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Sunday, November 15, 2009

Summary and a Look Ahead

by Calculated Risk on 11/15/2009 11:29:00 AM

This will be a busy week for key economic news starting with October Retail sales on Monday, Industrial Production and Capacity Utilization on Tuesday, and Housing Starts and CPI on Wednesday.

Also on Monday, at noon ET, Fed Chairman Ben Bernanke will speak at the Economic Club of New York.

Last week started with several key Fed speeches:

  • From Atlanta Fed President Dennis Lockhart: Economic Recovery, Small Business, and the Challenge of Commercial Real Estate
    I am concerned about the potential impact of CRE on the broader economy. ... there could be an impact resulting from small banks' impaired ability to support the small business sector—a sector I expect will be critically important to job creation.

    ... A lot of the CRE exposure is concentrated at smaller institutions (banks with total assets under $10 billion). These smaller banks account for only 20 percent of total commercial banking assets in the United States but carry almost half of total CRE loans (based on Bank Call Report data).

    Many small businesses rely on these smaller banks for credit. ... Moreover, small firms' reliance on banks with heavy CRE exposure is substantial. Banks with the highest CRE exposure (CRE loan books that are more than three times their tier 1 capital) account for almost 40 percent of all small business loans.
  • Later in the week, Atlanta Fed Vice President and Senior Economist John Robertson added some more thoughts: Small businesses, small banks, big problems?
    Today, the number one challenge for small businesses remains poor sales rather than access to credit. But tomorrow, it will be important that small businesses also have access to funding if they are going to play their traditional role as an engine of growth.
  • From San Francisco Fed President Dr. Yellen: The Outlook for the Economy and Real Estate
    When the weakness of the commercial property market is combined with the muted outlook for housing and consumer spending, you can see why I believe that the overall economic recovery is likely to be gradual and remain vulnerable to shocks. ... it would look something like an “L” with a gradual upward tilt of the base. With such a slow rebound, unemployment could well stay high for several years to come.
  • From Dallas Fed President Richard Fisher: The Current State of the Economy and a Look to the Future
    [L]ooking into 2010 and perhaps to 2011, the most likely outcome is for growth to be suboptimal, unemployment to remain a vexing problem and inflation to remain subdued.
    And economic data:
  • Fed: Lending Standards Tighten, Loan Demand Weakens

  • The U.S. trade deficit increased in September.

    U.S. Trade Exports Imports Click on graph for larger image.

    This graph shows the monthly U.S. exports and imports in dollars through September 2009.

    Imports and exports increased in September. On a year-over-year basis, exports are off 13% and imports are off 21%.

    The major contributors to the increase in the trade deficit were the increase in oil prices, and more imports from China. Also - the deficit is higher than expected, suggesting a downward revision to Q3 GDP.

    And there were three more bank failures on Friday taking the total to 123 in 2009:
  • For the second week in a row, the TARP lost money on a bank failure.
  • An amazing story: Orion Bank CEO Had a Plan ...
  • Unofficial Problem Bank List increases to 507

    And some other stories of interest:
  • Counterparty Risk: The Mortgage Insurers
  • From David Streitfeld at the NY Times: Housing Agency Says Cash Reserves Are Down Sharply
  • FHA on DAPs: "Too many homeowners not equipped for home ownership"

    And a couple of comments from your humble blogger:
  • Loan Modifications: Key Numbers not Released
  • Economic Outlook: Possible Upside Surprises, Downside Risks

    Best wishes to all.