by Calculated Risk on 3/20/2009 08:35:00 PM

Swirling Overhead...
Regulators swoop and seize,
None "too big to fail".
by Soylent Green Is People

First two large Corporate Credit Unions were seized today by the National Credit Union Administration (NCUA): U.S. Central and WesCorp. These two credit unions had a combined $57 billion in assets.

A couple of key points: these "corporate credit unions" don't serve the general public, and all "natural person" credit union money held at these corporate credit unions was guaranteed earlier this year.

From the WSJ: U.S. Seizes Key Cogs for Credit Unions

The affected institutions don't serve the general public. They provide critical financing, check clearing and other tasks for the retail institutions. These wholesale credit unions, known in industry parlance as corporate credit unions, are owned by their retail credit-union members.

And from the NCUA January letter to Credit Unions:

Offering a temporary National Credit Union Share Insurance Fund (NCUSIF) guarantee of member shares in corporate credit unions. The guarantee will cover all shares, but does not include paid-in-capital and membership capital accounts, through December 31, 2010. This guarantee is the equivalent of full share insurance on member shares and will be extended beyond that date by the NCUA Board if necessary.

So the natural person credit unions (the ones that serve the public) have had their money guaranteed.

Still the losses will be huge:

[Michael E. Fryzel, chairman of the National Credit Union Administration, the industry's federal regulator] said NCUA's latest estimate is that wholesale credit unions will eventually have to realize between $10 billion and $16 billion in losses on their holdings. The agency on Friday also raised its estimate for what these losses will cost its insurance fund, to $5.9 billion from the prior $4.7 billion estimate.

Three FDIC insured banks failed today. The FDIC estimates the combined cost to the Deposit Insurance Fund will be just over $200 million.

The WSJ reports that the Geithner toxic asset plan might be announced on Monday: U.S. Sets Plan for Toxic Assets

The federal government will announce as soon as Monday a three-pronged plan to rid the financial system of toxic assets, betting that investors will be attracted to the combination of discount prices and government assistance.

HotelNewsNow.com reported that year-over-year hotel occupancy rates were off 15.7 percent. See: Hotel Occupancy Rate Off Sharply for data and a graph.

by Calculated Risk on 3/20/2009 07:29:00 PM

From the FDIC: Herring Bank, Amarillo, Texas, Assumes All of the Deposits of Colorado National Bank, Colorado Springs, Colorado

Colorado National Bank, Colorado Springs, Colorado, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Herring Bank, Amarillo, Texas, to assume all of the deposits of Colorado National.
...
The FDIC estimates that the cost to the Deposit Insurance Fund will be $9 million. Herring Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. Colorado National is the nineteenth FDIC-insured institution to fail in the nation this year and the first in the state. The last FDIC-insured institution closed in Colorado was BestBank, Boulder, on July 23, 1998.

From the FDIC: Great Southern Bank, Springfield, Missouri, Assumes All of the Deposits of Teambank, National Association, Paola, Kansas

Teambank, National Association, Paola, Kansas, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Great Southern Bank, Springfield, Missouri, to assume all of the deposits of Teambank.
...
The FDIC estimates that the cost to the Deposit Insurance Fund will be $98 million. Great Southern Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. Teambank is the twentieth FDIC-insured institution to fail in the nation this year and the first in the state. The last FDIC-insured institution closed in Kansas was The Columbian Bank and Trust Company, Topeka, on August 22, 2008.

Teambank was affiliated with Colorado National Bank, Colorado Springs, which was also closed today by the Office of the Comptroller of the Currency. The FDIC entered into a separate transaction with Herring Bank, Amarillo, Texas, to assume the banking operations of Colorado National Bank.

That makes three today (the Corporate Credit Unions are different, but probably a bigger story).

by Calculated Risk on 3/20/2009 07:10:00 PM

From National Credit Union Administration: NCUA Conserves U.S. Central and Western Corporate Credit Unions

The National Credit Union Administration Board today placed U.S. Central Federal Credit Union, Lenexa, Kansas, and Western Corporate (WesCorp) Federal Credit Union, San Dimas, California, into conservatorship to stabilize the corporate credit union system and resolve balance sheet issues. These actions are the latest NCUA efforts to assist the corporate credit union network under the Corporate Stabilization Plan.

The two corporate credit unions were placed into conservatorship to protect retail credit union deposits and the interest of the National Credit Union Share Insurance Fund (NCUSIF), as well as to remove any impediments to the Agency’s ability to take appropriate mitigating actions that may be necessary. ...

Corporate credit unions do not serve consumers. They are chartered to provide products and services to the credit union system. These products and services will continue uninterrupted and there is no direct impact by NCUA’s actions on the 90 million credit union members nationwide. ...

U.S. Central has approximately $34 billion in assets and 26 retail corporate credit union members. WesCorp has $23 billion in assets and approximately 1,100 retail credit union members. The member accounts of both credit unions are guaranteed under provisions of the previously announced NCUA Share Guarantee Program, through December 31, 2010. The Program extends NCUSIF coverage to all funds held by the two corporate credit unions.
...
Additional mortgage and asset backed security analysis and assessment of the two credit unions by NCUA staff enabled NCUA to refine NCUSIF’s required reserve for potential loss. The findings indicated an overall estimated reserve level, previously announced by NCUA, had increased from $4.7 to $5.9 billion. The specific computation and the impact of the refined reserve level are addressed in NCUA Letter No: 09-CU-06, which NCUA issued and posted online today at http://www.ncua.gov/letters/letters.html.

NCUA is hosting a webcast Monday, March 23 at 2 p.m. to provide the credit union community with an update on the corporate credit union stabilization program.

Assets of $57 billion? There are some losses coming ...

by Calculated Risk on 3/20/2009 06:26:00 PM

From the FDIC: FDIC Approves the Payout of Insured Deposits of FirstCity Bank, Stockbridge, Georgia

The Federal Deposit Insurance Corporation (FDIC) approved the payout of the insured deposits of FirstCity Bank, Stockbridge, Georgia. The bank was closed today by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver.
...
As of March 18, 2009, FirstCity had total assets of $297 million and total deposits of $278 million. At the time of closing, the bank had approximately $778,000 in deposits that exceeded the insurance limits. This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers.
...
The FDIC estimates the cost of the failure to its Deposit Insurance Fund to be approximately $100 million. FirstCity Bank is the eighteenth FDIC-insured institution to fail this year. The last bank to fail in Georgia was Freedom Bank of Georgia, Commerce, on March 6, 2009.

It feels like Friday ...

by Calculated Risk on 3/20/2009 04:12:00 PM

While we wait for the FDIC, here is a look at the market.

The S&P 500 was off 2%

The Dow was off 1.65%

The NASDAQ was off 1.8%

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 3/20/2009 03:33:00 PM

From Reuters: General Growth loses some malls after defaults

A Louisiana court issued an order to seize and sell a General Growth Properties Inc GGP.N shopping center in a New Orleans suburb after the No. 2 U.S. mall owner failed to repay a $95 million loan, a Citigroup ... unit said on Friday.

The Oakwood Shopping Center in the town of Gretna is the fourth General Growth property seized in the last few days after the company failed to pay mortgage debt.

A possible General Growth Properties bankruptcy could happen in the next few days.

by Calculated Risk on 3/20/2009 12:52:00 PM

From the LA Times: California unemployment hits 10.5% in February

California's unemployment rate rose for the 11th straight month in February, hitting 10.5% as a recession-wracked economy shed 116,000 jobs across all professions and industries, the state reported today.

The number is up from 10.1% in January and is the highest since April 1983.

The unemployment rate in California peaked at 11% in the early '80s.

Here is the EDD report. Construction employment is off 18.5% from Feb '08 to Feb '09. This is over 155,000 construction jobs lost in California alone over the last 12 months.

by Calculated Risk on 3/20/2009 11:30:00 AM

UPDATE: Here is the transcript of Bernanke's speech.

Federal Reserve Chairman Ben Bernanke will speak at Noon ET on "The Financial Crisis and Community Banking", at the Independent Community Bankers of America’s convention in Phoenix, AZ.

I expect CNBC to cover this ...

Here is the CNBC feed.

by Calculated Risk on 3/20/2009 11:12:00 AM

In addition to watching for bank failures this afternoon, the 2nd largest mall owner in the U.S. - General Growth Properties - is facing a significant deadline:

From the WSJ: General Growth Shakes Up Executive Ranks

[General Growth's] most critical deadline is 5 p.m. Friday, when it hopes the majority of its bondholders will have agreed to refrain from demanding payment this year on $2.25 billion in bonds. If that effort fails, General Growth says it might need to seek Chapter 11 bankruptcy protection.

Yesterday: Moody's Cuts General Growth To Last Pre-Default Level

Moody's Investors Service lowered its ratings on debt-laden mall owner General Growth Properties Inc. (GGP) and some of its subsidiaries to C, the last stop before default, after the company let a $395 million bond payment pass without a payment earlier this week.
...
On Wednesday, Standard and Poor's Ratings Services lowered its credit ratings on the company to default on the missed bond payment.

by Calculated Risk on 3/20/2009 09:03:00 AM

From HotelNewsNow.com: STR reports U.S. hotel data for week ending 14 March

The U.S. hotel industry posted declines in three key performance measurements during the week of 8-14 March 2009, according to data from STR..

In year-over-year measurements, the industry’s occupancy fell 15.7 percent to end the week at 55.2 percent. Average daily rate dropped 11.2 percent to finish the week at US$99.60. Revenue per available room for the week decreased 25.1 percent to finish at US$55.02.

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week centered average).

The three week average is off 14.4% from the same period in 2008.

Note that the average daily rate dropped significantly too, so RevPAR (Revenue per available room) is off 25.1% from last year.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com