by Calculated Risk on 10/06/2008 03:28:00 PM

From the WSJ Real Time Economics: FDIC’s Bair: Wachovia Deal ‘Today’; Tougher Regulation Needed

Speaking Monday before the National Association for Business Economics, [Federal Deposit Insurance Corp. Chairman Sheila] Bair said the FDIC wasn’t driving the negotiations between Wachovia and its two suitors, Citigroup and Wells Fargo, though it is talking with all parties.
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“We’re all working together with regulators…to come at a solution and outcome that serves the public interest and I think we will have one today,” Bair said.

by Calculated Risk on 10/06/2008 12:19:00 PM

From the WSJ: Mall Vacancies Grow as Retailers Pack Up Shop

For strip centers and other open-air shopping venues, the vacancy rate climbed to 8.4% in the third quarter from 8.1% in the second quarter. That marks the highest rate since 1994, according to Reis. Meanwhile, retailers' closures outpaced new leases by 2.8 million square feet in U.S. strip centers in the third quarter, the third consecutive quarterly net decline. It is the first nine-month period of so-called negative net absorption since Reis started tracking the data in 1980.
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The vacancy rate at malls in the top 76 U.S. markets rose to 6.6% in the third quarter, up from 6.3% in the previous quarter, to its highest level since late 2001, according to Reis.

Click on image for larger graph in new window.

This graph shows the strip mall vacancy rate since Q2 2007. Note that the graph doesn't start at zero to better show the change.

by Calculated Risk on 10/06/2008 11:13:00 AM

Here are the Kennedy-Greenspan estimates (NSA - not seasonally adjusted) of home equity extraction for Q2 2008, provided by Jim Kennedy based on the mortgage system presented in "Estimates of Home Mortgage Originations, Repayments, and Debt On One-to-Four-Family Residences," Alan Greenspan and James Kennedy, Federal Reserve Board FEDS working paper no. 2005-41.

Click on graph for larger image in new window.

For Q2 2008, Dr. Kennedy has calculated Net Equity Extraction as $9.5 billion, or 0.3% of Disposable Personal Income (DPI).

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, both in billions of dollars quarterly (not annual rate), and as a percent of personal disposable income.

Last week the Bank of England reported that MEW was slightly negative in the UK in the 2nd quarter.

Less equity extraction means less consumption over the next few quarters. I'll have more on this later ...

by Calculated Risk on 10/06/2008 10:02:00 AM

DOW under 10K. From March 29, 1999 (15 sec CNBC Promo):

by Calculated Risk on 10/06/2008 08:22:00 AM

From the Fed: Board announces that it will begin to pay interest on depository institutions required and excess reserve balances

The Federal Reserve Board on Monday announced that it will begin to pay interest on depository institutions' required and excess reserve balances.
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The Financial Services Regulatory Relief Act of 2006 originally authorized the Federal Reserve to begin paying interest on balances held by or on behalf of depository institutions beginning October 1, 2011. The recently enacted Emergency Economic Stabilization Act of 2008 accelerated the effective date to October 1, 2008.
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Substantial Further Increases in Term Auction Facility Auctions
The sizes of both 28-day and 84-day Term Auction Facility (TAF) auctions will be boosted to $150 billion each, effective with the 84-day auction to be conducted Monday.

by Calculated Risk on 10/06/2008 01:49:00 AM

A discussion of Credit Default Swaps with an interview with Jim Grant on CBS 60 Minutes ...

by Calculated Risk on 10/05/2008 09:41:00 PM

The AP is reporting tonight that the Appellate Division of the New York State Supreme Court threw out the lower court order favoring Citigroup (to temporarily halt the Wells Fargo acquisition of Wachovia). (hat tip Kevin)

The AP is also reporting that documents filed with the court reveal that the FDIC had informed Wachovia that the bank would be seized last Monday if a deal wasn't reached immediately.

The WSJ reports: Fed Pushes to Resolve Wachovia Deal Dispute

In a sign that U.S. officials are concerned about the increasingly volatile situation, officials from the Federal Reserve were pushing hard for Citigroup and Wells Fargo to reach a compromise. That effort could result in essentially carving up the Charlotte, N.C., bank between its two suitors, these people said.

The Fed is still working weekends.

by Calculated Risk on 10/05/2008 07:39:00 PM

From the Telegraph: Financial crisis: Government could take shares in high street banks

Alistair Darling, the Chancellor, could give the banks billions of pounds in return for shares in an emergency bailout plan to be enacted if the financial crisis worsens, The Daily Telegraph has learnt.

The Treasury has drawn up detailed plans for the scheme, which would put taxpayers' money at risk.
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The Treasury plan to take shares in major high street banks will be discussed by the council.

This is more like the Swedish solution, or the RFC in the U.S. during the Depression, as opposed to the TARP.

by Calculated Risk on 10/05/2008 06:04:00 PM

From Bloomberg: Hypo Real Estate Gets 50 Billion-Euro Government-Led Bailout (hat tip Sam)

The German government and the country's banks and insurers agreed on a 50 billion euro ($68 billion) rescue package for commercial property lender Hypo Real Estate Holding AG ...

The NY Times explained part of the problem at Hypo:

Depfa, a Dublin-based lender that Hypo acquired last year, is at the center of its problems. Depfa underwrote a package of municipal bonds which were subsequently downgraded by ratings agencies. That step obliged Depfa to buy the bonds back ...

So Hypo needs much of the €50 billion to buy back the muni bonds, and despite the downgrades, these munis are probably still worth somewhat close to €50 billion (not like the disastrous losses for some of the MBS that is hitting US and other European banks). So this sounds more like a liquidity issue rather than a solvency problem.

by Calculated Risk on 10/05/2008 03:54:00 PM

From L'Echo: La reprise de Fortis Banque par BNP est bouclée (hat tip Alain)

Alain translates: The "Belgian government keeps a 25% minority (blocking) stake in Fortis Banque Belgium and obtains 10% of BNP Paribas in an all share deal. Luxembourg keeps 33% stake in local subsidiary and gets 1.4% of BNP".