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  • Wed, Nov 12 2008
  • 11:33 AM » Moore: Wachovia’s ‘shotgun marriage’ with Wells Fargo not fair to shareholders
    Published Wed, Nov 12 2008 11:33 AM by feeds.bizjournals.com
    State Treasurer Richard Moore on Wednesday slammed Wells Fargo’s purchase of Wachovia, calling the deal “highway robbery” during an appearance on CNBC. (WFC) (WB) (C) (GM) (F)
    Click Here to Read the Full Article

    Source: feeds.bizjournals.com
  • 11:17 AM » Nearly One Third of Recent Home Sales Sold at a Loss
    Published Wed, Nov 12 2008 11:17 AM by www.thetruthaboutmortgage.com
    More U.S. homeowners have been forced to sell their homes at a loss as values continue to slide, according to the latest report from Zillow. Nationally, home prices have fallen 9.7 percent year-over-year and now sit at levels not seen since the fourth quarter of 2004, spelling disaster for those who purchased a home during the [...]
    Click Here to Read the Full Article

    Source: www.thetruthaboutmortgage.com
  • 11:17 AM » More may qualify for gov't mortgage help
    Published Wed, Nov 12 2008 11:17 AM by CNN
    Read full story for latest details.
  • 11:02 AM » Best Buy "rapid, seismic changes in consumer behavior"
    Published Wed, Nov 12 2008 11:02 AM by Calculated Risk Blog
    "Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen. Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year." Brad Anderson, vice chairman and chief executive officer of Best Buy, . From WSJ: Best Buy Co. lowered its earnings outlook as the U.S. economic downturn has been quickly eroding sales at the consumer-electronics giant. ... Best Buy said sales at stores open at least a year slumped 7.6% last month following a 1.3% decline in September. As such, Best Buy now expects the measurement for the year ending Feb. 28 to fall 1% to 8%, with results for the last four months of the fiscal year -- which encompass the all-important holiday-shopping season -- potentially tumbling by between 5% to 15%. Best Buy had been expecting 2% to 3% growth in same-store sales for the year. Ouch.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 11:02 AM » Text of Paulson remarks on TARP
    Published Wed, Nov 12 2008 11:02 AM by Market Watch
    Here is the prepared text of remarks by Treasury Secretary Henry Paulson on Wednesday about the financial rescue package.
  • 11:02 AM » The Fed: Go forth and lend, Fed tells banks
    Published Wed, Nov 12 2008 11:02 AM by Market Watch
    In an unusual joint statement, the Federal Reserve and other bank regulators urge banks to lend more freely to creditworthy borrowers.
  • 9:59 AM » FBR sees Fannie Mae losing $20-$40 billion in next 4 quarters
    Published Wed, Nov 12 2008 9:59 AM by Reuters
    (Reuters) - Fannie Mae , once a mortgage giant, could post losses totaling $20 billion to $40 billion in the next four quarters, as elevated credit costs continue to hurt the company's capital position, an analyst at FBR Capital Markets said.
  • 9:32 AM » Number of U.S. Homes With Negative Equity Is Stunning
    Published Wed, Nov 12 2008 9:32 AM by Seeking Alpha
    submits: Do you wonder why Citibank (C), JP Morgan (JPM) and Bank of America (BAC) are rushing to rework mortgages and keep people in their homes? The following chart tells us why. Click to enlarge
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:31 AM » Fannie, Freddie and 'Streamlined Mortgage Modifications'
    Published Wed, Nov 12 2008 9:31 AM by Seeking Alpha
    submits: The or SMP was announced with great fanfare at 2:00 PM Tuesday. Fannie Mae (FNM), Freddie Mac (FRE) and , along with the Treasury and Federal Housing Finance Agency (FHFA), devised a free market plan to help only those homeowners whose mortgages are guaranteed toxic. In compliance with the Bush Administration doctrine – assist no homeowner who can make his payments or can be foreclosed profitably. SMP targets the most HOPELESS mortgages: Loan to values ((LTV)) greater than 90% with no upper limit and at least 90 days delinquent without bankruptcy. The program is limited to single family owner-occupied homes. Mortgages must be held (owned) by Fannie, Freddie or portfolio lenders. Securitized mortgages are not included. The goal is to reduce interest rates, extend loan terms up to 40 years, and as a last resort reduce principal so that total housing payments (mortgage, taxes, insurance and HOA/condo fees) won’t exceed 38% of the borrower’s income. Fannie and Freddie will pay servicers $800 to perform a mortgage modification. Borrowers must file a hardship statement to apply.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:30 AM » "Goldman big winner in government's revised bailout of AIG"
    Published Wed, Nov 12 2008 9:30 AM by Google News
    Note that the headline above was on a Wall Street Journal story about the new taxpayer-raping improved version of the AIG bailout. The current headline is anodyne: "New AIG Rescue Is Bank Blessing." Just as one wonders why the government backed down on a deal that was appropriately punitive to AIG (at worst, it was an orderly liquidation, which would be an acceptable outcome, and if management could sell enough businesses at good prices, they might be left with a rump of a company to operate). And now, the Wall Street Journal backs down from a headline that accurately and pointedly describes who does best out of these inexplicably sweetened terms. Both roads appear to lead to Goldman. As we said in an earlier post on this sorry affair, AIG claimed the interest payments were too high. The only way under the circumstances that they could be "too high" was if the company was having to borrow to fund them. If that was the case, the remedy was simple: require only part to be paid in cash on a current basis, and add the rest to principal. Similarly, AIG said they might not be able to sell subsidiaries in two years (the term of the original loan) to off the debt. Two years is a long way away. I would have waited at least a year and few months before doing anything and then might have extended the loan by a year if I was persuaded AIG really had made bona fide efforts to sell and had not held out for unrealistic prices. Similarly, Felix Salmon wondered , and why this matter was not left to the next Administration. This is all looking, as reader Marshall noted, like the Clinton pardons, except with more dollar signs attached. But even with the toned-down headline, it looks as if the AIG treatment is, again. all about special dealing on behalf of Goldman. Recall that on the terms of the original rescue. These guys are completely shameless, and for good reason. There are no repercussions from this sort of cronyism, not even recrimination in the media. From the...
  • 9:29 AM » Apartment Market Weakens
    Published Wed, Nov 12 2008 9:29 AM by Calculated Risk Blog
    From the National Multi Housing Council (NMHC): (hat tip at the O.C. Register) “Nine straight months of job losses have begun to cut into the demand for apartment residences,” said Mark Obrinsky, NMHC’s Vice President of Research and Chief Economist. “While favorable demographics and a lower homeownership rate will benefit the apartment industry over time, owners and managers will first have to work their way through the current economic downturn before the benefits of that increased demand are likely to show up. Until then, economic worry will cause some people to “double up” by moving in with a friend or returning to their parents’ house.” The Market Tightness Index, which measures changes in occupancy rates and/or rents, dropped from 40 last quarter to 24. This was the fifth straight quarter in which the index has been below 50. (For all of the survey indexes, a reading above 50 indicates that, on balance, conditions are improving; a reading below 50 indicates that conditions are worsening; and a reading of 50 indicates that conditions are unchanged.) Click on graph for larger image in new window. This graph shows the quarterly Apartment Tightness Index. As NMHC chief economist Obrinsky noted, it is common in a recession for apartment vacancies to rise, as households double up by moving in with a friend or family member. However an added factor in this recession is all the single family homes being offered as rentals. This is additional competition for apartments and might also be impacting demand for apartments.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:28 AM » Jim Rogers Down on Advanced Economy Stocks, Even More So on Bonds
    Published Wed, Nov 12 2008 9:28 AM by Google News
    Famed hedge fund investor and round-the-world motorbiker Jim Rogers is not very keen about financial assets these days, which is not entirely surprising given that he runs a commodities fund. Maybe the bearish outlook has to do with the view of the world from Singapore. Marc Faber, who makes most of his TV appearances from Singapore, says he holds almost entirely cash and stocks, and considered himself to be making a bullish move by going from 7-8% equities to 10%. From : The rout in global markets may continue while bonds will be a ``terrible'' investment as economic problems may persist until 2010, investor Jim Rogers said. ``Stocks in the West are still expensive on any historic valuation method,'' while ``bonds are going to be a terrible place to be for the next 10, 20 years,'' Rogers, chairman of Singapore-based Rogers Holdings, said at a conference in Seoul today. Equities in the West will be ``in a trading range for years to come,'' he said... ``I have started going back into the markets; that does not means it's the bottom,'' Rogers said. His purchases since mid- October include commodities and equities in China and Taiwan, as well as ``a Korea stock,'' he said, without giving deails. ``We may be hitting `a' bottom,'' Rogers said. ``I don't know if it's `the' bottom.'' Rogers, 66, correctly predicted the start of the commodities rally in 1999. His books include `Hot Commodities: How Anyone Can Investment Profitably in the World's Best Market' and `A Bull in China: Investing Profitably in the World's Greatest Market.' Rogers continues to favor commodities as an investment as fundamentals are ``unimpaired'' amid a global liquidation of assets, he said. ``You will see that stocks have gone down more so far than commodities. That will continue as far as I'm concerned.'' An MSCI index of developed- and emerging-market stocks has lost 44 percent so...
  • 9:27 AM » Industrial Bond Yields Strongly Support Deflation Thesis
    Published Wed, Nov 12 2008 9:27 AM by feeds.feedburner.com
    As one might expect in a credit crunch, default risk is rising. One measure of that risk is corporate bond yields. Let's take a look and see how various grades of bonds are performing. Click on any chart in this series to see a sharper image. Bloomberg AAA Rated Industrial 10-Year Bond Index Bloomberg A Rated Industrial 10-Year Bond Index Bloomberg BBB Rated Industrial 10-Year Bond Index Bloomberg B Rated Industrial 10-Year Bond Index The above charts are courtesy of Bloomberg sent to me by Chris Puplava at . The idea for this post came from Bennet Sedacca who posted one of the above charts on . As you can see, only AAA rated bonds are performing well. This is strong evidence that we are not in a period of "disinflation" as some claim. In a disinflationary environment, one would expect risk premiums to drop not rise. Action here is consistent with rising default risk, which is what one should expect in deflation. Those harping about prices of consumer goods, food, services, etc., are missing the boat about what deflation is and what one should expect in deflation. Trillions of dollars of debt are being wiped off the books via bankruptcies and foreclosures while inflationistas worry about the price of eggs going up by 35 cents. It is truly mindless. Baa to 3 Month T-Bill Spread Click On Chart For Sharper Image The above chart sent by my friend "BC" is quite telling. It shows risk premiums of Baa rated bonds over 3-Month T-Bill rates going all the way back to 1934. This spread is at an all time high. Otherwise, the highest points on the chart are during the Great Depression and the stagflation period in the 70's and 80s'. So which one is it, Stagflation or Deflation? This is where it pays to evaluate more than one indicator at a time. To resolve the question, one needs to look at other factors such as the treasury yield itself. 30 Year Bond Yields Click On Chart For Sharper Image The idea of stagflation is simply not consistent with falling...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 9:26 AM » For Many, 20% Down Payment Is All That’s Left
    Published Wed, Nov 12 2008 9:26 AM by mrmortgage.ml-implode.com
    This news has been a long time coming and is very damaging to the housing market. This announcement from Wells is the first I have seen but others should follow suit this week. I have done numerous reports on the mortgage insurers and how it does not matter what Fannie and Freddie do with respect to loan-to-value, its all about what the mortgage insurers will do. See stories below for how we got here. Posted on August 4, 2008 3:36 PM Posted on August 27, 2008 10:22 AM In CA (other states as well) due to mortgage insurer ‘challenges’, the MINIMUM credit score required to do any loan (Fannie/Freddie included) over 80% is now 720 from the previous 620. I am not sure the percentage of folks with over 720 scores vs. under but regardless, this will take a massive number of people out of the market. Putting 20% down is a very rare thing especially in this housing market. Over 50% of all sales came from the foreclosure stock and move-up buyers are not driving force - it is first-time home buyers, renters and investors. While investors usually have to put down at least 20%, first-time buyers and renters can put down less through Fannie and Freddie. Until recently, in CA you could purchase a home with 5% down under 720 score. This just made affordability drop in a big way. To compensate, house values have to fall even further. This will also shuffle folks over to FHA for loans over 80% where rates are higher and where much fewer programs are available, which I am sure is part of the master plan. Ultimately, this will be great for housing in the future, as home owners will be nowhere near as leveraged in their home. But between now and the years it takes to get to ‘ultimately’, you must be aware of how damaging things like this can be to housing. -Best, Mr Mortgage More Mr Mortgage Posted on November 11, 2008 12:26 PM Posted on November 10, 2008 6:44 PM Posted on November 5, 2008 8:18 PM Posted on November 4, 2008 5:20 PM
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 9:26 AM » Retail Tsunami Hits Gift Cards And No. 2 Mall Operator
    Published Wed, Nov 12 2008 9:26 AM by feeds.feedburner.com
    Reuters is reporting . The once-hot holiday gift card may be losing some of its luster, dealing a setback to struggling U.S. retailers who count on the cards to drive consumers into stores for a post-Christmas shopping spree. As shoppers have witnessed a slew of retail bankruptcies this year, they are showing some reluctance toward buying the cards as gifts for friends and family. And with retailers already rolling out tremendous discounts to entice consumers to spend their limited dollars, shoppers may find they can buy presents this holiday for less than what they were planning to spend on a gift card. "We do see a decline in the demand for gift cards," said Darrell Rigby, head of Bain & Co's global retail practice. Consumers "may be able to give a gift with higher perceived value by getting actual merchandise than by just giving a gift card," he said. This year, consumers have watched as a slew of retailers, including Sharper Image, Linens 'n Things, and Mervyn's, have filed for bankruptcy protection, placing millions of dollars of unused gift cards into question. Fear that a retailer will go out of business is prompting shoppers to shy away from gift cards, according to a survey by America's Research Group conducted for Reuters. The survey found that 43.2 percent of respondents said they will give gift cards less often this year because they are worried that those cards would be worthless if a retailer files for bankruptcy. Circuit City Inspired Shopping Tips Flahsback October 21, 2008: Shopping Tips If you are thinking about buying someone a Circuit City gift card, think again about what you are doing. There is no reason to expect Circuit City to survive. Its stock is trading at $0.35. If you already have a Circuit City gift card, please go use it. If you hold that card after it files bankruptcy, the card will likely be worthless. Maintenance contracts are normally a waste of money in any circumstances. In the case of Circuit...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 9:26 AM » Deutsche Bank sues Lehman for $72.5 million
    Published Wed, Nov 12 2008 9:26 AM by CNN
    Read full story for latest details.
  • Tue, Nov 11 2008
  • 5:47 PM » Three Problems with the Fannie / Freddie Mortgage Modifications
    Published Tue, Nov 11 2008 5:47 PM by Seeking Alpha
    submits: There are at least three serious issues with the Freddie (FRE) / Fannie (FNM) mortgage modification programs. First, they are fundamentally offensive to anyone who bought a house with a reasonable amount of money down, some contentiousness about the price paid, and the cash flow to support it. Granted, sometimes you have to hold your nose and go along with such things if a credible case that the alternative is worse – i.e., mass defaults – but that doesn’t make it materially less offensive. Second, unless I missed something, the mortgage mods didn’t actually, you know, modify the most vexing part of the mortgages. Interest can be lower, but principle will be repaid at the end of the loan? What the f**k does that do that’s useful for people who owe more on their mortgages than their houses are worth? Those are most of the people walking away right now. Simply being able to (currently) muster the cash flow to hang in doesn’t make it materially less likely that many people won’t walk away from their home.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 5:47 PM » The Underwhelming Frannie Loan-Mod Plan
    Published Tue, Nov 11 2008 5:47 PM by Seeking Alpha
    submits: The Frannie loan-mod plan has , and it's not particularly exciting. Among the more obvious problems: It applies only to mortgages owned by Frannie ([[FRE]] and [[FNM]]), which means, by definition, that it doesn't include subprime mortgages. FHFA is trying to apply moral suasion -- but no cash -- to persuade other mortgage holders to adopt the same plan. Good luck with that. It doesn't even begin to address the problem of mortgages which have been securitized, rather than being held by a single bank. It's based on the idea that servicers "have dedicated personnel who are experienced in working with borrowers who are struggling with finances, but who are eager to keep their homes". Not nearly enough of them, they don't. It requires borrowers to be 90 days delinquent -- and therefore gives many borrowers with mortgages over 38% of their gross monthly income a massive incentive to cease making any mortgage payments now. The onus is on the borrower to initiate proceedings, providing a package including "monthly gross household income, association dues and fees, and a hardship statement". For $800 per mod, servicers aren't going to be proactive about helping get this kind of thing done, especially given how overworked they are already. In a quite extraordinary turn of events, FHFA director James Lockhart said in his statement that "we have drawn on the FDIC's experience and assistance, and have greatly benefited from the FDIC's input", yet the FDIC's Sheila Bair then turned around and released her own statement, that the plan "falls short of what is needed to achieve widescale modifications of distressed mortgages".
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 5:31 PM » Past Haunts AIG as Bailout Solution Announced
    Published Tue, Nov 11 2008 5:31 PM by feeds.feedburner.com
    Is American International Group, Inc.’s (AIG) hosting of a conference for independent financial planners a sign that the company is rising from the ashes with the help of a newly announced bailout from the U.S. Treasury and Federal Reserve or just the latest in a string of high-profile and expensive mistakes? Two months ago, the U.S. government and American taxpayers saved AIG from collapse by loaning the company a record $85 billion. AIG executives used the money to go on the now infamous hunting trip. Not long after that, the company paid more than $400,00 to send top-performing insurance agents on a week-long retreat. So it is understandable that people - the media, taxpayers, politicians, regulators - view AIG’s hosting of a $343,000 conference in Phoenix, Arizona with some skepticism. The skepticism is deserved. Especially since the bailout increased to more than $150 billion on Monday. The solution, outlined in a public statement from AIG distributed to the media on Monday includes: The purchase of $40 billion in newly issued AIG perpetual preferred shares and warrants to purchase the equivalent of 2 percent of outstanding AIG common stock by the U.S. Treasury Department. The perpetual preferred stock carries a 10 percent coupon with cumulative dividends. Proceeds from the sale of the preferred and common stock will be used to pay down the credit issued by the Federal Reserve Bank of New York (FRBNY). The existing FRBNY credit will be revised to reflect a total commitment of $60 billion, an interest rate of LIBOR (London Interbank Offered Rate) plus 3 percent annually, a 0.75 percent fee on undrawn commitments and a 5-year loan term. AIG will transfer mortgage-backed securities to a newly created financing entity capitalized with $1billion in subordinated funding from AIG and up to $22.5 bilion in senior funding from FRGNY. The purchase of approximately $70 billion in Multi-Sector CDO exposure by a second financing entity created by AIG and FRBNY. “Today’s actions...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 5:27 PM » Two Major Hedge Funds to Be Liquidated by Tontine
    Published Tue, Nov 11 2008 5:27 PM by CNBC
  • 5:26 PM » U.S. Offers Plan to Modify Home Loans
    Published Tue, Nov 11 2008 5:26 PM by www.nytimes.com
    The goal will be to modify the mortgages of homeowners facing foreclosure so that a monthly loan payment is no higher than 38 percent of a borrower’s monthly income.
    Click Here to Read the Full Article

    Source: www.nytimes.com
  • 5:25 PM » The Technical Indicator: S&P 500 threatens to violate major support
    Published Tue, Nov 11 2008 5:25 PM by Market Watch
    The U.S. markets staged their worst two-day sell-off in 21 years last week, placing the technical backdrop on shaky footing.
  • 5:25 PM » Merrill Chief Sees Shades of 1929
    Published Tue, Nov 11 2008 5:25 PM by dealbook.blogs.nytimes.com
    John Thain, the chief executive of securities firm Merrill Lynch, said Tuesday morning that the global economy was seriously stalled and would not bounce back quickly, and likened the current environment to the period that ushered in the Great Depression. In his comments at Merrill Lynch’s banking and financial services conference in New York, Mr. [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 5:25 PM » MarketWatch First Take: Mortgage aid programs serve banks as well as needy
    Published Tue, Nov 11 2008 5:25 PM by Market Watch
    Big U.S. banks are making the right move by agreeing to revise terms on at-risk mortgages, but let’s be clear: these revisions will help the banks too.
  • 5:00 PM » Goldman Sachs Beaten, Buffett Down $2 Billion
    Published Tue, Nov 11 2008 5:00 PM by Seeking Alpha
    submits: Warren Buffett is down a cool $2 Billion already on his Goldman Sachs (GS) investment in about 6 weeks []. Maybe he can make himself into a bank holding company (Bank of Buffet) and access the Fed window if things really get bad? That seems to be the cool thing to do nowadays. A few readers have emailed me about Goldman and I have no idea what is wrong - the . Big losses from Volkswagen debacle [] - prime brokerage business suffering - hedge funds leaving - their own hedge funds stinking it up. Goldman is now almost the same price as it was at IPO in the late 90s. The problem with these companies is much of their business is a black box - without faith you have a hard time valuing the company since you can't see behind the curtains. That is fine in good times, but in bad times - uncertainty leads to bad outcomes. I wrote a piece in 2007 on this specific to Goldman []
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 4:59 PM » FHFA Modification Program Details
    Published Tue, Nov 11 2008 4:59 PM by Calculated Risk Blog
    Here is the from the FHFA. Note that this does not include principal reduction as a solution to create an affordable payment, and is limited to: "extending the term, reducing the interest rate, and forbearing interest". This is intended to help "thousands" (a drop in the bucket unless it is several hundred thousand), and seems to encourage homeowners to stop making payments until they are 90 days late. Here are some excerpts: Q: What is a streamlined modification? A: A streamlined modification is a modification that requires less documentation and less processing. In this case, the streamlined modification seeks to create a monthly mortgage payment that is sustainable for troubled borrowers by targeting a benchmark ratio of housing payment to monthly gross household income. Q: What is the benchmark ratio? A: This is the first time the industry has agreed on an industry standard. The benchmark ratio for calculating the affordable payment is 38 percent of monthly gross household income. Once the affordable payment is determined, there are several steps the servicer can take to create that payment – extending the term, reducing the interest rate, and forbearing interest. In the event that the affordable payment is still beyond the borrower’s means, the borrower’s situation will be reviewed on a case-by-case basis using a cash flow budget. Q: Why is it necessary? A: With the rise in serious delinquencies and increasing number of loans in foreclosure, this program will help borrowers who have missed three or more payments, but want to keep their homes. Because the eligibility requirements and process are streamlined and consistent, the program will allow servicers to reach more borrowers more quickly. Q: Who is eligible? A: The highest risk borrower, who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed bankruptcy. The loan is a Freddie Mac, Fannie Mae or portfolio loan with participating investors...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 4:59 PM » Most misunderstood chart of all time
    Published Tue, Nov 11 2008 4:59 PM by themessthatgreenspanmade.blogspot.com
    With the increasing number of comparisons between the recent economic turmoil and the Great Depression, this chart is showing up more and more. In my humble opinion, it is one of the most misunderstood charts of all time. Why? The upward spike in the 1930s had little to do with "Debt Buildup" as so many claim - it was almost completely a result of a contracting economy! The chart above is from a recent Martin Weiss about preventing another depression, but the same curve has appeared in thousands and thousands of places over the years. It is typically presented as evidence that the recent accumulation of debt has only been seen once before - back around the time of the Great Depression. But what this chart really shows is the ratio of debt to GDP - that's two variables - and as anyone with a rudimentary understanding of mathematics knows, either the numerator or the denominator can cause a ratio to change. In this case it's the denominator (GDP) not the numerator (debt) as one might be inclined to think when looking at the title that sits atop the curve. Along with this chart, you typically see commentary like, "the debt build-up in the U.S. today is far greater than it was on the eve of Great Depression I" (actually, that's right from Weiss article). But, as shown below, you can construct almost the exact same curve when you hold debt constant during this period. As everyone should know, the real story of the 1930s was not debt, but economic contraction that occurred at rates of -8 percent, -6 percent, and a then a whopping -14 percent in 1932. Early in the last century the buildup in debt occurred during the 1920s, but since a goodly amount of economic growth came along with that expansion in debt, you couldn't discern a problem from looking at that decade in the first chart above. Sound familiar? Then, as now, the problems occur when the growth stops but the debt lingers.
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 4:59 PM » Trump to lenders: You're fired! sued!
    Published Tue, Nov 11 2008 4:59 PM by themessthatgreenspanmade.blogspot.com
    As goes "The Donald", so goes the country ... apparently. The papers have been full of stories in recent days about New York real estate developer Donald Trump who may soon put to the test his theory that he is included in the group of borrowers who are "too big to fail". So far, not so good. Over the weekend, this WSJ recounted the trouble brewing in Chicago and the lawsuit that has followed, seeing fit to include one of the creepiest sketches in recent memory (admittedly, the hair must be a challenge for any artist). Trump Files Suit Against Lenders Donald Trump filed suit against the lenders on his unfinished Chicago skyscraper, plunging the project into legal turmoil and highlighting the credit crunch's pervasive effects on real estate. Mr. Trump is suing to extend a $640 million senior construction loan on the 92-story Trump International Hotel & Tower from a group of lenders led by Deutsche Bank AG and including a unit of Merrill Lynch & Co., Union Labor Life Insurance Co., iStar Financial Inc., a publicly traded real-estate investment trust, and Highland Funds, a unit of Highland Capital Management LP. The tower, which contains 339 hotel rooms and 486 condominiums, will be the second-tallest building in the U.S. behind Chicago's Sears Tower and is expected to be completed in mid-2009. The hotel, on the lower floors, opened earlier this year. But sales of both the hotel rooms and the condominiums have come in below original estimates and the project's current projected revenue remains short by nearly $100 million needed to pay off the senior lenders. The lawsuit, filed in New York State supreme court in Queens, is a further indication of the dysfunction in the real-estate lending markets as borrowers and lenders struggle to resolve troubled projects. People familiar with the matter say the lender group, which is made up of more than a dozen institutions, was unable to agree on the extension. The host of NBC's erstwhile...
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 2:07 PM » Despite Government Takeover, Fannie Mae Still Bleeding
    Published Tue, Nov 11 2008 2:07 PM by feeds.feedburner.com
    A guest post from Frank Shump. Frank is a veteran from the financial services industry, and currently authors a blog called , which documents his thoughts on money matters and his adventures in self employment. In hind sight, it’s easy to point fingers as to why Fannie Mae and Freddie Mac were so hopelessly reckless with their money. Where this crisis started and ended was in the government, spurred ever onward to grow by Uncle Sam, these firms became increasingly reckless despite their major role in the mortgage markets. Repeated . The average tax payer was forced to pay for these mistakes as the government took control of these two firms that had fallen so far from grace that bankruptcy was imminent and . Yet officials seemed cautiously optimistic about the takeover. They hoped that it would begin a lengthy process of stabilizing the housing market. Lender balance sheets could be cleaned up, and mortgage rates and fees could get cheaper as a result of this. Mortgage securities owned by Freddie and Fannie could also be turned into Federal paper, which would boost confidence for foreign investors. Most importantly, the line of thinking was that the government could work with existing home owners and modify the terms on delinquent loans that could allow them to keep their homes with more flexibility than lender owned mortgages. Yet serves as a sobering reminder that the government takeover is not the be-all end-all of mortgage fixes. The mistakes made by both Freddie and Fannie are not something that will be repaired overnight, much less in the near future. With this most recent loss, firm officials said that it hasn’t had to tap into the $100 billion of allocated tax dollars just yet. However, the firm filed on Friday that “if current trends in the housing and financial markets continue or worsen…we may have a negative net worth as of December 31, 2008.” If your a taxpayer, this probably doesn’t sit well with you. So where did the losses come from? $21 billion was from...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 2:07 PM » Wachovia Terminates Outsourced Loan Modification Program
    Published Tue, Nov 11 2008 2:07 PM by www.thetruthaboutmortgage.com
    Today seems to be all about the loan modifications, with the Citi launch and word of a government move to modify Fannie and Freddie loans forthcoming. But while most banks are launching or expanding their loan modification programs, Wachovia’s seemed to take a big step backwards. The Charlotte-based bank, which had agreed to outsource loss mitigation duties [...]
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    Source: www.thetruthaboutmortgage.com
  • 1:51 PM » MBS Holders: Look What AIG and Fed Are Planning
    Published Tue, Nov 11 2008 1:51 PM by Seeking Alpha
    Five key quotes from (AIG)
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    Source: Seeking Alpha
  • 1:51 PM » LIBOR Declines to 2.18%
    Published Tue, Nov 11 2008 1:51 PM by Calculated Risk Blog
    From Bloomberg: The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars slid 6 basis points to 2.18 percent today, the 22nd consecutive decline and the lowest level since Oct. 29, 2004, according to British Bankers' Association data. The three-month LIBOR was at 2.24% yesterday and the rate peaked at 4.81875% on October 10th. The U.S. bond market is closed today for Veterans Day so many of the other indicators are not available.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 11:46 AM » Banks Giving 1-2% Teaser Rates as Modifications
    Published Tue, Nov 11 2008 11:46 AM by mrmortgage.ml-implode.com
    The re-leveraging of the US home owner has begun. It was just reported on CNBC that part od CITI’s plan was to give temporary teaser rates of 1-2% to ‘help’ borrowers avoid foreclosure.This will ultimately lead to lost decades in housing. Its sad when the only way to ’save’ housing and get borrowers out of default is keep them terribly leveraged by cutting their rates to 1-2%. Exotic loans with teaser rates is what got us here in the first place. What is also sad is 1-2% is about the rate needed to compete with the exotic loans given to everyone in the past 6 years. This emphasized how much leverage was in the system. This really does nothing to save housing it just keeps housing propped by allowing the borrowers to stay terribly leveraged. This does nothing to clear the market, only push the problem out. This does nothing to help the gross amount of negative equity around the nation, which is the primary reason for loan default. Posted on November 10, 2008 6:44 PM To those of you interested is this, be careful. It is my opinion that a mortgage modification must be a market-rate fixed rate loan at a level you can afford to pay with 28/36% debt-to-income ratios. This means principal balance reductions. If not, you are just renting your home because housing prices will not ‘come back’ any decade soon. That is of course, they bring back all of the exotic loan programs that allowed a $80k a year income buy a $800k home or wages rise 300%. For those of you interested in mortgage modifications, please read the reports below. They will tell you all you need to know. - Best Mr Mortgage Mr Mortgage on Mortgage Modifications Posted on November 4, 2008 5:20 PM Posted on November 3, 2008 2:20 PM Posted on October 7, 2008 5:46 PM
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 11:46 AM » Mortgage crisis poses extra problems for military personnel
    Published Tue, Nov 11 2008 11:46 AM by feeds.feedburner.com
    A guest post from , veteran business journalist and author of the blog , a humorous look at marketing, business and his dog . On this Veterans Day 2008, there are 23.4 million military veterans alive in America. Of those, . About 2,000 of those are people who served in Afghanistan and Iraq. While this is a long-term problem, it will get worse as vets return from the current conflagrations to an economy that’s figuring out how far down “the pits” are. Vets face a unique set of challenges when they come home. In the best case scenario they are merely adjusting to a life without a constant threat to their lives and safety. That is really no small thing. If you are in the National Guard or the Reserves, that best-case scenario also involves going back into the work force after a year or more away and at a time when most companies are laying people off. These problems are only compounded if you are self-employed or run your own business. In addition to that, most in the Guard and Reserves have been receiving substantially lower wages while they were on active duty and have had to spend out of whatever savings they’ve had to support their families. And, like I said, that’s the best case scenario. In addition to any physical wounds, a huge number of vets have to contend with mental health issues – from post-traumatic stress disorder to addiction to sadly much more. All of which were acquired on behalf of us. Whether or not you supported the George Bush Desert Classic (full disclosure: I was against it from before the start and I have a brother in the Reserves who’s already done a year in Iraq), the truth is we owe all of these soldiers, sailors, marines and airmen. Maybe you wish we only had to send troops to “good wars,” as we now call World War II. The fault for whether or not to fight in this war lies not with the troops but with the generals, our leaders and the people who elect them – i.e., you and me. So we owe these people who did what we corporately decided needed to...
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    Source: feeds.feedburner.com
  • 10:59 AM » Toll: Record Low Homebuyer Demand
    Published Tue, Nov 11 2008 10:59 AM by Calculated Risk Blog
    "Unfortunately, the preliminary signs of stability we had discussed in early September, during our 2008 third quarter earnings call, were upended by the past month's financial crisis. Results of this crisis -- accelerating fears of job losses, a large decline in consumer spending, a significant capital crunch, increased credit market disruption, and plummeting stock market values -- all contributed to drive our cancellations up to 233 units (about 30% of current-quarter-contracts, or 9% of beginning-quarter-backlog), and drive home buyer confidence and our traffic and demand down to record lows." Robert Toll, CEO Toll Brothers, From MarketWatch: Unfortunately, the preliminary signs of stability we had discussed in early September, during our 2008 third quarter earnings call, were upended by the past month's financial crisis," said Chief Executive Robert Toll in a prepared statement. The crisis contributed to pushing up cancellations and drove homebuyer confidence and the company's traffic and demand to record lows, the CEO said, pointing to "accelerating fears of job losses, a large decline in consumer spending, a significant capital crunch, increased credit market disruption, and plummeting stock market values." ... "Given the significant uncertainty surrounding sales paces, cancellation rates, market direction, unemployment trends and numerous other aspects of the overall economy, we are not comfortable offering delivery, revenue or earnings guidance for the coming year," said Chief Financial Officer Joel Rassman. Not surprising. Also the cancellation rate rose to 30%, far above Toll's historical average of 7%, but still below the record highs of recent years.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 10:44 AM » Downey Savings: "Substantial Doubt" About Survival
    Published Tue, Nov 11 2008 10:44 AM by Calculated Risk Blog
    From Reuters: Downey Financial Corp ... one of the largest specialists in "option" adjustable-rate mortgages, said on Monday its survival was in doubt because it may fail to raise enough capital to satisfy its regulators. In its quarterly report filed with the U.S. Securities and Exchange Commission, Downey said there was "substantial doubt" about its ability and that of its banking unit "to continue as going concerns for a reasonable period of time." Something to watch this friday!
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    Source: Calculated Risk Blog
  • 10:11 AM » The 30-minute version of I.O.U.S.A.
    Published Tue, Nov 11 2008 10:11 AM by themessthatgreenspanmade.blogspot.com
    The condensed version of the movie I.O.U.S.A from the crew at The Daily Reckoning - lots of pretty cool graphics with more info available at the website.
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    Source: themessthatgreenspanmade.blogspot.com
  • 10:11 AM » Battle Over Bazooka Point Lending
    Published Tue, Nov 11 2008 10:11 AM by feeds.feedburner.com
    Paulson asked for and received the right to do damn near anything he wanted with the $700 billion bank bailout money appropriated by Congress. His next step was to cram money down banks' throats whether they wanted it or not, at conditions that did not make a lot of sense to several banks. For a refresher course on that sequence of events, please see written October 15,2008. My opening gambit in the above link was " For now, you can force banks to take money, but you can't force them to lend it. " The operative words in that sentence were " For now ". Because of rising unemployment, rising credit card defaults, rising foreclosures, and the need to increase loan loss reserves, banks are sitting on the money or using it for mergers. Clearly that is a quite a rational thing to do. However, the FDIC will have none of it. The Washington Post is reporting . The Treasury Department plans to spend $250 billion to buy stakes in financial firms as part of its mammoth $700 billion financial rescue program. Lawmakers, however, have complained that institutions that have accepted the government investments have been spending excessive amounts to reward their shareholders and top officers instead of increasing lending. In drafting guidance for financial firms, federal banking agencies have wrestled over how to goad them into lending without compelling them to make bad loans. The Federal Deposit Insurance Corp. wants stronger language that would pressure institutions to lend, while other regulators have argued that that could expose the banks to more losses, the sources said on condition of anonymity because the document has not been released publicly. The disagreement at one point threatened the effort. My Comment : It's too bad they resolved the dispute. "Any suggestion that the guidance will tell banks not to lend to creditworthy customers is not correct," said Kevin Mukri, a spokesman for the Office of the Comptroller of the Currency. In...
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    Source: feeds.feedburner.com
  • 10:11 AM » Bubble-States Awash in Negative-Equity
    Published Tue, Nov 11 2008 10:11 AM by mrmortgage.ml-implode.com
    One of my primary arguments that the foreclosure crisis has a long way to go has to do with to the massive amount of negative equity in the hardest hit, most populated ‘bubble states’. The very states that added so much to the great wealth effect. Negative-equity is FICO-score and loan type blind. In the new era of ‘my house is my largest investment’, most everyone feels the same way about paying into a massively depreciated asset. This is even more the case when the payment increases on an exotic-type loan such as a 2/28, Pay Option ARM or even a Prime 5/1 Interest Only. In the hardest hit states, those not in a negative equity position have very little equity remaining given the current data. This is why the all-important move-up buyers are non-existent and over half of the homes sold are from the foreclosure stock. With lending tightened to such a large degree, sizable down payments are now required to attain the best financing. Ideally, a buyer wants to extract this and all other purchase expenses through the sale of the property. However, with the median Loan-to-Value’s in the bubble states being so high there is not enough left over from the proceeds to pay a real estate agent, put a down payment on the new property and cover all of the other costs associated with moving. People are stuck in their properties unable to move or refinance. This recent data from Loan Performance below corroborates my research. The first chart shows the amount of negative equity in each state. In addition, I added the top 10 foreclosure states per Realty Trac in the third column. With the exception of Illinois and Indiana, the top 10 negative equity states are the same as the top 10 foreclosures states. Nevada and Michigan top the list…a solution there may be bulldozers and gasoline. This second chart shows the median Loan-to-Value in each state. The top negative-equity states have the highest median Loan-to-Value ratio (littlest amount of equity). These housing markets within these...
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    Source: mrmortgage.ml-implode.com
  • 9:40 AM » Why Washington Cannot Prevent Depression
    Published Tue, Nov 11 2008 9:40 AM by www.moneyandmarkets.com
    Fear of depression is sweeping the nation. Millions of Americans are consumed with anxiety, abandoning their old shop-till-they-drop habits, slashing their spending, trying desperately to pinch pennies for the coming hard times. Thousands of bankers are snapping shut their coffers, tightening their lending standards, hunkering down ...
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    Source: www.moneyandmarkets.com
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