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  • Tue, Nov 11 2008
  • 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 [...]
    Click Here to Read the Full Article

    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)
    Click Here to Read the Full Article

    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...
    Click Here to Read the Full Article

    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!
    Click Here to Read the Full Article

    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.
    Click Here to Read the Full Article

    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...
    Click Here to Read the Full Article

    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...
    Click Here to Read the Full Article

    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 ...
    Click Here to Read the Full Article

    Source: www.moneyandmarkets.com
  • 9:39 AM » Update on FDIC guarantee fees
    Published Tue, Nov 11 2008 9:39 AM by www.econbrowser.com
    On Saturday that details of the could introduce a substantial wedge between the fed funds target and the effective fed funds rate. argues that this could not be affecting the current effective fed funds rate due to details of the "opt out" provision. Here I provide some further discussion of this point. I believe that is correct that I was misinterpreting the . A substantially clearer statement appears in the implementation of the interim rule in the : Beginning on November 13, 2008, any eligible entity that has not chosen to opt out of the debt guarantee program will be assessed fees for continued coverage. All eligible debt issued from October 14, 2008 (and still outstanding on November 13, 2008), through June 30, 2009, will be charged an annualized fee equal to 75 basis points multiplied by the amount of debt issued, and calculated for the maturity period of that debt or June 30, 2012, whichever is earlier. The fee charged will take into account that no fees will be charged during the first 30 days of the program. That seems to state pretty clearly that a bank will not be assessed the 75 basis point fee on overnight fed funds borrowed prior to November 13. Moreover, on the deadline for opting out of the program until December 5. But this brings me back to my original core puzzle. If bank fund managers indeed understand the interim system to be as described, there should be a perfect arbitrage opportunity from at a 0.25% rate, holding them as excess reserves on which they are now paid 1.0% by the Fed, and pocketing the difference. Banks trying to take advantage of this should be bidding up the rate for borrowing overnight fed funds above 25 basis points. If we have among our readers any fund managers who can tell us why you're not bidding up the price of borrowed funds to profit from this right now, I welcome the opportunity to be educated further. Technorati Tags: , , , ,
    Click Here to Read the Full Article

    Source: www.econbrowser.com
  • 9:38 AM » Major Mall Owner Warns of Possible Default
    Published Tue, Nov 11 2008 9:38 AM by Calculated Risk Blog
    From the WSJ: Ailing mall owner General Growth Properties Inc. warned Monday in a government filing that its failure to refinance or extend $1 billion in debt due this month could trigger default on billions of dollars in debt and its ability to continue operations would be in "substantial doubt." ... General Growth has $900 million in debt coming due Nov. 28 on two luxury malls on the Las Vegas strip. It has another $58 million in bonds due on Dec. 1. From the on the economy: Deteriorating economic conditions will have an adverse affect on our revenues and available cash, and may also impair our ability to sell our properties. General and retail economic conditions continue to weaken, and we expect this weakness to continue and worsen in 2009 as the economy enters a recessionary or near recessionary period. Consumer spending recently declined for the first time in 17 years, the unemployment rate is expected to rise, consumer confidence has decreased dramatically and the stock market remains extremely volatile. Given these expected economic conditions, we believe there is a significantly increased risk that the sales of stores operating in our centers will decrease, negatively affecting their ability to make minimum rent payments and increasing the risk of tenant bankruptcies. In addition to the direct adverse effect of tenant failures to pay minimum rents and tenant bankruptcies on our operations, these events also negatively affect our ability to attract and maintain minimum rent levels for new tenants. These circumstances negatively affect our revenues and available cash, and also reduce the value of our properties, reducing the likelihood that we would be able to sell such properties, on attractive terms or at all.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:38 AM » AmEx to Become Bank Holding Company
    Published Tue, Nov 11 2008 9:38 AM by Calculated Risk Blog
    Fed : The Federal Reserve Board on Monday announced its approval of the applications and notices under sections 3 and 4 of the Bank Holding Company Act by American Express Company and American Express Travel Related Services Company, Inc., both of New York, New York, to become bank holding companies on conversion of American Express Centurion Bank, Salt Lake City, Utah, to a bank, and to retain certain nonbanking subsidiaries, including American Express Bank, FSB, Salt Lake City, Utah. American Express has approximately $127 billion in consolidated assets, and becoming a bank holding company allows access to financing from the Federal Reserve for some of these assets. More details are in the .
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:38 AM » Fannie: $100 Billion May Not be Enough
    Published Tue, Nov 11 2008 9:38 AM by Calculated Risk Blog
    From Bloomberg: Fannie Mae may need more than the $100 billion in funding pledged by the U.S. Treasury to stay afloat after reporting a record $29 billion loss and confronting more difficulty in issuing and refinancing debt. ``This commitment may not be sufficient to keep us in solvent condition or from being placed into receivership,'' if there are further ``substantial'' losses or if the company is unable to sell unsecured debt, Washington-based Fannie said in a filing today with the U.S. Securities and Exchange Commission. Here is the filed with the SEC. This statement is under "Risks Relating to Our Business" and is not a prediction from Fannie, just a statement of a possible risk. The huge loss reported today was mostly because of a reduction in deferred tax assets. Here are a few excerpts from the Fannie section on Housing and Economic Conditions: Growth in U.S. residential mortgage debt outstanding slowed to an estimated annual rate of 2.0% based on the first six months of 2008, compared with an estimated annual rate of 8.3% based on the first six months of 2007, and is expected to continue to decline to a growth rate of about 0% in 2009. We continue to expect that home prices will decline 7% to 9% on a national basis in 2008, and that home prices nationally will decline 15% to 19% from their peak in 2006 before they stabilize. Through September 30, 2008, home prices nationally have declined 10% from their peak in 2006. (Our estimates compare to approximately 12% to 16% for 2008, and 27% to 32% peak-to-trough, using the Case-Schiller index.) We currently expect home price declines at the top end of our estimated ranges. We also expect significant regional variation in these national home price decline percentages, with steeper declines in certain areas such as Florida, California, Nevada and Arizona. The deteriorating economic conditions and related government actions that occurred in the third quarter of 2008 have increased the uncertainty...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • Mon, Nov 10 2008
  • 10:49 PM » Fed Delays Plan to Shore Up Money Funds
    Published Mon, Nov 10 2008 10:49 PM by WSJ
    The Fed is delaying a plan to buy up to $540 billion of money funds' short-term debt until later this month.
  • 10:49 PM » Winners and losers from China's $586 billion boost
    Published Mon, Nov 10 2008 10:49 PM by Market Watch
    China’s 4 trillion yuan ($586) billion economic stimulus plan may have lifted sentiment toward global growth, commodities and related stocks, but some market strategists were quick Monday to identify potential losers from the plan, starting with U.S. consumers and Treasury debt.
  • 10:34 PM » Recession fears eclipse AIG rescue, China stimulus
    Published Mon, Nov 10 2008 10:34 PM by Reuters
    NEW YORK (Reuters) - The United States pledged more support for struggling insurer AIG on Monday as international action to halt the financial crisis failed to dent investor sentiment that the economy was in for a long and deep recession.
  • 10:33 PM » Citigroup Offers to Ease Mortgage Terms
    Published Mon, Nov 10 2008 10:33 PM by www.nytimes.com
    The bank joined a growing list of financial institutions which are offering a program to help thousands meet their monthly payments.
    Click Here to Read the Full Article

    Source: www.nytimes.com
  • 10:33 PM » Breakingviews.com: For Regulators, A.I.G. Is Exhibit A
    Published Mon, Nov 10 2008 10:33 PM by www.nytimes.com
    The example of the bailout of A.I.G. shows that regulations are needed to capture any company that becomes too significant to the financial system.
    Click Here to Read the Full Article

    Source: www.nytimes.com
  • 10:33 PM » Housing agencies to widen homeowner help: sources
    Published Mon, Nov 10 2008 10:33 PM by Reuters
    WASHINGTON (Reuters) - The regulator for Fannie Mae and Freddie Mac will on Tuesday announce fresh steps to mitigate foreclosures while a separate agency is preparing to ease terms on another homeowner-aid program, sources familiar with the plans said late on Monday.
  • 3:04 PM » 401(k)s Under Attack!
    Published Mon, Nov 10 2008 3:04 PM by www.minyanville.com
    Late last week the following news story began circulating widely on the Internet and has begun to take on an epic hysterical new life:Dems Target Private Retirement AccountsThe story's scary and misleading headline aside there are some facts to consider:A hearing was held on October 7 by Education and Labor Committee Chairman George Miller (D-CA) to look into the impact of the financial crisis on workers' retirement security. Please read Congressman Miller's opening remarks because there is no mention in them whatsoever about confiscating retirement assets. Instead Congressman Miller mentioned in his remarks and has long been an outspoken advocate of ...
    Click Here to Read the Full Article

    Source: www.minyanville.com
  • 3:04 PM » WSJ Op-Ed: “global depression?”
    Published Mon, Nov 10 2008 3:04 PM by ml-implode.com
    I haven’t seen anything published on the Journal editorial/op-ed pages that articulated even the possibility of a “depression,” much less a “global” one. As recently as this past Spring, they were still publishing op-eds saying the economy was fine and would continue growing. The typical establishmentarian "horses out of the barn" about-face. Also see from Rolfe: One world government? No. Still, when UK Prime Minister Gordon Brown says we should “seize the moment” to build a “global society,” I get a bit queasy. Will leaders at this week’s G20 meeting propose a new supra-national framework to solve various world problems?
    Click Here to Read the Full Article

    Source: ml-implode.com
  • 3:04 PM » Credit Crisis Indicators: Little Progress
    Published Mon, Nov 10 2008 3:04 PM by Calculated Risk Blog
    A daily update ... day to day there has been little progress, but overall most indicators have improved since the crisis started. As an example, the LIBOR is down sharply from 4.82% on Oct 10th to 2.24% today. And the TED spread is at 2.0% from 4.63%. The progress is slow, but there has been progress. LIBOR declined again , from Bloomberg: The London interbank offered rate, or Libor, that banks say they charge each other for such loans declined 5 basis points to 2.24 percent today, the lowest level since November 2004, the British Bankers' Association said. The three-month LIBOR was at 2.29% on Friday. The rate peaked at 4.81875% on Oct. 10. ( Better ) The on 3 month treasuries fell to 0.20 for 0.303%. ( worse ) With the effective Fed Funds rate at 0.23% (), this is probably somewhat in the right range. At some point, I'd like to see the effective Fed funds rate close to the target rate (currently 1.0%). The : 2.02, up slightly from 1.98 ( slightly worse ) The TED spread is around 2.0, but still too high. The peak was 4.63 on Oct 10th. I'd like to see the spread move back down to 1.0 or lower. A normal spread is about 0.5. The from Bloomberg: 103.75 down slightly from 107.25 ( slightly better ). This spread peaked at near 165 in early October, so there has been significant progress, and we are finally getting close to 100. Activity in the Treasury's (SFP). This is the Treasury program to raise cash for the Fed's liquidity initiatives. If this program slows down borrowing, I think that would be a good sign. Here is a . It has been a few days without an announcement from the Treasury... ( no progress ). Weekly Fed Balance Sheet. This will be update weekly. Click on graph for larger image in new window. The Federal Reserve assets increased $105 billion last week to $2.075 trillion. Note: the graph shows Total Factors Supplying Federal Reserve Funds and is an available series that is close to assets. So far the Federal Reserve assets are still increasing...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 2:32 PM » AIG CEO Edward Liddy’s Optimistic Journey
    Published Mon, Nov 10 2008 2:32 PM by Seeking Alpha
    submits: Could American International Group (AIG) be as great a buy at $2 as Wachovia (WB) was? The market certainly has shown little faith this morning in the . AIG will be selling $40B perpetual preferred to the TARP at a 10% dividend plus warrants for 2% of the common equity, receive a 5 year $60B credit facility for 3% over LIBOR plus an undrawn fee of 0.75% and 77.9% of the common equity, and facilities to liquidate a large percentage of CDS and RMBS exposures. The most compelling statement CEO Liddy made during this morning’s conference call was that the latest changes in the Fed and Treasury’s support for AIG are just step 2 in a long journey. I take this to mean that if AIG could show that the government can profit more by even less onerous terms, AIG has further room to negotiate. Liddy implied that even the government’s 79.9% might be negotiable if a reduction in systemic financial risk could be shown.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 2:31 PM » Op-Ed: Solutions for the President-Elect
    Published Mon, Nov 10 2008 2:31 PM by www.minyanville.com
    Barack Obama is the President-Elect of the United States of America. I don’t envy him. He must not let the extremists in his party push him to make hasty short-sighted decisions. President-Elect Obama will need to realize that short-term stimulus packages are the last recourse of weak-minded politicians like George Bush and Nancy Pelosi. Long-term thinking is what’s required at this juncture of history. Barack Obama ran one of the best Presidential campaigns in history. At his first press conference after the victory however he looked a bit lost. It reminded me of the final scene in the movie ...
    Click Here to Read the Full Article

    Source: www.minyanville.com
  • 2:31 PM » Buffet’s Investment in Goldman - Nothing To See Here
    Published Mon, Nov 10 2008 2:31 PM by mrmortgage.ml-implode.com
    Bloomberg put put out a great story on the Lehman saga over the weekend. We already knew most of it, but the color and detail makes for a fun read. One thing I found particularly interesting is how Buffet was ready to do a deal with Lehman during its crisis period. If he would have done so, he would have ended up with a big, fat ZERO. Perhaps this is why Goldman is having such a rough time lately - a Buffet deal does not automatically mean that everything is great. Hearing this should make Buffet chaser investors proceed with caution. Not even Buffet has lived through a global crisis like the one that faces us today and everyone seems to be making the wrong move lately. - Best, Mr Mortgage Source: Bloomberg - Counter-Punching This time around Fuld also reached out to Omaha billionaire Buffett, the man who had ridden to the rescue of Salomon Inc. in 1987, according to two people with knowledge of the approach. He asked investment banking chief , 49, to call , chairman of Berkshire Hathaway-owned MidAmerican Energy Holdings Co., and see if Buffett might be interested in a stake in Lehman. Spurning Buffett The answer was yes, Sokol told McGee. So Fuld called the 78-year-old Buffett. would buy preferred shares that would pay a dividend of 9 percent and could be converted to common at the then-market price of $40, the people said. That was costlier than what other investors demanded, Fuld was told by associates, and he spurned the offer. A few days later, on April 1, Lehman sold $4 billion of convertible preferred stock to public investors with a 7.25 percent interest rate and a 32 percent conversion premium. That meant those buying the convertibles were willing to pay one-third more than the market price for Lehman’s shares if and when they wanted to convert. Buffett was willing to pay only the going price at the time, which would have meant more dilution for existing shareholders. A spokeswoman for Buffett declined to comment. Fuld had saved some money, yet he rebuffed...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 2:31 PM » The Wealth Effect of House Price Declines
    Published Mon, Nov 10 2008 2:31 PM by Seeking Alpha
    submits: reckons that wealth effects alone would be sufficient to cause a massive recession, even absent any kind of financial crisis: Homeowners have lost more than $5 trillion in housing wealth. There is a very well established wealth effect whereby $1 of housing wealth is estimated as leading to 5 to 6 cents of annual consumption. This implies that the loss of wealth to date would cause consumption to fall by $250 billion to $300 billion annually (1.7 percent to 2.0 percent of GDP). If you add in the loss of around $6 trillion in stock wealth, with an estimated wealth effect of 3-4 cents on the dollar, then you get an additional decline of $180 billion to $240 billion in annual consumption (1.2 percent to 1.6 percent of GDP).
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:14 AM » Peter Schiff Hugely Right, Enormously Wrong as Hard Landing Hits China
    Published Mon, Nov 10 2008 9:14 AM by feeds.feedburner.com
    We will take a look at Schiff from two perspectives shortly. First let's note the massive influx of workers into Chinese cities is now in reverse as . Tens of thousands of migrant workers are leaving the southern Chinese city of Guangzhou after losing their jobs, railway officials say. The increase to 130,000 passengers leaving the city's main station daily is being blamed on the credit crunch. Guangzhou is one of China's largest manufacturing hubs, but many companies who export products have collapsed. Chinese officials are worried that a sudden increase in unemployment could lead to social unrest. The most badly hit export companies are toy, shoe, and furniture manufacturers. There are already reports of demonstrations and social unrest in the provinces of Zhejiang and Guangdong. Toy Manufacturing Collapses Here are a few headlines about the Chinese to exporting business. A total of 3,631 toy exporters or 52.7 percent of the industry's businesses shut down in 2008. They were mainly small-sized toy producers with an export value of less than $100,000. Workers at a toy factory in Guangdong have become the latest victims of the worldwide financial tsunami. More than 6,000 employees lost their jobs when Smart Union, a major toy manufacturer in Dongguan, closed earlier this week. "The main reason for the closure is we are too dependent on the US market, which has become sluggish," said Xu Xiaofang, a Smart Union human resource worker. After losing money for the first half of the year, its cash flow finally dried up. Machinery normally busy churning out toys for major US toy brands Mattel and Disney now sits idle. Speaking in an interview with Guangzhou Daily, Wang Zhiguang, vice-chairman of the Dongguan Toy Industry Association, said: "Of the 3,800-odd toy firms in Dongguan, no more than 2,000 are likely to survive the next couple of years." Xiao Yong, the owner of a Dongguan firm that sells Christmas trees and gifts, is equally worried...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 8:58 AM » The Housing Solution No One Wants to Hear
    Published Mon, Nov 10 2008 8:58 AM by Seeking Alpha
    Joe Adamaitis submits: For over 50 years, FHA and VA have had in place a program which, if those in DC and elsewhere were to consider, may find itself to be a lifesaver in today's housing crisis. Not to mention it could save us (taxpayers) billions. The simple solution I suggest is to take the FHA guidelines that allow 'qualified buyers' the opportunity to assume a mortgage from someone who needs to sell, can't make payments or is simply mailing in the keys. Take this long time program and authorize Fannie and Freddie to allow all mortgages to be assumable. Deal with the servicers and securities folks in the same manner. Instead of allowing banks to pay dividends, buy out other banks etc., force them to work with these 'qualified buyers' to take over the mortgages of thousands upon thousands of homes.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:58 AM » Larger Bailout for AIG
    Published Mon, Nov 10 2008 8:58 AM by Calculated Risk Blog
    From the NY Times: The Treasury Department and the Federal Reserve were near a deal to abandon the initial bailout plan and invest another $40 billion in the company ... When the restructured deal is complete, taxpayers will have invested and lent a total of $150 billion to A.I.G., the most the government has ever directed to a single private enterprise. ... The revised deal, which may be announced as early as Monday morning ... What a mess ...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • Sun, Nov 9 2008
  • 8:58 AM » The Thundering Herd . . . “Were Pigs”
    Published Sun, Nov 09 2008 8:58 AM by The Big Picture
    “The mortgage business at Merrill Lynch was an afterthought — they didn’t really have a strategy. They had found this huge profit potential, and everybody wanted a piece of it. But they were pigs about it.” – William Dallas, founder of Ownit Mortgage Solutions, a lending business in which Merrill bought a stake a few years ago. > There is a monster Gretchen Morgenson piece in the Sunday Times, titled, . Its about the rise and ignomius fall of Mother Merrill. How did it happen? Bad mortgages. TYPICAL of those who dealt in Wall Street’s dizzying and opaque financial arrangements, Merrill ended up getting burned, former executives say, by inadequately assessing the risks it took with newfangled financial products — an error compounded when it held on to the products far too long. The fire that Merrill was playing with was an arcane instrument known as a synthetic collateralized debt obligation. The product was an amalgam of collateralized debt obligations (the pools of loans that it bundled for investors) and credit-default swaps (which essentially are insurance that bondholders buy to protect themselves against possible defaults). Synthetic C.D.O.’s, in other words, are exemplars of a type of modern financial engineering known as derivatives. Essentially, derivatives are financial instruments that can be used to limit risk; their value is “derived” from underlying assets like mortgages, stocks, bonds or commodities. Stock futures, for example, are a common and relatively simple derivative. Among the more complex derivatives, however, are the mortgage-related variety. They involve a cornucopia of exotic, jumbo-size contracts ultimately linked to real-world loans and debts. So as the housing market went sour, and borrowers defaulted on their mortgages, these contracts collapsed, too, amplifying the meltdown. The synthetic C.D.O. grew out of a structure that an elite team of J. P. Morgan bankers invented in 1997. Their goal was to reduce the risk that Morgan would lose...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 8:57 AM » The End of Our Banking System?
    Published Sun, Nov 09 2008 8:57 AM by Seeking Alpha
    submits: The American Banking System is one of the most regulated industries in America. Since 1935, banks have had to deal with regulations that no other industry has come near. So what went wrong? Because of 1929, banking regulations were devised setting up minimal capital requirements. They established capital adequacy ratios in order to prohibit banks from lending more than 12 times their capital plus retained earnings.
    Click Here to Read the Full Article

    Source: Seeking Alpha
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