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  • Thu, Oct 30 2008
  • 9:26 AM » Here Comes Da Zirp!
    Published Thu, Oct 30 2008 9:26 AM by The Big Picture
    How likely are we to see a zero percent interest policy? Pretty likely: "Federal Reserve Chairman Ben S. Bernanke signaled he's ready to cut interest rates to the lowest level on record should the central bank's actions fail to stem the deepening economic slump. Policy makers said yesterday that ``downside risks to growth remain'' even after their half-point reduction in the main rate to 1 percent. The Fed dropped a reference in its statement to threats from inflation, projecting "levels consistent with price stability'' in coming quarters... Bernanke is drawing on an academic career studying the failed efforts to prevent the Great Depression, and yesterday's shift indicates he's prepared to revisit his 2003 commitment as a governor to lower rates to zero percent if necessary. Should lending fail to revive by December, the central bank will probably cut by another half point, said former Fed Governor Lyle Gramley... Reflecting a crisis that has reverberated throughout the global economy, the Fed's Open Market Committee yesterday said that international rate cuts should contribute by loosening credit markets. The FOMC also said slowing economies abroad will threaten the record boom in American exports, which have kept the U.S. from a deeper slump... In a new step to increase the availability of dollars in emerging markets, the Fed yesterday agreed to provide $120 billion to four counterparts. Brazil, Mexico, South Korea and Singapore get $30 billion each by signing the so-called currency swap lines. The U.S. already has unlimited agreements with the European Central Bank and Bank of England." Inflation from 2002-07, Deflation from 2008-09, hyper inflation from 2010-??? I could see Gold going to $3,000, by way of $300 first. > * With apologies to Source: Scott Lanman and Craig Torres Bloomberg, Oct. 30 2008 http://www.bloomberg.com/apps/news?pid=20601087&sid=adtjOhAF5mEk&
    Click Here to Read the Full Article

    Source: The Big Picture
  • 9:25 AM » Fed Expands Swap-O-Rama to Brazil, Mexico, South Korea, Singapore
    Published Thu, Oct 30 2008 9:25 AM by feeds.feedburner.com
    In an effort to unfreeze money markets the . The Federal Reserve agreed to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore, expanding its effort to unfreeze money markets to emerging nations for the first time. The Fed set up "liquidity swap facilities with the central banks of these four large systemically important economies" effective until April 30, the central bank said yesterday in a statement. The arrangements aim "to mitigate the spread of difficulties in obtaining U.S. dollar funding." "The swap lines will help unclog the liquidity pipeline and that action is boosting markets even more than" the Fed's rate cut, said Venkatraman Anantha-Nageswaran, head of research at Bank Julius Baer & Co. in Singapore. "It's a step in the right direction and prevents things from getting worse." Step Towards The Cliff The idea that currency swaps are a step in the right direction is complete silliness. The Fed's swap-o-rama meet does not unclog anything. It just seem s like it. The illusion will vanish as soon as the Fed stops the swap meet. Note the similarity between the Fed's actions and a drug dealer and his client. A shot of heroin will relieve the withdrawal symptoms, but only if the next dose is stronger. Korean Stock Market Surges On Fed Supplied Drugs For now the market is happy as . South Korea's stock index rose by a record and the won surged after the central bank signed a $30 billion currency swap with the Federal Reserve and President Lee Myung Bak said he's ready to take more steps to aid the economy. The swap line is part of the Federal Reserve's efforts to alleviate a credit freeze in emerging nations, with the U.S. also providing dollars to Singapore, Brazil and Mexico. Korean lawmakers today approved the government's $100 billion guarantee of bank debts to help lenders struggling to access foreign funds. Korea's currency jumped 14 percent...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 9:24 AM » I think this is the bottom
    Published Thu, Oct 30 2008 9:24 AM by themessthatgreenspanmade.blogspot.com
    From Tom Toles at the :
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 9:23 AM » Cuomo Prepares to Embarrass Banks Over Top Level Pay
    Published Thu, Oct 30 2008 9:23 AM by Google News
    Banks have proven to be remarkably immune to condemnation over senior level pay. CEOs and top level producers seem to have an undimmed sense of entitlement, even though the nine banks receiving the first Treasury handouts equity purchases earned a collective $305 billion from 2004 to mid 2007, followed by $323 billion in writedowns. But the powers that be are keeping up scrutiny and pressure. The latest salvo comes from New York attorney general Andrew Cuomo. At this stage, Cuomo appears merely to have made a request to the nine recipients of Federal largess to cough up fairly extensive information about bonuses. If the firms fail to respond, he may try to force them to comply. The New York AG would then resort to a legal theory that is a bit of a stretch. Even if Cuomo is unlikely to win a case based on this theory, it may have enough substance to survive a motion for summary judgment from the opponents. If it does, Cuomo can then proceed to discovery, which means he can gather a great deal of potentially embarrassing information. From the : Under pressure from members of Congress to curtail compensation, banks now face a new threat from Andrew M. Cuomo, the New York attorney general, who sent a letter on Wednesday to nine big financial institutions receiving government aid. Mr. Cuomo gave the companies a week to provide a “detailed accounting regarding your expected payments to top management in the upcoming bonus season.” That could prove difficult for the banks, which typically do not complete bonus pools until later this month at the earliest. Mr. Cuomo’s letter also warned that payments worth more than the services provided by executives might violate New York law. The letter follows one sent earlier this week to the same banks by Henry A. Waxman, the California Democrat who is chairman of the House Committee on Oversight and Government Reform, urging them not to use any government money for bonuses or other payments and asking for data on pay going back to 2006...
  • 9:22 AM » "Fears mount in Japan over complex yen products"
    Published Thu, Oct 30 2008 9:22 AM by Google News
    This Times Online story is frustratingly vague about the exact nature of these complicated and risky foreign exchange products sold to Japanese retail investors. While the size of the problem ($90 billion) may seem not all that bad in comparison, say, to subprime exposures, recall that these trades are likely to be unwound in a compressed period of time when currency markets are already volatile, thus increasing the potential for havoc. The irony is that Japanese regulators were once hugely protective of retail investors and placed tough restrictions on what products could be sold to them. That attitude clearly went out the window. From the : Traders in Tokyo have given warning that about $90 billion (£55billion) of complex foreign exchange products, sold mainly to Japanese households and institutions, are on the brink of falling “like a house of cards”. A rescue effort by the product issuers - large Japanese, European and American investment banks - is expected to involve extensive hedging measures that will throw global currency markets into even deeper turmoil. The products, which are known as power reverse dual currency notes (PRDC), were sold to Japanese households as simple products offering higher yields than regular savings but the bonds were in reality hugely complex structures “with 15 moving parts and multiple points of pain”, derivatives experts at RBS in Tokyo said. The products combine exposure to foreign exchange, interest rate differentials and domestic inflation and have formed a small but potent part of the so-called yen carry trade - the borrowing of yen to invest in currencies offering higher interest rates - a gambit thought to have financed huge amounts of global risk-taking in recent years. RELATED LINKS Japanese giants lose £777m as demand slows Japan's regional banks to receive public funds The PRDC's complexity disguised from the buyers the fact that they were taking on the same big foreign exchange risks as the regular carry trade but...
  • 9:21 AM » JP Morgan Under Criminal Investigation for Jefferson County, Other Swaps
    Published Thu, Oct 30 2008 9:21 AM by Google News
    The agonies of Jefferson County, Alabama, which got itself into a too-clever-by-half funding arrangement that put the county on the verge of bankruptcy, have faded from the public eye. However, the type of transaction that caused so much woe, a swaption to supposedly lower financing costs, has been the subject of SEC and Justice Department investigations for some time. The focus has moved to JP Morgan based on its role n the ill-fated Jefferson County deal and other municipal transactions. The Bloomberg story provides some detail on the swaption itself, and if the reporting is accurate, this looks like an a deal almost certain to have turned out badly for the county. This is not at all uncommon for OTC derivatives, where even if the transaction in theory has merit, the fees charged are so high as to make the deal uneconomical to the client. But clients almost universally lack the skills to properly model the deal to figure this out. Most deals don't blow up as spectacularly as this one did, so most clients never figure out they were had. From : The U.S. Justice Department is investigating a derivative trade between the state of Alabama and JPMorgan Chase & Co. as part of a nationwide criminal probe. The Justice Department subpoenaed documents about a so- called swaption, or an option on an interest-rate swap, between JPMorgan and the state's school construction authority, according to a federal lawsuit filed by the state, which is trying to void the 2002 deal. The agency is investigating whether banks and advisers conspired to overcharge governments on the contracts. ``Although the authority does not seek by this action to avoid payment of any legitimate obligation, the pendency of at least two separate governmental inquiries implicating the validity of the transaction heightens the necessity for a judicial determination of the parties' rights,'' the complaint, filed yesterday in federal court in Montgomery, Alabama, said. U.S. prosecutors and...
  • 9:20 AM » House Oversight Committee Requests Bonus Info of Major Banks
    Published Thu, Oct 30 2008 9:20 AM by feeds.feedburner.com
    Henry A. Waxman, Committee Chairman on Oversight and Government Reform, . In letters to nine major banks that will receive $125 billion of taxpayer funds, Chairman Waxman requested information on their compensation and bonus plans in 2008. List of Banks (121 KB) (122 KB) (123 KB) (122 KB) (121 KB) (121 KB) (124 KB) (121 KB) (123 KB) The letters are all essentially the same. Congress is upset at the level of bonuses being handed out and is asking for compensation data for 2006-2008 for all personnel broken down by salaries, bonuses (cash and equity), and benefits. It is asking for additional information of the highest paid employees. The banks have until November 10th to comply. A huge public backlash is likely over this bailout and one can not blame them. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com to learn more about wealth management for investors seeking strong performance with low volatility.
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 9:20 AM » My house has still got to be worth...
    Published Thu, Oct 30 2008 9:20 AM by themessthatgreenspanmade.blogspot.com
    There's a new up at the Zillow blog where homeowners all across the U.S. were asked what they think happened to the value of their home over the last year and what the year ahead might bring. As expected, many homeowners remain blissfully unaware of the carnage that has recently occurred in the nation's housing market and are far too optimistic about what the future holds. But, some of this is quite understandable - after all, we don't all obsess over this stuff. If you've been in a place for years with no plans to move, haven't had the need to "tap" your home equity only to find less of it there, and don't see the need to keep track of what nearby houses sell for, you're probably not really qualified to offer an opinion on this anyway. It's like asking someone who doesn't know or care about the S&P500 where stocks have come and where they're going. Despite what the National Association of Realtors might tell you, housing hasn't always been viewed as an investment by everybody - many people still look at their house as an asset that depreciates in real terms when upkeep, taxes, and insurance are factored in. For those who do view their home as an investment, it's easier than ever to get some kind of an idea what real estate is worth with the rise of websites like Zillow. I became painfully aware of Zestimates after we sold our Southern California house a few years back, only to watch the Zestimate rise to $805,000 during the 2006 peak - it's now at $535,000. Anyway, the survey data for how homeowners think home prices have moved over the last year is interesting, but, in my view, not all that surprisingly. Here are the results by region: And, a short excerpt: There’s no doubt we’ve been deluged with depressing economic and housing news over the past few months. Every day is a new headline, every channel has a new pundit and the recession debate has shifted from “if” to “how long.” Given this, when fielding...
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 9:20 AM » Nouriel Roubini blames the Fed
    Published Thu, Oct 30 2008 9:20 AM by themessthatgreenspanmade.blogspot.com
    Nouriel Roubini is everywhere! You have to wonder if he's starting to make odd requests for his media appearances like asking for . Last night, he was on the Nightly Business Report and was asked a very simple question, "Who or what is the major culprit of this financial crisis?" Here's his simple reply: First of all the Fed kept interest rates too low for too long and created the housing bubble. Secondly the Fed and the other regulators were asleep at the wheel and allowed all these toxic mortgages to be created without controlling it. Three, there was plenty of greed and excessive risk taking on Wall Street . And four, the rating agencies had major conflicts of interest because they were being paid by those that were supposed to be rating. So the blame is to be shared by many different culprits. It is quite clear there is plenty of blame to go around but, interestingly, the first two of the four culprits mentioned by the world's most in-demand economist were the Federal Reserve. The entire transcript is available . The New York University economics professor and founder of RGE Monitor (how does he find time to teach these days?) was also on Bloomberg video this morning predicting a very long and painful recession dead ahead. Click to play in a new window This simple on "Roubini" at Bloomberg shows the extent of Nouriel's omnipresence - a total of ten references in just the last few days.
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 7:53 AM » Credit Suisse aims to benefit from UBS weakness in U.S: report
    Published Thu, Oct 30 2008 7:53 AM by Reuters
    ZURICH (Reuters) - Credit Suisse Group AG aims to benefit from rival UBS AG's weakness in the United States, its chief executive said in an interview published on Thursday.
  • 7:52 AM » Where Did A.I.G.’s Cash Go?
    Published Thu, Oct 30 2008 7:52 AM by dealbook.blogs.nytimes.com
    The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October, The New York Times’s Mary Williams Walsh says. Some analysts say at least part of the shortfall [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 7:51 AM » Japan unveils $275 billion stimulus package
    Published Thu, Oct 30 2008 7:51 AM by CNN
    Read full story for latest details.
  • 7:50 AM » Deutsche Bank posts profit as rule change limits write-downs
    Published Thu, Oct 30 2008 7:50 AM by Market Watch
    Deutsche Bank on Thursday reported an unexpected third quarter profit of 435 million euros ($575 million), helped by a tax gain and a change to accounting rules that allowed the bank to take fewer write-downs on its risky debt.
  • 7:50 AM » Investors Get Back Some Appetite for Risk
    Published Thu, Oct 30 2008 7:50 AM by CNBC
    Asian share markets rallied, European stocks were higher and the euro surged on Thursday on initial signs that investors are rediscovering an appetite for risk.
  • 7:50 AM » Ex-Fannie CEO Wishes he Said "No" More Often: Report
    Published Thu, Oct 30 2008 7:50 AM by CNBC
  • Wed, Oct 29 2008
  • 5:59 PM » Treasury, FDIC Considering Plan to Rework Millions of Mortgages
    Published Wed, Oct 29 2008 5:59 PM by Calculated Risk Blog
    From the WaPo: Treasury, FDIC Crafting Plan to Rework Millions of Mortgages Officials with the Treasury and the Federal Deposit Insurance Corp. are crafting a plan under which the government would guarantee the mortgages of as many as 3 million homeowners now struggling to avoid foreclosure ... Under the program being discussed, the lender would agree to reduce borrowers’ monthly payments, for
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 5:58 PM » Countrywide REOs Going Parabolic
    Published Wed, Oct 29 2008 5:58 PM by ml-implode.com
    ``19,618 Homes Offered For Sale on Countrywide Financial's Website.'' -- Click through to see the rather alarming chart.
    Click Here to Read the Full Article

    Source: ml-implode.com
  • 5:58 PM » NYAG Cuomo warns nine banks about bonus payments
    Published Wed, Oct 29 2008 5:58 PM by ml-implode.com
    ``New York Attorney General Andrew Cuomo, who negotiated executive payment clawbacks by American International Group Inc (NYSE:AIG - News) as it received a taxpayer bailout, warned nine banks receiving government money on Wednesday that using the funds for bonus payments may be illegal under state law.''
    Click Here to Read the Full Article

    Source: ml-implode.com
  • 5:58 PM » New York Attorney General asks banks for bonus information
    Published Wed, Oct 29 2008 5:58 PM by Market Watch
    New York Attorney General Andrew Cuomo asks nine of the largest U.S. banks for information about the bonuses they plan to pay.
  • 3:20 PM » Wall St Journal on the CA Housing Meltdown
    Published Wed, Oct 29 2008 3:20 PM by mrmortgage.ml-implode.com
    The Wall St Journal ran a very thorough yet backward looking story on the state of CA real estate. They focus on Los Banos, a small farming community about 80 miles South of Silicon valley, which is another ’subprime central’. One important thing they leave out is the fact this is beginning to happen everywhere not just Los Banos and the Subprime epicenters. In all areas Notices-of-Default, the first stage to foreclosure are surging. This will lead to similar foreclosure epidemics in higher priced areas. Values in the state have plummeted everywhere and you can use the ‘Subprime Implosion’ road map as a guide to what will happen to higher paper grades such as Pay Option ARMs, broader Alt-A, Jumbo Prime and finally Prime conventional sue to the negative equity effect and/or the exotic nature of said loans. Remember, what happened to Subprime borrowers with respect to payment adjustments is not unique to Subprime. Its just that Subprime ARM were mostly structured with 2-year teaser rate periods. The higher paper grades were structured longer such as 5-years. As a matter of fact the most popular Alt-A, Jumbo Prime and Prime loan program type in CA from 2003 through 2005 was the 5/1 interest only that allows an interest only period for 5-years then adjusts to a fully amortized loan in most cases according to LIBOR, CMT or 1-yr Treasury yield plus a margin. Do the math…2003 to 2005 + 5-years = heavy adjustments coming from 2008 - 2010. Even though the payments won’t double on these loans like on Subprime, any payment increase when the value of your home is down 50%, you are underwater 30% and paying 60% of your gross income on debt is rubbing salt on the wound and grounds for many to walk. Another very popular 5-year program was the now infamous Pay Option ARM, which has destroyed nearly every bank holding them. Below is their adjustment time. We can still get ahead of the major Pay Option implosion with proactive loan modifications but the banks just don’t want to play that...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 3:20 PM » Fannie Mae Slammed for Setting Poor Industry Servicing Standard
    Published Wed, Oct 29 2008 3:20 PM by www.thetruthaboutmortgage.com
    Mortgage financier Fannie Mae “has become a major roadblock” in terms of helping at-risk borrowers find long-term solutions to their housing woes, according to the Neighborhood Assistance Corporation of America (NACA). The consumer help group, which planned a protest outside Fannie’s headquarters in Washington D.C. today, claims the mortgage giant is setting poor “Accepted Servicing Practices,” [...]
    Click Here to Read the Full Article

    Source: www.thetruthaboutmortgage.com
  • 11:54 AM » Deflation risk
    Published Wed, Oct 29 2008 11:54 AM by www.econbrowser.com
    There are plenty of things to worry about in the current economic situation. But deflation isn't one of them. Greg Mankiw had a last weekend in which he challenged the view that macroeconomists have learned enough to prevent a repeat of the Great Depression. Greg notes some disturbing similarities between our current difficulties and the problems of the 1930s: From 1930 to 1933, more than 9,000 banks were shuttered, imposing losses on depositors and shareholders of about $2.5 billion. As a share of the economy, that would be the equivalent of $340 billion today. The banking panics put downward pressure on economic activity in two ways. First, they put fear into the hearts of depositors. Many people concluded that cash in their mattresses was wiser than accounts at local banks. As they withdrew their funds, the banking system's normal lending and money creation went into reverse. The money supply collapsed, resulting in a 24 percent drop in the consumer price index from 1929 to 1933. This deflation pushed up the real burden of households' debts.... Deflation across the economy is not a problem (yet), but deflation in the housing market is the source of many of our present difficulties. With so many homeowners owing more on their mortgages than their houses are worth, default is an unfortunate but often rational choice. Widespread foreclosures, however, only perpetuate the downward spiral of housing prices, further defaults and additional losses at financial institutions. Greg is certainly correct that house price declines have a potential to cause similar problems today as we saw in the 1930s. But I believe it is more than an academic distinction whether we are talking about a relative price change (house prices go down but the dollar price of most other items goes up) or a true deflation (the dollar price of almost everything you buy goes down). The reason is that the latter problem is absolutely one that the Federal Reserve could fix, whereas the former...
    Click Here to Read the Full Article

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

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

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

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

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

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

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

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

    Source: news.yahoo.com
  • 12:22 PM » Consumer Confidence Plunges to Record Low
    Published Tue, Oct 28 2008 12:22 PM by The Big Picture
    chart via , Bloomberg > The Conference Board reported Consumer Confidence Index for October hit a record low of 38. Is there any connection between weak consumer confidence readings and bullish reversals in the stock market? To decide, have a look at the following quick-and-dirty overview (which includes all data going back to the Feb-67 start of the confidence series): (*Note: Interim low - market was already in a secular upswing.) (#Note: Consumer confidence readings that were closest to the latest reading.) Table via From the Conference Board "The Conference Board Consumer Confidence Index™, which had improved moderately in September, fell to an all-time low in October. The Index now stands at 38.0 (1985=100), down from 61.4 in September. The Present Situation Index decreased to 41.9 from 61.1 last month. The Expectations Index declined to 35.5 from 61.5 in September. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. Says Lynn Franco, Director of The Conference Board Consumer Research Center: "The impact of the financial crisis over the last several weeks has clearly taken a toll on consumers' confidence. The decline in the Index (-23.4 points) is the third largest in the history of the series, and the lowest reading on record. In assessing current conditions, consumers rated the labor market and business conditions much less favorably, suggesting that the fourth quarter is off to a weaker start than the third quarter. Consumers' appraisal of current conditions deteriorated sharply in October. Those saying business conditions are "bad" increased to 38.3 percent from 33.4 percent, while those claiming business conditions are "good" declined to 9.2 percent from 12.8 percent. Consumers' assessment of the labor market was also much more negative. The percentage of consumers saying jobs are "hard to get" rose to 37.2 percent from 32.2 percent in September, while those claiming...
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    Source: The Big Picture
  • 12:22 PM » Phoenix and Las Vegas home prices fall 31%
    Published Tue, Oct 28 2008 12:22 PM by themessthatgreenspanmade.blogspot.com
    The August for the S&P Case-Shiller Home Price Index shows the 10-City and 20-City Composite Home Price Indices at new record annual declines of 17.7 percent and 16.6 percent, respectively. Price indices for all 20 cities are shown below. To aid in viewing this graphic, the order of the legend (upper left) reflects the top-to-bottom position of all 20 cities for the current month (far right). As such, the legend indicates which cities have managed to hold onto the largest real estate price gains since 2000. Not surprisingly, a number of cities have consistently moved down in the legend, notably, Phoenix and Las Vegas, both of which were near the top of the list late last year and earlier this year. The reason for their steady move down is clear to see when looking at the table below - both now sport year-over-year declines of more than 30 percent. Miami is not far behind, nor are San Francisco, Los Angeles, or San Diego. Regrettably, the curve for San Francisco in the first graphic above is somewhat obstructed - its recent decline has been remarkable, mirroring Las Vegas in declining sharply in 2008. David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, noted: The downturn in residential real estate prices continued, with very few bright spots in the data. The 10-City Composite and the 20-City Composite reported record 12-month declines. Furthermore, for the fifth (5th) straight month, every region reported negative annual returns. This started when Charlotte, NC, was the last region to turn negative back in April 2008. Both the 10-City and 20-City Composites have been in year-over-year decline for 20 consecutive months. Of the 20 regions, 13 of them had their annual returns worsen from last month’s report . As seen throughout 2008, the Sun Belt markets are being hit the most. Phoenix and Las Vegas are both reporting annual declines in excess of 30%, and Miami, San Francisco, Los Angeles and San Diego are all in excess of 25%. There was...
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    Source: themessthatgreenspanmade.blogspot.com
  • 12:22 PM » More Improvement in Money Market Conditions
    Published Tue, Oct 28 2008 12:22 PM by Google News
    While none of the changes in interest rates were dramatic, and both interbank rates and stress levels remain elevated, improvement continues and all the metrics moved in the right direction. From : Money-market rates in London declined as cash injections by European central banks showed signs of easing the paralysis among lenders. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell 4 basis points to 3.47 percent today, its 12th straight drop, according to the British Bankers' Association. The comparable euro rate slid 5 basis points to 4.85 percent, the lowest level since April 28. Rates for the U.K. pound were also lower... The European Central Bank today lent financial institutions 325.1 billion euros ($408 billion), the most in 10 months. The Bank of England loaned $3 billion of overnight cash today, after allotting the same amount yesterday. Singapore's comparable rate for U.S. dollars fell 4 basis points to 3.48 percent, its 10th straight decline since reaching 4.8 percent on Oct. 13, the highest level this year. Hong Kong's three-month interbank lending rate, or Hibor, increased 10 basis points to 3.84 percent today, the highest since Oct. 17. While money-market rates have declined, the three-month Libor for dollars remains 197 basis points above the Federal Reserve's target rate for overnight loans of 1.5 percent and up from 81 basis points about three months ago. At the start of the year, the spread was 43 basis points. In a further sign some banks remain wary of lending to each other, financial institutions lodged 213.1 billion euros in the ECB's overnight deposit facility yesterday, up from 202.6 billion euros the previous day. The daily average in the first eight months of the year was 427 million euros. The Libor-OIS spread, a measure of cash scarcity, narrowed 5 basis points to 258 basis points today, down from 345 basis points two weeks ago. It was at 87 points before Lehman...
  • 10:21 AM » America Underwater: Growing Number of Homeowners “Upside Down” on Mortgages
    Published Tue, Oct 28 2008 10:21 AM by loanworkout.org
    With falling housing prices in nearly every market, the questions that homeowners are asking have shifted. Rather than asking “what is my home worth?”, they are now asking “Is my home worth it?” The problems are affecting the entire country, with nearly 1 in 6 homeowners owing more than their home is worth.For homeowners who owe [...]
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    Source: loanworkout.org
  • 10:20 AM » Iceland Central Bank: 18% Rate!
    Published Tue, Oct 28 2008 10:20 AM by The Big Picture
    Gee, do you think they are trying to attract some capital? Iceland's central bank unexpectedly raised the benchmark interest rate to 18 percent, the highest in at least seven years, after the island reached an aid agreement with the International Monetary Fund. Policy makers raised the key rate by 6 percentage points, the Reykjavik-based bank said in a statement on its Web site today, taking the rate to the highest since the bank began targeting inflation in 2001. It will publish the reasons for today's move at 11 a.m. local time. The central bank is raising rates as Iceland, the first western nation to seek aid from the IMF since the U.K. in 1976, faces a prolonged contraction, coupled with possible hyperinflation and rising joblessness. The economy will shrink as much as 10 percent next year, the IMF forecasts. Iceland will receive about $2.1 billion in aid from the Washington-based fund, according to a deal struck on Oct. 24. The US Fed starts a two day meeting today . . . > Source: Tasneem Brogger and Helga Kristen Einarsdottir Bloomberg, Oct. 28 2008 http://www.bloomberg.com/apps/news?pid=20601068&sid=ay61s1zV3NCA&
    Click Here to Read the Full Article

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

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