — growth for its own sake. As other areas tasted the excesses of the housing boom, they gorged on it. From 2002 to 2006, about 20 percent of private industry growth in the United States was tied to real estate and construction. In the Phoenix area, almost 36 percent of growth in the private economy during that period — more than $34 billion worth — came from real estate and construction.” The entire piece — the print version was buried behind a weird headline in the Business section — is well worth a read. Previously : (May 27th, 2005) (December 29, 2006) (August 24, 2007)
  • 2:12 PM » The “Coming Alt-A Mortgage Reset Bomb” Is A Myth
    Published Fri, Aug 28 2009 2:12 PM by
    Courtesy of Henry Blodget of After we published yesterday’s post about , we got a note from Bill Matz, president of California-based . Bill thinks our concerns–and the concerns of all those who have viewed the Credit-Suisse chart nearby showing the impending crush of Alt-A resets (green)–are unfounded. Bill is a bit more worried about the Option ARM (”POA”, yellow) resets. Here’s Bill… The forecast of a coming “wave” of Alt-A loans resets reflects significant confusion about these loans. Alt-A loans became popular during 2001-08. They offered a full array of fixed and hybrid ARM programs. Alt-A loans were specifically labeled as such on rate sheets and do not include the pay option ARMs (POAs) offered primarily by WaMu, Countrywide, World, and their correspondents. Hybrid ARMs had an initial fixed period of 3, 5, 7, or 10 years. After the fixed period, they would “reset”, adjusting every 6 or 12 months for the rest of the term; most used the 6 or 12-month LIBOR or 1-year Treasury, with margins of 2.25 -2.75%. A typical POA (e.g. 1% type) had four payment options: 15-year, 30-year, interest-only, and minimum payment (less than interest only so it “negatively amortized”, increasing principal). The minimum payment , utilized by most borrowers, was fixed for 12 months (but rates changed monthly). Each subsequent year payments could increase by 7.5%. After 5 years, the loan would “recast”, jumping to a fully-amortizing payment, based on then-current rates and the term remaining. However, if the loan balance rose to a limit, such as 110%, it would immediately recast, even if sooner than 5 years. Some specific misunderstandings cause confusion about a possible “reset wave”: Differing fixed terms mean hybrid ARMs reset over a 15+ year span in a less concentrated manner than projected. Hybrid ARM resets currently often go down, not up. Many ARMs due to reset or recast have been refinanced, modified, foreclosed, or paid from sale. This includes many POAs that recast well before...
    Click Here to Read the Full Article

  • 2:12 PM » Greater Than One in Four FDIC Insured Institutions are Unprofitable; Bank Problem List at 15 Year High
    Published Fri, Aug 28 2009 2:12 PM by Google News
    The second quarter 2009 has some interesting charts and facts that inquiring minds will be interested in. Insured Institution Performance Higher Loss Provisions Lead to a $3.7 Billion Net Loss More Than One in Four Institutions Are Unprofitable Charge-Offs and Noncurrent Loans Continue to Rise Net Interest Margins Show Modest Improvement Industry Assets Decline by $238 Billion The Industry Posts a Net Loss for the Quarter The Industry Posts a Net Loss for the Quarter Burdened by costs associated with rising levels of troubled loans and falling asset values, FDIC-insured commercial banks and savings institutions reported an aggregate net loss of $3.7 billion in the second quarter of 2009. Increased expenses for bad loans were chiefly responsible for the industry’s loss. Insured institutions added $66.9 billion in loan-loss provisions to their reserves during the quarter, an increase of $16.5 billion (32.8 percent) compared to the second quarter of 2008. Quarterly earnings were also adversely affected by writedowns of asset-backed commercial paper, and by higher assessments for deposit insurance. Almost two out of every three institutions (64.4 percent) reported lower quarterly earnings than a year ago, and more than one in four (28.3 percent) reported a net loss for the quarter. A year ago, the industry reported a quarterly profit of $4.7 billion, and fewer than one in five institutions (18 percent) were unprofitable. The average return on assets (ROA) was -0.11 percent, compared to 0.14 percent in the second quarter of 2008. Net Charge-Off Rate Sets a Quarterly Record Net charge-offs continued to rise, propelling the quarterly net charge-off rate to a record high. Insured institutions charged-off $48.9 billion in the second quarter, compared to $26.4 billion a year earlier. The annualized net charge-off rate in the second quarter was 2.55 percent, eclipsing the previous quarterly record of 1.95 percent reached in the fourth quarter of 2008. The $22.5 billion (85.3 percent...
  • 2:12 PM » Southern California Shadow Inventory: Born on October 2008. Foreclosures Still Exploding but MLS Down from 160,000 to 69,000 in Southern California Since September 2007. Renting the next Bailout?
    Published Fri, Aug 28 2009 2:12 PM by Google News
    The last time we examined shadow inventory we arrived at a conclusion that there were . I believe this estimate is underscoring the massive amount of shadow inventory hidden on the dark balance sheets of many banks throughout the country. Yet trying to get an accurate figure is a challenge in itself. As we examined the we start understanding the dynamics of volatile Southern California real estate. I wanted to get a more accurate figure of when the shadow inventory started taking off. If you want to think about the peak of the housing bubble, for Southern California it popped in the summer of 2007 when it reached its pinnacle in terms of price. From that point on, it has fallen roughly 50 percent in terms of the median price. I started tracking the MLS data at that time and since that time, the public inventory has dwindled from 160,000 in September of 2007 to our current low level of 69,000. This of course does not tell the entire story. I decided to put together various sources in one chart to try to help us discover the birth of the in Southern California: I’ve put the MLS data on one axis and the NTS/REO and Southern California sales data on another. First thing you’ll notice is the MLS trend has been perfectly heading lower. In fact, the MLS data has gone down by a stunning 62 percent since September of 2007! This of course has come in large part to the massive price cuts and the large sale in distressed properties making up nearly 50 percent of all sales throughout this time. But the other data helps us pinpoint the start of the . If you notice in the beginning, the NTS and REO data tracks up until December of 2007. This should be no surprise. This is a typical foreclosure process: The NTS stage is the last stage before a home becomes a bank owned (REO) property. Given that few homes sold at auction during the early phase of the bubble burst, many of these homes simply went back to the bank. In the early stages, it was nearly a 1:1 ratio. After December 2007 you...
  • 1:55 PM » Banks 'Too Big to Fail' Have Grown Even Bigger
    Published Fri, Aug 28 2009 1:55 PM by Washington Post
    When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system. Banks 'Too Big to Fail' Have Grown Even Bigger
    Click Here to Read the Full Article

    Source: Washington Post
  • 11:38 AM » Unemployment Claims Falling Faster than in Half of Past Recessions
    Published Fri, Aug 28 2009 11:38 AM by Google News
    The U.S. Department of Labor released the Unemployment Insurance Weekly Claims Report showing that initial jobless claims decreased 10,000 in the latest week to 570,000 from an upwardly revised 580,000 the week prior. The 4-week moving average is now 566,250, less than 100,000 off the April peak. Since the week ended Jul. 18, the average initial claims figure has been hovering in the 560-570,000 range. So, this marks six straight weeks during which we have seen no discernible improvement in the employment picture painted by jobless claims data. It is now 20 weeks since initial jobless claims peaked and we are shedding only 92,500 fewer jobs. I found this quite worrying until I compared it to previous recession , demonstrating that the last two jobless recoveries had a similar dynamic. Even in the recessions of 1970 and 1974-75, jobless claims were slow to fall. Below is a comparison of the 20-week fall during previous recessions: 2001 : 92,750. Oct. 20, 2001 peak of 489,250 vs. Mar. 9, 2002 figure of 396,500. 1991 : 68,500. Mar. 30, 1991 peak of 501,250 vs. Aug. 17, 1991 figure of 432,750. 1982 : 185,500. Oct. 9, 1982 peak of 674,250 vs. Feb. 26, 1983 figure of 488,750. 1980 : 179,750. May 31, 1980 peak of 629,000 vs. Oct. 18, 1980 figure of 449,250. 1974 : 61,250. Feb. 1, 1975 peak of 560,750 vs. Jun. 21, 1975 figure of 499,500. 1970 : 25,250. May 9, 1970 peak of 343,750 vs. Sep. 26, 1970 figure of 318,500. If one looks at these numbers in percentage terms, the fastest job recovers in order are: 1980: 28.6% 1982: 27.5% 2001: 19.0% 2009: 14.0% 1991: 13.7% 1974: 10.9% 1970: 7.3% So, contrary to my expectations, the fall in unemployment claims is very much in line with what we have seen in recessions over the previous 40 years. Originally published at and reproduced here with the author's permission.
  • 11:37 AM » Obama Lucky to have Bernanke
    Published Fri, Aug 28 2009 11:37 AM by Google News
    Brad DeLong explains why presidents are willing to reappoint Fed chairs that are members of opposing political parties: William McChesney Martin, a Democrat, was twice reappointed chairman of the ... Federal Reserve by Republican President Dwight D. Eisenhower. Paul Volcker, a Democrat, was reappointed once by the Reagan administration (but not twice: there are persistent rumors that Reagan's treasury secretary, James Baker, thought Volcker too invested in monetary stability and not in producing strong economies to elect Republicans). Alan Greenspan, a Republican, was reappointed twice by Bill Clinton. And now Barack Obama has announced his intention to renominate Republican appointee Ben Bernanke... The reason American presidents are so willing to reappoint Fed chairmen from the opposite party is closely linked to ... confidence of financial markets that the Fed will pursue non-inflationary policies. If financial markets lose that confidence - if they conclude that the Fed is too much under the president's thumb to wage the good fight against inflation, or if they conclude that the chairman does not wish to control inflation - then the economic news is almost certain to be bad. Capital flight, interest-rate spikes, declining private investment, and a collapse in the value of the dollar - all of these are likely should financial markets lose confidence in a Fed chairman. And if they occur, the chances of success for a president seeking re-election - or for a vice president seeking to succeed him - are very low. By reappointing a Fed chairman chosen by someone else, a president can appear to guarantee to financial markets that the Fed is not too much under his thumb. ... It may or may not be true, especially these days, that what is good for General Motors is good for America and vice versa, but certainly what is good economically for America is good politically for the president. It is here that Obama has lucked out. Ben Bernanke is a very good choice for Fed...
  • 11:36 AM » Economists React: What’s Next After Cash-for-Clunkers Boost?
    Published Fri, Aug 28 2009 11:36 AM by WSJ
    Economists react to July’s : The cash-for-clunkers incentives boosted consumer spending in July and will give an even bigger kick in August. But, aside from that, consumer spending is still subdued. Incomes remain weak, showing no change in July, although there was one encouraging signal in that wage and salary income edged higher, its first monthly increase so far this year. But the labor market is still shedding jobs. When given sufficient incentive (as in cash-for-clunkers) consumers will spend. But reduced wealth, high debt, tight credit, and a weakening labor market are all weighing on consumers. Consumers remain a missing link in hopes for strong recovery. — Nigel Gault, IHS Global Insight Cash for clunkers lifted spending into positive territory in July. However there was noticeable offset in other discretionary categories so that the overall gain was fairly modest. Government estimates of cash for clunkers sales in August suggest an even more substantial gain in auto sales, which should confirm a solid gain for [the third quarter] as a whole. However the weakness in income highlights the fragility of these gains. Given no further boost to income from the stimulus package on the horizon over [the second half of 2009] we expect consumer spending to remain fairly subdued. — Julia Coronado, BNP Paribas Households are still facing further declines in net worth as house prices continue to fall, though rising stock prices have provided somewhat of an offset, and household debt burdens remain high even as households pare down credit card debt. In this atmosphere, the fuel for growth for consumer spending is looking less and less potent -– while clunker cash will provide a boost to the [third-quarter] spending data, the reality is that clunker cash is, at least ultimately, a nonsustainable fuel for U.S. consumer spending. Restrained growth in consumer spending beyond Q3 is one factor behind our expectation that what will be fairly rapid real GDP growth in Q3 will not...
  • 11:36 AM » Real-Time Inflation Forecasting in a Changing World.
    Published Fri, Aug 28 2009 11:36 AM by NY Fed
    Jan J. J. Groen, Richard Paap, and Francesco Ravazzolo. Real-Time Inflation Forecasting in a Changing World. Federal Reserve Bank of New York Staff Reports Staff Report Number 388, August 2009.
  • 11:36 AM » Federal Reserve Balance Sheet Update: Week Of August 26
    Published Fri, Aug 28 2009 11:36 AM by
    Total Federal Reserve balance sheet assets for the week of August 26 of $2,049 billion ($15 billion higher compared to the prior week's $2,034) consisting of: Securities held outright: $1,479 billion (an increase of $135 billion MoM , resulting from $45.2 billion in new Treasury purchases, $79.8 billion increase in MBS and $10.1 billion in Agency Debt ), or $18.6 billion increase sequentially Net borrowings: $327.6 billion , a decrease from the last update at $340.5 billion Float, liquidity swaps, Maiden Lane and other assets: $242.9 billion, a $15 billion decline on $4 billion reduction in CPFF and $9 billion in Liquidity Swaps which have now hit a low not seen since May 2008. Foreign holdings increased by $9 billion to $2,826 billion. No change in the trends in the balance sheet with skyrocketing Securities Held Outright offset by declining Net Borrowings and Other Assets. Foreign holdings, as has lately been the case, are lagging the Fed's own purchases of securities, this week with a factor slightly higher than 2x.
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  • 8:14 AM » Top 10 Cities Facing the Next RE Bust
    Published Fri, Aug 28 2009 8:14 AM by
    10. Las Vegas What happens in Vegas depends on the rest of the American economy, and until Americans start to travel (and gamble) again, nearly one-fifth of Sin City’s commercial space will stay vacant. 9. Baltimore With the nation’s retail sector in a tailspin, shipments in and out of the Port of Baltimore have tanked, leaving acres [...]
  • 8:14 AM » How the Feds Are Making the Mortgage Mess Even Worse
    Published Fri, Aug 28 2009 8:14 AM by Seeking Alpha
    submits: So goes the title of a July 7th letter to the editor of Delaware Online by Linda A. Moffett, a Realtor from Newark. In it Linda charged the Feds with forcing mortgage lenders to deal "with such ridiculous government-imposed regulations that it is becoming more and more difficult to settle on time, if at all... Banks laid off the majority of their mortgage department staff and hired temps with little or no real estate knowledge to get through the overabundance of refinances and short sales." "Obama mortgage plan needs work" proclaimed the title of another article on CNN Money the next day. Apparently, many borrowers were asking, "Mr. President, help us get one of your mortgage workouts now." Nearly five months after President Obama unveiled his housing rescue plan it was still beset with problems, said borrowers, housing counselors and even the president himself: "Loan servicers are overwhelmed by the numbers of homeowners applying for loan modifications or refinancing. Borrowers are frustrated that their paperwork is being lost, and calls are not returned. Administration officials are racing to roll out new features to improve the program."
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:11 AM » Fannie Mae Monthly Summary-July
    Published Fri, Aug 28 2009 8:11 AM by Fannie Mae
    Fannie Mae’s Book of Business grew at a compound annualized rate of 10.1 percent in July and 6.1 percent year to- date. Fannie Mae’s Gross Mortgage Portfolio declined at a compound annualized rate of 18.2 percent in July. The Conventional Single-Family Serious Delinquency Rate rose 26 basis points in June to 3.94 percent; the Multifamily Serious Delinquency Rate rose 1 basis point to 0.51 percent in June (latest data available). The Effective Duration Gap on Fannie Mae’s portfolio averaged negative one month in July.
  • Thu, Aug 27 2009
  • 4:37 PM » For Young People, A Jobless Summer
    Published Thu, Aug 27 2009 4:37 PM by WSJ
    The youth unemployment rate hit 18.5% in July 2009, the highest level for that month since 1948, the. The youth unemployment rate, which covers people 16 to 24 years old, was down from 19.9% in June, but was the highest for the month of July since the Labor Department started tracking it. From April to July, the number of employed young people rose by 1.6 million to 19.3 million, according to Labor Department data that’s not seasonally adjusted because it’s meant to track the traditional increase in summer employment among young people. Last summer the number of young people grew by 1.9 million. The proportion of young people working, though, was 51.4%, another historic low for the month of July, which tends to be the peak for youth summer jobs. At its peak in 1989, that proportion was about 18 percentage points higher. Young workers tend to be some of the most vulnerable employees, so they’ve been hit particularly hard during this deep downturn. Summer is traditionally the season when they hit the market en masse, searching for their first jobs, internships, or seasonal employment. The worst recession in 70 years has made that pursuit extraordinarily tough, pushing even experienced workers and parents to shell out thousands . Some, it appears, are fleeing the labor market entirely – at least for now. The labor force participation rate for the age group, meaning the proportion of young people working or looking for work, was 63% in July, 2.1 percentage points lower than last year. It’s the lowest July rate in more than 50 years.
  • 4:33 PM » Fed Purchases $25.4bn Agency MBS
    Published Thu, Aug 27 2009 4:33 PM by NY Fed
    The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.
  • 2:01 PM » Report: Car Sales Slump 11% Below June Levels
    Published Thu, Aug 27 2009 2:01 PM by Calculated Risk Blog
    From the Financial Times: (ht James) [S]igns are already emerging that overall sales will fall back sharply now that the incentives have expired. ... [] estimates that, based on visits to its websites, “purchase intent” is down 11 per cent from the average in June ... excerpted with permission It now appears that sales in August were at about a 16 million SAAR (auto sales for August will be released next week). This follows an 11.22 million SAAR in July. The Cash-for-clunkers program started on July 24th. If sales in September are 11% below June - that would put sales at under 9 million SAAR - the lowest sales for this cycle, and perhaps at the lowest rate since the early '70s. Of course the program just ended, but it will be interesting to see how much Cash-for-Clunkers cannibalized future sales.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 2:00 PM » NewsWatch: FDIC's 'problem list' of troubled banks tops 400
    Published Thu, Aug 27 2009 2:00 PM by Market Watch
    The Federal Deposit Insurance Corp. says more lenders ran into financial trouble during the second quarter as the recession continued to saddle banks with soured loans.
  • 2:00 PM » For Toll Brothers, Future's Uncertain
    Published Thu, Aug 27 2009 2:00 PM by
    Editor's Note: This article was originally published on the Buzz & Banter. It's being reposted here for the benefit of the Minyanville community.In its earnings announcement Toll Brothers (TOL) states that the company: "...recorded non-cash valuation allowances of $416.8 million against its federal deferred tax asset and $22.6 million against its state deferred tax assets following an assessment of the recoverability of its deferred tax assets under SFAS 109. The Company believes that the extended downturn in the housing market the uncertainty as to its duration and the Company's recent losses due primarily to recognition of impairment charges are significant evidence ...
    Click Here to Read the Full Article

  • 2:00 PM » FDIC Rightly Worries About Consumer Confidence
    Published Thu, Aug 27 2009 2:00 PM by Seeking Alpha
    submits: Due to the large number of bank failures during 2009, the FDIC Deposit Insurance Fund (DIF) has fallen to the lowest level since March 1993. Numerous headlines are screaming that the FDIC is bankrupt and that the DIF fund is depleted. Considering the perilous financial condition of the banking industry and the possibility of perhaps another 1,000 or more bank closings, the FDIC is probably not capable of fulfilling its mission without substantial loans from the US Treasury. (The last time this happened was in the early 1990s during the savings and loan crisis when the FDIC had to borrow $15 billion from the US Treasury.) This does not mean, however, that the upcoming FDIC Quarterly Banking Profile will report a negative balance in the DIF. The FDIC has made it clear that they consider it important to maintain a positive DIF number to avoid causing a lack of confidence in the banking system by the public.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:51 AM » Keepin’ It Real Estate: Allocating Stimulus to Land Banks
    Published Thu, Aug 27 2009 9:51 AM by
    After four years of searing pain the US housing market is finally showing signs of life. And even as the causes and relative sustainability of this nascent “recovery” are being hotly debated traditional buyers and investors alike are jumping into the market for homes with both feet. It now appears that the biggest baddest investor of them all the one with infinitely deep pockets is wading into the fray: Uncle Sam. According to HousingWire the US Department of Housing and Urban Development or HUD is giving state and local governments a total of $50 million to help deal with ...
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  • 9:51 AM » Answers for Homeowners With Taylor, Bean & Whitaker Loans
    Published Thu, Aug 27 2009 9:51 AM by Freddie Mac
    My loan is with Taylor, Bean & Whitaker (TBW) and they have closed. What should I do? Freddie Mac has arranged for several servicing companies to begin working directly with homeowners who have TBW-serviced mortgages. You should soon be receiving notification from your new servicer, the company that collects your mortgage payments.
  • 9:36 AM » New Home Sales Strong... At the Right Price
    Published Thu, Aug 27 2009 9:36 AM by Seeking Alpha
    Yesterday was another "borefest" on Wall St as the bears and the bulls continued to tango around the 1000-1050 area on the S&P. We got some more bullish housing data on new and existing home sales. I have to admit, that tax credit seems to really be working. A few mortgage brokers have told me that things (especially on the low end) have picked up as a result of the government stimulus.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:17 AM » Housing prices
    Published Thu, Aug 27 2009 8:17 AM by
    Even if the big bust is over, that doesn't mean we'll see a rebound; at best, this is the new normal. 2005 isn't coming back.
    Click Here to Read the Full Article

  • 8:02 AM » Report: Mortgage Delinquencies increase in July
    Published Thu, Aug 27 2009 8:02 AM by Calculated Risk Blog
    From Reuters: Among U.S. homeowners with mortgages, a record 7.32 percent were at least 30 days late on payments in July, up from about 4.5 percent a year earlier and 7.23 percent in June, according to monthly data from the Equifax credit bureau. There numbers aren't directly comparable to the , but this shows that delinquencies are still rising.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 8:02 AM » Reviewing the FDIC's Role in This Crisis
    Published Thu, Aug 27 2009 8:02 AM by Seeking Alpha
    submits: With the Federal Deposit Insurance Corporation (FDIC) about to release its latest figures for banks it regulates and its own financial condition, now is a good time to review its role in this crisis. This post is about the FDIC’s role in the credit crisis, how it seizes banks and why I believe this matters. In my opinion, Sheila Bair, the head of the FDIC, is the best regulator in government these days (although ). Her agency has taken on the workman’s regulatory role in this crisis of identifying undercapitalized institutions, seizing them and putting their assets in new hands. These actions are a necessary part of capitalism. When a bank is reckless, it must suffer the consequences.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • Wed, Aug 26 2009
  • 10:42 PM » Subprime Lenders Getting U.S. Subsidies, Report Says
    Published Wed, Aug 26 2009 10:42 PM by
    Much “of this money is going directly to the same financial institutions that helped create the sub-prime mortgage mess in the first place,” Bill Buzenberg, executive director of the center, said in a statement. For example, J.P. Morgan Chase, Wells Fargo and Countrywide, which has been bought by Bank of America, are eligible to receive billions [...]
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More From MND

Mortgage Rates:
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  • 15 Yr FRM 2.62%
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  • Jumbo 30 Year Fixed 3.95%
MBS Prices:
  • 30YR FNMA 4.5 107-11 (-0-03)
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  • 30YR FNMA 5.0 109-07 (0-05)
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  • 30YR FNMA 5.5 110-01 (0-08)
Recent Housing Data:
  • Mortgage Apps 2.24%
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  • Refinance Index 0.44%
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  • Purchase Index 5.34%