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  • Tue, Nov 4 2008
  • 10:50 AM » Fed Hires Bear Stearns Risk Chief...To Supervise Bank Soundness
    Published Tue, Nov 04 2008 10:50 AM by Google News
    You cannot make this stuff up. From the : Michael Alix has been named a senior vice president in the Bank Supervision Group of the Federal Reserve Bank of New York. He will serve as a senior advisor to William L. Rutledge, executive vice president, Bank Supervision Group.... Most recently, Mr. Alix worked for the Bear Stearns Companies, Inc., where he served as chief risk officer from 2006-2008 and global head of credit risk management from 1996-2006. His prior experience included eight years at Merrill Lynch & Company where he was a director, Asia chief credit officer and a vice president, head of North America financial institutions credit. He began his career with the Irving Trust Company where he served as an assistant vice president and lending officer. As John Carney of Clusterstock, who found this remarkable tidbit, : We suppose that Alix at least has plenty of experience with unsound banking institutions. He was the chief risk officer of Bear Stearns from 2006 until 2008. So, basically, he was the guy on the mast charged with yelling "iceberg" just before the Titantic introduced its bow to a floating hunk of ice. We have our own paranoid pet theory as to how this appointment might have come about. Who would know better what was in the dreck pool that the Fed has parked over at BlackRock than the former chief risk officer? If Alix knows a few embarrassing things, might be wise to give him an incentive not to talk them up.
  • 10:50 AM » WSJ: Foreclosure Prevention Program Drags
    Published Tue, Nov 04 2008 10:50 AM by Calculated Risk Blog
    From the WSJ: The FDIC has been developing a proposal, which some estimate could help between two and three million homeowners, designed to encourage banks to rework troubled loans by providing a partial federal guarantee for losses on modified mortgages that meet specific criteria ... The plan would use between $40 billion and $50 billion from the government's $700 billion financial-market rescue fund ... Several officials said the plan is strongly opposed by the White House, though officials there deny killing the idea. It sounded like a plan would be announced last week, but it appears there is strong disagreement on what the plan should look like. This is a key point: "Even an ambitious program of mortgage modifications will not prevent a further decline in house prices," said Douglas Elmendorf, a senior fellow at the Brookings Institution and a former Clinton economic adviser. "It might prevent an overshooting of house prices on the downside. But houses still look overvalued relative to people's rents or incomes, and it's going to be very difficult to sustain house prices at their current level." Any attempt to keep house prices artificially high will just postpone the inevitable and delay the eventual recovery.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:34 AM » Real Look at the ‘Credit Market’
    Published Tue, Nov 04 2008 10:34 AM by mrmortgage.ml-implode.com
    The credit markets remain unprecedentedly tight despite what you hear by the popular media on how the TED spreads, swap spreads, LIBOR/OIS etc etc are improving. These are just indicators and everyone has their favorite. Their movement from Armageddon levels absolutely does not mean that we will get a thaw in commercial or consumer lending anytime soon. Instead of looking at sometimes artitrary indicators, just look at what’s going on in the real market. One will argue that ‘just by virtue of these deals going off at all means things are great’. I say ‘no way!’ If Verizon, one of the strongest companies in the world, has to pay near 9% and MGM has to pay 14% for a loan using New York New York as collateral, I feel sorry for most corporate America. Additionally, every week I see mortgage finance tighten and prgrams go away. For some reason the markets think when we ‘come out of this’ everyone will open their eyes and it will be 2005 again. I think in a year or three when the global financial markets actually stabilize that most of us will not recogize it because it will be so much different than most of us have ever seen in our lifetimes. -Best, Mr Mortgage Below is a great summary of the Verizon deal from one of my favorite new bloggers at : November 3rd, 2008 3:35 pm …10 year bond and a 30 year bond by Verizon. That very large telecom company with a reasonably pristine reputation issued 10 year notes and 30 year notes 4 7/8 percent above benchmark Treasury debt. The bonds carry 8 7/8 coupons in 10 years and 8.95 in 30 years. Each came 50 basis points to 60 basis points cheap to outstanding VZ debt. I have asked this question before. If VZ has to pay nearly 9.00 percent to raise capital, what is the fate of a BBB industrial? I suspect they defer any attempts to raise funds. And for financials the world is so confused that for most the market is also closed. So while the corporate market is manifesting some faint signs of improvement, a true rehabilitation is a distant...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 10:34 AM » LIBOR Continues to Decline
    Published Tue, Nov 04 2008 10:34 AM by Calculated Risk Blog
    From Bloomberg: The three-month rate dropped 15 basis points to 2.71 percent, the lowest level since June 9, according to BBA figures. This has pushed the down to 2.22 this morning (from 2.39 yesterday, and 4.63 on Oct 10th). This is still way too high, but shows more progress. More later on credit indicators ...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:34 AM » Unrelenting Bullishness
    Published Tue, Nov 04 2008 10:34 AM by feeds.feedburner.com
    MarketWatch, the Wall Street Journal, Hussman, MSNBC, and Barron's are all bullish on the stock market. That is pretty amazing optimism in the face of the collapse we have seen. Is such optimism warranted? Let's take a look and see. The Wall Street Journal is reporting . World-wide, stock valuations have fallen to a level roughly equivalent to the one that prevailed during the 1970s, according to Citigroup. As of Thursday, global stocks were trading at roughly 10.3 times their earnings for the previous 12 months, even lower than the average of 11.4 through the 1970s. The selloff has been especially savage in emerging markets. Earlier this week, investors drove down stocks in such markets to valuations that were almost as low as those during the nadir of the Asian crisis in the late 1990s, according to a Merrill Lynch report. "There are a host of things that have sold off to extraordinarily ridiculous levels," says Uri Landesman, a senior portfolio manager at ING Investment Management in New York. "The baby and all its diapers and onesies were thrown out with the bathwater." Indian shares, which last September traded at about 25 times the previous 12 months' earnings, now trade at just over 10 times, using Citigroup and MSCI figures. Shares of Chinese companies open to foreign investors are down to about nine times, from 27 times. And Russian shares are trading at about 4.4 times prior earnings, from 13 times. "Everything looks cheap," says Ronald Frashure, co-chief investment officer of Acadian Asset Management in Boston. That is, "unless the world is going into something like the Great Depression, and we think there's a low probability of that occurring." Historically Cheap Amid Volatility MSNBC is reporting . Analysts and money managers agree that unusually sharp volatility and a freeze in credit markets have made it more difficult than ever to forecast a market bottom. But many of them also say it's clear...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • Mon, Nov 3 2008
  • 11:38 AM » WaMu Ex-Employee Speaks Out - How It Really Was
    Published Mon, Nov 03 2008 11:38 AM by mrmortgage.ml-implode.com
    For all of you who want to know how the mortgage industry really was between 2003 and 2007, this is a good testimonial. Remember, this was not WaMu specific. This was just how it was. This is why I maintain that given such lax standards were used along with such high leverage in the way the loan programs were structured and guidelines were written (i.e. 50% debt-to-income ratios for Prime loans) that nothing is how it seems. There are many more loans are ‘at-risk’ than anyone can imagine going all the way up the credit chain to ‘Prime’. This is why we have recently seen the ‘Subprime Implosion’ jump tracks to the Alt-A universe led by the now infamous Pay Option ARM, Jumbo Prime and Prime. This is why the mortgage bankers association just reported that That goes far beyond Subprime. This is why banks and regulators are all of a sudden endorsing mortgage modifications…they have to. There are $7 trillion in outstanding loans originated during the bubble years that are all suspect. The only way to fix this problem is to modify. If not and left up to a natural clearing process, the housing market could be in turmoil for a decade. If all the banks and servicers act together in a major loan mod plan re-qualifying every borrower with 28/36% debt ratios and putting them into a market-rate 30-year fixed, perhaps the housing market will bottom within a few years. -Best, Mr Mortgage (WaMU) Nov 1, 2008 By Gretchen Morganson AS a senior mortgage underwriter, Keysha Cooper was proud of her ability to spot fraud and other problems in a loan application. A decade of vetting mortgage documents had taught her plenty, she says. But as a senior mortgage underwriter at during the late, great mortgage boom, Ms. Cooper says she found herself in a vise. Brokers squeezed her from one side, her superiors from the other, she says, and both pressured her to approve loans, no matter what. Click for link to full story. Highlights of story At WaMu it wasn’t about the quality of the loans; it was about...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 11:38 AM » Wells Fargo and Wachovia: "Background of the Merger"
    Published Mon, Nov 03 2008 11:38 AM by Calculated Risk Blog
    The WSJ mentions the FDIC's role in Wells Fargo acquiring Wachovia: Here is the Wells Fargo narrative mentioned in the story from an with the SEC: Background of the Merger Wachovia’s strategy has been to build a diversified financial services company providing a wide range of financial products and services to an expanded customer base. To accomplish this objective, over the last two decades Wachovia acquired nearly 100 banks, thrifts and broker-dealers to become a leading banking franchise in the eastern, southern and western United States, as well as a nationwide retail securities brokerage business. In 2006, at a time when Wachovia’s market cap was approximately $86 billion, in furtherance of Wachovia’s objectives of expanding its banking franchise to the California markets and gaining market share in U.S. residential mortgage lending, Wachovia acquired Golden West Financial Corporation of Oakland, California for approximately $25.5 billion. Golden West added significant size to Wachovia’s then-small California retail banking presence and also added approximately $120 billion of residential mortgages to Wachovia’s balance sheet, which at the time had assets of about $553 billion. Substantially all of the Golden West mortgage portfolio has consisted of a product, referred to as “option ARMs” or adjustable rate mortgages with monthly payment options. The credit quality of this portfolio has deteriorated significantly in the current mortgage crisis. In the spring of 2007, the U.S. housing market began experiencing increases in sub-prime home loan delinquencies and declines in housing values. Throughout the remainder of 2007, in accordance with the mark-to-market valuations required by United States generally accepted accounting principles, these declining asset values created valuation losses in certain types of securities that Wachovia held on its balance sheet, including sub-prime residential mortgage-backed securities (RMBS) and collateralized debt obligations...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 11:38 AM » Mortgage Modifications Go Mainstream - BE CAREFUL!
    Published Mon, Nov 03 2008 11:38 AM by mrmortgage.ml-implode.com
    BANKS MAY BE GIVING IT AWAY SOON…finally! But be careful. If it is too good to be true, it generally is. There are very strict rules you should adhere to when getting a mortgage modification. For those of you not wanting to read the rest of this post, check out the Mortgage modifications are finally in the limelight because that is the only way out of the nation’s default and foreclosure crisis. All of a sudden, several politicians and banks have a ‘plan’ most of which will be doomed to fail from the onset. That is unless they adhere to a strict set of guidelines and essentially use modifications to undo all of the damage that was done through mortgage loan program leverage and artificial affordability over the past six years. At Mr Mortgage and The Mortgage Lender Implode-O-Meter, we endorse or . They are pioneers in this space and reports on positive outcomes I get out of there daily astound me. Before you accept a pre-packaged government or bank proposed mortgage modification that is likely not the best deal you can get, you need to get a second opinion. Green Credit will give you a free up front consultation on your specific case, so it is worthwhile to check it out. There are other reputable modification firms out there but there are a lot of frauds - be careful. I have been telling you for a year that the only way through this mess is to re-underwrite every single loan made between 2003-2007, especially anything that is not a full-doc 30-year fixed not underwater vs. value. Currently, there are roughly $7 trillion in loans still on the book made during the years in question. Even borrowers with 750 scores who put 20% down and got a a 30-year fixed are walking due to excessive allowable debt-to-income ratios at the time the loan was made and negative equity, as values are down as much as 75% in some of the harder hit areas in the bubble states. For all of you who ‘did nothing wrong and are being punished’, I sympathize. Unless...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 11:27 AM » Flat Tax Is Fairest of Them All
    Published Mon, Nov 03 2008 11:27 AM by www.minyanville.com
    Auditors recently revealed that the IRS paid out an estimated $1.6 billion in potentially fraudulent tax refunds during the 2006 and 2007 filing seasons. Given the track record of government agencies that figure is probably higher - a lot higher. This is particularly troubling because there’s nothing yet in place to fix the problem. The fraudulent refunds are typically in increments so small that the IRS doesn’t deem them worthy of investigation. What’s worse the IRS lacks the investigative capacity to go after so pervasive a problem even if they deemed it worthy of attention. The audit concluded: “This ...
    Click Here to Read the Full Article

    Source: www.minyanville.com
  • 11:26 AM » Chase Launches Loan Modification Program, Halts Foreclosures
    Published Mon, Nov 03 2008 11:26 AM by www.thetruthaboutmortgage.com
    JP Morgan Chase announced Friday it was expanding its “already significant” loan modification program to include recently acquired Washington Mutual and EMC customers. Over the next 90 some-odd days, the bank will put the brakes on foreclosures while it systematically reviews its entire mortgage portfolio to determine which borrowers can benefit from some kind of loan [...]
    Click Here to Read the Full Article

    Source: www.thetruthaboutmortgage.com
  • 11:25 AM » JPMorgan Meets WaMu Homeowners, Face-to-Face
    Published Mon, Nov 03 2008 11:25 AM by Seeking Alpha
    submits: Three cheers for JPMorgan (JPM)! I recently wrote complaining that Wells Fargo (WFC) was using third party, non-profit organizations to assist in mortgage modifications, instead of dealing directly with its customers. and FDIC Chairwoman Sheila Bair has led the way with IndyMac Federal Bank. Now, Bloomberg is that JPMorgan will deal directly with Washington Mutual’s delinquent homeowners. It is only fitting that JPMorgan shows deference to Bair when the FDIC gifted it with Washington Mutual (WM) the bank, without the excess baggage and debt of WaMu the bank holding company. Bair has been far more vocal in demanding social responsibility and accountability from their bank merger beneficiaries than either Treasury Secretary Paulson or Federal Reserve Chairman Bernanke. JPMorgan CEO Jamie Dimon has shown better political acuity than his mega bank colleagues have. Dimon has already taken his WaMu markdowns and has no need to hide behind .
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 11:24 AM » China: Owners Deserting Factories
    Published Mon, Nov 03 2008 11:24 AM by Calculated Risk Blog
    Don Lee at the LA Times reports on a growing trend in China: First, Tao Shoulong burned his company's financial books. He then sold his private golf club memberships and disposed of his Mercedes S-600 sedan. And then he was gone. And just like that, China's biggest textile dye operation -- with four factories, a campus the size of 31 football fields, 4,000 workers and debts of at least $200 million -- was history. ... Toy makers are among the hardest hit. More than 3,600 such factories have closed -- about half the industry's total, government figures show. Most were small operations, but last month Smart Union Group's three huge factories stopped production, leaving more than 8,700 workers jobless. Back in March, I spoke with an executive of a U.S. company, and his company was scaling back their Chinese operations because their manufacturing costs in China had increased by 30%. This was due to a combination of the new Chinese labor laws, higher currency exchange, higher material costs and other factors. Now a global slowdown and the credit crisis has led to a in the Chinese manufacturing sector. China will probably be forced to stimulate their economy - and, as I this weekend, this could lead to higher intermediate and long term interest rates in the U.S. At least 'decoupling' is officially dead.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 11:23 AM » Crisis in Prime Mortgages on Horizon
    Published Mon, Nov 03 2008 11:23 AM by www.minyanville.com
    The private sector is actively engaging the mortgage crisis with the first broad-based systemic attempt to prevent foreclosure. Both Bank of America (BAC) and JPMorgan (JPM) are attempting to help hundreds of thousands of troubled homeowners with massive loan modification efforts.Regulators and bank executives are operating under the assumption that reducing foreclosures will slow record drops in home prices. In turn this will help stabilize the financial system - and by extension the economy as a whole. This logic isn't necessarily flawed - but it's reactive rather than proactive which is what's most needed now. Most foreclosures are concentrated in regions where homebuilders ...
    Click Here to Read the Full Article

    Source: www.minyanville.com
  • 11:22 AM » Incentives: A Positive Trend Developing For Homebuilders?
    Published Mon, Nov 03 2008 11:22 AM by Seeking Alpha
    Since the housing market peaked two years ago, homebuilders have been trying to use incentives to lure buyers in. They've met with varying degrees of success, but it has certainly impacted margins all the way down.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 11:22 AM » Fiscal Implications of the Candidates' Plans
    Published Mon, Nov 03 2008 11:22 AM by www.econbrowser.com
    I think now is the time to consider the fiscal implications of the candidates' budget -- and particularly tax -- plans, especially considering the revenue declines and outlays that will confront the next President. Indeed, I would say imminent revenue declines will place an even greater premium on sensible tax plans, and efficient use of Federal dollars. Figure 1 displays the budget surplus to GDP ratio, both actual and CBO baseline. Figure 1: Federal budget balance to GDP ratio (thick dark green), baseline (green), EGTRRA/JGTRRA extended (purple), baseline with Obama tax plan as stated by campaign staff (blue), baseline with McCain plan as stated by campaign staff (red), and Deutsche Bank estimate for FY 2009 (teal square). All dates pertain to fiscal years. Sources: Table C-2, [xls], 2008 deficit data from , , Chowdhury and Huie, "Skyrocketing Issuance," US Economics/Strategy Weekly (Deutsche Bank, 10 Oct.) and author's calculations. Figure 1 also reports the alternative ratio if the 2001 and 2003 tax cuts (EGTRRA and JGTRRA) are extended (but not including AMT fixes). What is noteworthy is that if Obama's plan (as evaluated on September 15 by the Tax Policy Center) is implemented, then -- excepting the first couple years, the budget balance mimics the baseline plus extending EGTRRA/JGTRRA. On the other hand, the McCain's plan implies a substantial deterioration relative to even the baseline plus tax cut extension. The McCain plan induces budget deficit to GDP ratio nearly 1 percentage point larger than the Obama plan by FY2018. (Note: I have used the revenue implications as indicated under "Tax Proposals as Described by Campaign Staff" in the following table): Table from . Let me stress what I think is the key take-away from this table: the total revenue loss FY2009-18 under the McCain plan is $4170.5 billion, as compared to the $2947.6 billion loss relative to CBO current law baseline . So the McCain plan implies a $1.2 trillion...
    Click Here to Read the Full Article

    Source: www.econbrowser.com
  • 11:22 AM » Long Line Forms at Bailout Window
    Published Mon, Nov 03 2008 11:22 AM by Calculated Risk Blog
    From the WSJ: Treasury and banking regulators say as many as 1,800 publicly held institutions could apply for government investments in coming weeks ... thousands more private banks could apply for government capital as well, a Treasury spokeswoman said Sunday. What a surprise ...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:10 AM » EU growth seen grinding to a halt
    Published Mon, Nov 03 2008 10:10 AM by www.ft.com
    The European Union's economic outlook is 'precarious', with growth expected to grind to a halt next year and put government finances under significant pressure, the European Commission warned
  • 10:10 AM » Fed's Lacker wary on inflation, sees U.S. recovery
    Published Mon, Nov 03 2008 10:10 AM by Reuters
    JERUSALEM (Reuters) - The Federal Reserve must not forget about inflation as it battles recession, or leave interest rates too low for too long next year, policy-maker Jeffrey Lacker said on Monday.
  • 9:55 AM » Financial Stocks: Thousands of banks reportedly set to apply for government cash
    Published Mon, Nov 03 2008 9:55 AM by Market Watch
    As many as 1,800 publicly traded financial institutions could seek assistance from the government under the Treasury Department’s $700 billion rescue plan for troubled banks, according to a published report.
  • 9:55 AM » PMI Group's Loss Widens
    Published Mon, Nov 03 2008 9:55 AM by WSJ
    PMI Group posted a widened third-quarter loss and said it will end up paying fewer U.S. claims this year than it previously projected.
  • Sun, Nov 2 2008
  • 7:48 PM » Deflation worries from coast to coast
    Published Sun, Nov 02 2008 7:48 PM by themessthatgreenspanmade.blogspot.com
    They are awfully worried about deflation these days - from coast to coast. Both the New York Times and the Los Angeles Times have run stories in recent days warning about the danger of falling prices: Ominously, the world's most popular doomsayer, Nouriel Roubini, is quoted in both. It's as if the whole world is about to fall into some sort of a deflation vortex where we will all be transported back into a black-and-white 1930s breadline if prices fall. Maybe we will. From the left coast, Tom Petruno writes: Investors are constantly reminded to think about inflation when making decisions about their money. Now there's a new wrinkle: the possibility of deflation. We've already had severe deflation -- falling prices -- in housing, stocks and commodities this year . The question is whether that could spill into prices of goods and services across the board, as well as into wages, as the economy worsens. ... Declining inflation is good for the economy, and consumers, in the long run. And in some businesses, such as tech, prices are always falling. But if the CPI were to go negative for an extended period, that would signal that a potentially dangerous deflation had kicked in. It would suggest that demand was so weak that companies were slashing prices to a level that would gut their earnings, in turn fueling massive layoffs and wage cuts. Could it happen? Tom Higgins, chief economist at investment firm Payden & Rygel in L.A., isn't predicting a drop in the CPI in 2009. But he believes the risk of outright deflation is higher today than it was in 2002-03 , the last time there was serious talk about a broad-based decline in prices taking hold. Because the double whammy of falling home values and plummeting stock prices over the last year has sharply eroded many people's net worth, "I'd be much more worried about deflation today than in 2003," Higgins said. It never ceases to amaze me how so many writers and economists place so much...
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 7:47 PM » Promising Regional Banks For Patient Investors - Barron's
    Published Sun, Nov 02 2008 7:47 PM by Seeking Alpha
    The news on the U.S. financial system may seem grim, but banks are mostly healthier than people think, says . The banking industry is expected to be profitable next year, none of the major banks are likely to need bailouts, and regional outfits trading near book value could be a great buy for investors willing to wait out the downturn. Banks have access to $250B of new government capital. With a 10:1 capital-to-assets ratio, $2.5T is theoretically available for lending. Of course, banks aren't lending nearly this much, and many are likely to use the cash for acquisitions instead of loans. Along with a tightened supply of credit, demand is likely to shrink as recession looms and consumers cut spending. Just as well, some would argue, since Americans are over-leveraged, with consumer debt at 100% of GDP and twice the level of the mid-1980s.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 7:46 PM » Tightening Credit May Reduce Big Retailers' Christmas Sales by 8%
    Published Sun, Nov 02 2008 7:46 PM by Google News
    The consumer credit retrenchment is coming even faster and harder than many anticipated. Big box retailers look likely to get coal in their stockings for Christmas as reduced consumer credit limits cut directly into sales. From : Home Depot Inc., Sears Holdings Corp. and other retailers may lose as much as 8 percent of their holiday sales this year because lenders and stores are clamping down on financing. Almost a quarter of shoppers say banks cut the spending limits on their credit cards, according to a survey by America's Research Group, which also provided the sales-loss estimate. More people are being rejected for new cards, hurting sales for bigger purchases. Demand is being pinched just as retailers prepare to enter the holiday selling season, which accounts for as much as 35 percent of their annual revenue. ``Banks just don't have the money,'' said David Bassuk, a New York-based managing director at consulting firm AlixPartners LLP. The tightening credit is putting retailers ``at big risk to lose those sales or lose those customers,'' he said. ``There is a big concern there with the holiday spending.''.... About two-thirds of holiday purchases are made using credit cards, estimates America's Research Group Chairman Britt Beemer. That excludes gift cards, three-quarters of which are also bought using credit cards, he said. His Charleston, South Carolina-based firm surveys 10,000 consumers a week. Beemer predicts holiday sales will decrease at least 4 percent, the first decline since he started forecasting in 1979, as consumers grapple with sinking home and stock values. His projections have been correct in 16 of the past 17 years. Retailers that offer zero- or low-interest financing --which is often backed by banks -- may also rein in the credit they extend to shoppers to avoid being left with bad loans when customers can't pay them back... A quarter of consumers polled in a Standard & Poor's survey released Oct...
  • 7:45 PM » Is Credit Card Relief Coming?
    Published Sun, Nov 02 2008 7:45 PM by feeds.feedburner.com
    Credit card defaults are soaring. And banks after having fought credit card reform for years are now in panic mode over losses. Newsday.Com asks Banks, which are losing billions because many card holders aren't paying anything, seek OK to forgive up to 40% of strapped consumers' debts. Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy. The new pilot program, which the banks hope will become permanent, could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent. "There's obviously a financial benefit to the financial institutions to step up to the plate right now," said Susan Keating, president and chief executive of the National Foundation for Credit Counseling. "We absolutely support the proposal." In an increasingly tough economic climate, banks and other mortgage lenders already have been agreeing to modify loans of distressed homeowners to help them avoid foreclosure. Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely. Americans are lumbering under about $900 billion in credit card debt, according to the latest available Federal Reserve figures. The new proposal pitched to federal regulators by the Financial Services Roundtable, which represents more than 100 big banks and other financial companies, and the Consumer Federation of America, would allow lenders to reduce by as much as 40 percent the amount of credit card debt owed by deeply indebted consumers in a pilot program. Be Careful For What You Wish...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 7:45 PM » We Simply Do Not Have a Financial System
    Published Sun, Nov 02 2008 7:45 PM by Seeking Alpha
    submits: Here's : Sooner or later, then, consumers were going to have to pull in their belts. But the timing of the new sobriety is deeply unfortunate. One is tempted to echo St. Augustine’s plea: “Grant me chastity and continence, but not yet.” For consumers are cutting back just as the U.S. economy has fallen into a liquidity trap — a situation in which the Federal Reserve has lost its grip on the economy.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 7:45 PM » World's Most Efficient Solar Cells Created
    Published Sun, Nov 02 2008 7:45 PM by feeds.feedburner.com
    In the land down under, comes some positive news on the energy front: . The University of New South Wales’ ARC Photovoltaic Centre of Excellence has reported the first silicon solar cell to achieve the milestone of 25 per cent efficiency. The UNSW ARC Photovoltaic Centre of Excellence already held the world record of 24.7 per cent for silicon solar cell efficiency. Now a revision of the international standard by which solar cells are measured, has delivered the significant 25 per cent record to the team led by Professors Martin Green and Stuart Wenham and widened their lead on the rest of the world. Professor Green said the jump in performance leading to the milestone resulted from new knowledge about the composition of sunlight. “Since the weights of the colours in sunlight change during the day, solar cells are measured under a standard colour spectrum defined under typical operational meteorological conditions,” he said. “Improvements in understanding atmospheric effects upon the colour content of sunlight led to a revision of the standard spectrum in April. The new spectrum has a higher energy content both down the blue end of the spectrum and at the opposite red end with, dare I say it, relatively less green.” Dr Anita Ho-Baillie, who heads the Centre’s high efficiency cell research effort, said the UNSW technology benefited greatly from the new spectrum “because our cells push the boundaries of response into the extremities of the spectrum”. “Blue light is absorbed strongly, very close to the cell surface where we go to great pains to make sure it is not wasted. Just the opposite, the red light is only weakly absorbed and we have to use special design features to trap it into the cell,” she said. Professor Green said: “These light-trapping features make our cells act as if they were much thicker than they are. This already has had an important spin-off in allowing us to work with CSG Solar to develop commercial ‘thin-film’ silicon-on-glass solar cells that are...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 7:30 PM » Here's an update on the criminal investigation (still) underway of Angelo Mozilo and his gang of thieves at Countrywide Toxic Mortgage
    Published Sun, Nov 02 2008 7:30 PM by feeds.feedburner.com
    I think we'll have to wait for a new Attorney General and new SEC chief until we see the laws of the land being enforced again. Since under the Bush Administration, laws were meant to be broken, not enforced. But there's always hope that this day may come sooner rather than later. Picture the day HP'ers that Angelo Mozilo is frog-marched and put into an orange jumpsuit, along with his criminal "VIP" pals.
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 7:30 PM » Reckless loans ruled Wa-Mu, ex-worker says
    Published Sun, Nov 02 2008 7:30 PM by ml-implode.com
    As a senior mortgage underwriter, Keysha Cooper was proud of her ability to spot fraud and other problems in a loan application. A decade of vetting mortgage documents had taught her plenty, she says. But as a senior mortgage underwriter at Washington Mutual during the late, great mortgage boom, Cooper says she found herself in a vise. Brokers squeezed her from one side, her superiors from the other, she says, and both pressured her to approve loans, no matter what
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    Source: ml-implode.com
  • Fri, Oct 31 2008
  • 11:16 AM » Economic Report: Biggest drop in consumer spending in 4 years in Sept.
    Published Fri, Oct 31 2008 11:16 AM by Market Watch
    WASHINGTON (MarketWatch) -- Reluctance on the part of consumers to shop for big-ticket items like cars led U.S. consumer spending to its biggest drop in over four years, the Commerce Department reported Friday.
  • 11:02 AM » Some Banks May Tell U.S. to Keep Bailout Cash
    Published Fri, Oct 31 2008 11:02 AM by CNBC
  • 11:01 AM » Economic Report: Consumer sentiment drops in October
    Published Fri, Oct 31 2008 11:01 AM by Market Watch
    As the financial crisis takes its toll, U.S. consumer sentiment drops in October from the prior month, reaching a record monthly decline, according to the University of Michigan/Reuters index released Friday.
  • 11:01 AM » Consumer Spending Falls 0.3 Percent in September
    Published Fri, Oct 31 2008 11:01 AM by Washington Post
    Consumers shied away from big-ticket items in September, as wages remained basically stagnant and people began to tuck more money into savings -- further evidence of a pullback by American households.
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    Source: Washington Post
  • 11:01 AM » Money Markets
    Published Fri, Oct 31 2008 11:01 AM by acrossthecurve.com
    My money market correspondent reports that the short term money markets are awash in a mountainous sea of liquidity. The target funds rate seems “symbolic” as the central banks push to flood the system with dollar liquidity has forced the funds rate down to 25 basis points. He notes that there are solid names finding overnight commercial paper funding as cheaply as 10 basis points. Traditionally, with a one percent target overnights would range between 90 basis points and 1.10 percent. He opines that the CPFF facility is taking supply out of the market and at some point will compel large institutional investors to move out on the money market yield curve. Those clients have been inactive quite some time but the punishing overnight rate will force them to do credit homework and buy some longer dated paper. He notes that the Irish banks trade Libor plus 10 basis points to 15 basis points and with the government guarantee are sovereign debt. Separately, money funds are still phobic about another credit event and another round of redemptions. That tends to keep them short and liquid.
    Click Here to Read the Full Article

    Source: acrossthecurve.com
  • 10:41 AM » AIG Arbitrages the Fed Via Its New Commercial Paper Program
    Published Fri, Oct 31 2008 10:41 AM by Google News
    Let's see, AIG had to ask to be included in the Fed's new commercial paper program. AIG was reported to have said it needed a wee bit more money, but no more than $10 billion. No reasons were given in any news stories. Now we find out the intended use. From (hat tip reader Steve A): American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) reduced the amount it owes under a U.S. Federal Reserve credit line by $6.8 billion, but only by borrowing from a different government lending program. AIG currently owes $83.5 billion under two emergency facilities from the Fed, which were necessary to prevent the company from filing for bankruptcy. That figure was $90.3 billion a week ago. An AIG spokesman said neither the company nor the Fed plan to disclose the exact amount the Fed was repaid. The company was able to repay part of the amount already borrowed by voluntarily participating in a program that the Fed started on Monday to buy short-term debt known as commercial paper from companies. Surprisingly, a on the same snookering gamesmanship was entirely approving and indicates the amount borrowed through the CP program to repay the other credit lines was even larger: American International Group Inc., the insurer bailed out by the U.S., reduced its debt under two credit lines to $83.5 billion by using cash from the Federal Reserve's commercial paper program. The insurer got as much as $20.9 billion from the program, which swaps commercial paper for cash, AIG spokesman Nicholas Ashooh said yesterday in an interview. The terms of the commercial paper funding are better than the U.S. loan made last month to save New York-based AIG from collapse, he said. ``They're paying off a Fed loan with another kind of government subsidy -- it's like using one credit card to pay off another credit card,'' said Robert Haines, an analyst at CreditSights Inc. ``If they make progress paying off debts over time, I don't think it'll be viewed...
  • 10:40 AM » Public Pensions Place Undue Burden on Staggering Economy
    Published Fri, Oct 31 2008 10:40 AM by www.minyanville.com
    The ticking time bomb of overpromised underfunded public pension plans has finally exploded. Here are a few articles to consider: Pension fund of San Diego may have lost as much as $1 billion of its $5 billion in assets Through mid-October Colorado’s PERA fund lost $10 billion in market value Illinois taxpayers may soon be forced to bail out IMRF the best-funded public pension plan in the state after it incurred $3.6 billion in losses A pension crisis is on the horizon in Canada. Taxpayers may have to spend $1 billion to prop up Los Angeles County’s public pensions. Fresno ...
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    Source: www.minyanville.com
  • 10:39 AM » Levitt: Derivatives Necessary, Should Be Regulated
    Published Fri, Oct 31 2008 10:39 AM by The Big Picture
    Former U.S. Securities and Exchange Commission Chairman Arthur Levitt talks about the importance of credit derivatives to the financial markets and the need for regulation and transparency, and the outlook for executive compensation at financial firms. Levitt is a senior adviser to the Carlyle Group and a board member of Bloomberg LP, the parent company of Bloomberg News. click for Video: http://www.bloomberg.com/avp/avp.htm?N=av&T=Levitt%20Says%20Derivatives%20Necessary%2C%20Should%20Be%20Regulated&clipSRC=mms://media2.bloomberg.com/cache/vhbslNoBG_nI.asf 00:00 Credit derivatives' importance, transparency 01:26 Growth of derivatives market, new regulation 02:11 "Some moderation" in executive compensation Running time 03:48 Source: Bloomberg, Last Updated: October 29, 2008 09:23 EDT http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azMrpQyorJFs
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    Source: The Big Picture
  • 10:38 AM » Could Junk Bond Defaults Reach 20%?
    Published Fri, Oct 31 2008 10:38 AM by Google News
    As the economy weakens, a predictable result is an increase in corporate defaults. In the early 1990s, the default rate on high-yield bonds peaked at 12+% (note some define the universe differently and come up with somewhat lower figures) The most recent Standard & Poor's forecast, while noting a marked deterioration in the economy and revising up its expected level of defaults accordingly, still forecasts that defaults over the next year will be considerably lower than the worst periods in the early 1990s recession and the dot-bomb era. However, in part that is because they are forecasting only as far out as full year 2009. From : Standard & Poor’s expects the rate of default in the U.S. speculative-grade segment to increase materially in the next 12 months, reaching 7.6% by September 2009, the highest level in nearly six years. Under a “pessimistic scenario,” the rate could go as high as 9.6%.... The pessimistic scenario yields a mean default rate of 9.6%, more than double the long-term average of 4.4% but still below the peaks of 10.8% in the 2001-2002 recession and 12.5% in the 1991-1992 recession. The optimistic scenario yields an average default rate of 6.1%. In the next 12 months. But Accrued Interest, in "" argues that Motown defauls could swamp forecasts: On Monday the yield on the Merrill Lynch High Yield Master index reached a shocking 19.6%..... In short, if we're getting 20% yield, could we wind up suffering 20% losses in defaults? According to Moody's, the largest default rate in history was 15% in 1933. In the post Depression era, there have been three years which produced double-digit default rates: 1990 (10.1%), 1991 (10.4%) and 2001 (10.6%). The average recovery rate (i.e., the amount the bond is worth immediately after default) is 32% for the three peak default years. So if a portfolio suffers 10% in defaults with 30% in recovery, it has actually suffered 7% in total credit losses. That history would seem to favor high...
  • 10:37 AM » New Mortgage Recue Proposal to Kick Can Down the Road a Few Years
    Published Fri, Oct 31 2008 10:37 AM by Google News
    Before we debate the merits (more accurately, the lack thereof) of the latest trial balloon of a plan being floated to rescue overextended mortgage borrowers, we need to consider a few not sufficiently discussed facts: 1. The problem is that banks are not making loan modifications as they did in the past. That is turn is due to securitization In the old days, including in the nasty (in the Southwest and Texas) housing bear market of the early 1990s, it was standard practice for banks to modify mortgages. That was not charity on the part of the bank but a cold-blooded economic calculation, that in the majority of cases, it would take a lower loss by changing mortgage terms than by foreclosing. 80% of mortgages are now securitized, however, and the servicers do not do mods in the vast majority of cases, despite over a year of tough talk, pressure, and various half-baked programs (Hope Now Alliance as the poster child).Why? Our belief is the big reason is the most obvious: servicers get pretty well compensated for foreclosing, but cannot charge (much if any) for the work of doing a mod. Servicers are also set up like factories, with highly standardized procedures. They are not set up to do anything on a one-to-one basis, lack knowledge of the borrower (no doc and low doc mortgages mean the initial files are skimpy, and I am told they are often a mess) and have no experience in assessing borrower ability to pay (ie, they never were in the credit-extension business). To top that off, many servicers have lousy relationships with their borrowers, and so borrowers would probably not be as forthcoming as they would need to be to work out a fair and viable deal (the borrower would assume anything could and would be used against them). 2. A foreclosure lowers the value of all other homes in the neighborhood. Readers have said that recent studies have found 5% is a typical level; anyone with better data or links is encouraged to speak up. 3. I am amazed that the banking industry...
  • 10:37 AM » Some Additional Observations on the 2008Q3 Advance GDP Release
    Published Fri, Oct 31 2008 10:37 AM by www.econbrowser.com
    If you went no further than noticing that the q/q annualized growth rate of -0.3% was faster than the -0.5 in the Bloomberg consensus, you might have taken this as good news. I'm not going to say it wasn't good news (relatively speaking), although negative growth makes the case for recession pretty good according to (who is on the ); see also . However, there are some pretty interesting things that merit additional discussion. I think that most observers will concur with assertion that the -3.1% decline in consumption q/q annualized was the most important aspect, as highlighted in . To place the consumption drop in perspective, consider the q/q changes in GDP and consumption over the last forty years. The last time consumption growth went negative was in the 1990-91 recession. Figure 1 show the growth rates (not contributions to GDP). Figure 1: Quarter-on-quarter annualized growth rates of real GDP (blue) and consumption (red), calculated as log-differences. NBER defined recession dates shaded gray. Source: BEA, NIPA release of 30 October 2008, , and author's calculations. What is the composition of this consumption decline? Figure 2 shows the contribution of each consumption aggregate to GDP growth. It's apparent that the consumption decline is widespread, spanning all categories. Durables I expected to decline, given the procyclicality of consumer durable expenditures. The decline in services and nondurables, however, signals either more binding credit constraints, a downward revision in permanent income, or both. Figure 2: Consumption contribution to GDP growth (tan bars), durables contribution (red), non-durables contribution (green) and services contribution (teal), in percentage points. NBER defined recession dates shaded gray. Source: BEA, NIPA release of 30 October 2008 and . Returning to overall growth, I have two observations that pertain to growth prospects. The first is that exports are accounting for a smaller proportion of overall growth...
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    Source: www.econbrowser.com
  • 10:37 AM » Trump - a (late-20th century) American icon
    Published Fri, Oct 31 2008 10:37 AM by themessthatgreenspanmade.blogspot.com
    Donald Trump will go kicking and screaming into the new American "culture of austerity" that was thrust upon us all last month. Throughout the two-decade long credit bubble, the New York real estate developer has been a symbol of American success and excess, rebounding from near-bankruptcy during the 1990s housing bust, then returning bigger and better than ever with a reality TV show that has since become something of a bad parody of itself. Apparently exhausting viewers with the original format of The Apprentice, the show has resorted to celebrity editions, apparently a necessary prerequisite for NBC signing on for another season that begins in January. The "new frugality" sweeping the nation runs counter to everything the Trump name stands for - borrow big, build big, spend big, and make a lot of noise in the process. Can the Trump brand survive during an era when "layaway" payment plans are making a comeback (seriously, I heard an ad for this morning where they touted layaway plans as an exciting new payment option). Anyway, it looks like the Donald may be in for a rough patch according to this WSJ : Donald Trump's tallest construction project ever is facing some tall challenges. Many real-estate developers are under pressure these days as lenders and investors rush to cut their exposure to the market. But Mr. Trump's 92-story Trump International Hotel & Tower in Chicago, which will be the tallest building constructed in the U.S. since the Sears Tower opened in 1973, may be especially vulnerable because it's getting hit by a triple whammy of colliding forces: the credit crunch, the reversal in the housing market and weak retail sales. The shiny glass skyscraper is one of the few that the brash Mr. Trump developed without partners. The situation also puts pressure on one of the project's major lenders, Fortress Investment Group LLC. So far, Mr. Trump has lined up buyers for a bit less than $600 million of condo units...
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
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