Thursday, October 01, 2009

Summary and Misc Articles

by Calculated Risk on 10/01/2009 06:40:00 PM

The BLS jobs report will be released tomorrow morning. The consensus is for 170 thousand net jobs lost and the unemployment rate rising to 9.8%. That seems a little optimistic given the recent data flow.

Lots of data today:

  • Weekly Unemployment Claims: 551,000
  • August PCE and Saving Rate Note: August was distorted by cash-for-clunkers (see auto post).
  • ISM Manufacturing shows expansion in September
  • Construction Spending increases in August
  • Light Vehicle Sales 9.2 Million (SAAR) in September

    And a few other interesting articles:

  • Another article on strategic defaults, from Bloomberg: Leaving Affordable Mortgage May Become Winning Gambit
    So-called strategic defaults, in which homeowners stop paying their mortgages while remaining current on other debts, rose 128 percent to 588,000 last year, according to Experian PLC ...
    The classic definition of a "strategic default" is a borrower who can afford their mortgage, but stops paying it because they owe far more than their home is worth. This measurement from Experian is very different and includes many people who can no longer afford their mortgage. Long ago borrowers paid their mortgages first - to keep their homes - but that was when people actually had money invested in their homes. (sorry for the snark).

  • On failed banks, from Jonathan Weil at Bloomberg: Banks Have Us Flying Blind on Depth of Losses
    There was a stunning omission from the government’s latest list of “problem” banks, which ran to 416 lenders, a 15-year high, as of June 30. One outfit not on the list was Georgian Bank, the second-largest Atlanta-based bank, which supposedly had plenty of capital.
    ...
    The cost of Georgian’s failure confirms that the bank’s asset values were too optimistic.
    ...
    Georgian also reported a 12-fold jump in nonperforming loans to $306.4 million from $24.7 million three months earlier, mostly construction loans. Georgian’s numbers made it seem as if the surge arose from nowhere.
    ...
    What wasn’t made public until Sept. 25, the day it closed, was that Georgian Bank had agreed to a cease-and-desist order with the FDIC on Aug. 31 after flunking an agency examination.
    I believe it would be helpful if the FDIC released the Cease & Desist orders on a more timely basis.

  • From Bloomberg: Recession Rising Like Phoenix With Area Delinquencies Surging (ht Mike In Long Island)
    Delinquencies in the Phoenix area on loans backed by office, industrial, retail and apartment properties have risen more than five-fold since March, according to data compiled by Bloomberg.
    ...
    “The problems in commercial real estate are just getting started and they will dampen what is already going to be a weak economic recovery,” said Jim Rounds, senior vice president and senior economist at Elliott D. Pollack. “In Arizona, the recession is probably going to last to the middle of the next calendar year.”
    Live by real estate. Die by real estate.