by Calculated Risk on 4/25/2009 02:45:00 PM

From Jon Lansner at the O.C. Register: No recovery seen for housing until late 2010. A few excerpts (not in order):

Nobody has a bigger stack of housing data than the First American real estate information empire from Santa Ana. We figured we’d ask Sam Khater, an economist at First American’s CoreLogic unit, what’s up ...

Lansner: Bottom this year?

Sam: I think, absolutely, there first chance for any kind of housing recovery is late 2010. We’ll see some bumps from the stimulus and the economy will look somewhat better than it really is. But we won’t see any housing bottom — and I’m talking prices — until late 2010. To me, the price is the most important thing.
...
Lansner: We seem to be enjoying a sales bump recently …

Sam: ... What you’re seeing in California is an uptick in distressed sales. All things being equal, the distressed sales will eventually wear off and sales will slow again.

... We have to remember what a normal year us. We’re not that far below, in terms of sales. You’ve got to view some of these housing numbers through a long-term series.
emphasis added

It seems most economists are looking for "stabilization" in existing home sales. I've been making the argument for some time that existing home sales will probably fall further, see: Home Sales: The Distressing Gap

And here is a long term graph:

Click on graph for larger image in new window.

This graph shows existing home turnover as a percent of owner occupied units. Sales for 2009 are estimated at the March rate of 4.57 million units.

I've also included inventory as a percent of owner occupied units (all year-end inventory, except 2009 is for March).

The turnover rate is just below the median of the last 40 years - and will probably fall further in coming years.

Also - notice when Khater is talking a housing "bottom" he makes it clear he is talking prices. There are typically two bottoms for a housing bust - the first is for residential investment (new home sales, housing starts, etc.) and the second - usually much later - is for existing home prices.

by Calculated Risk on 4/25/2009 08:55:00 AM

From The Times: Spain's unemployment rate leaps to record high

According to the country's National Statistics Institute a record high figure of 17.4 per cent were unemployed in the first quarter of the year.

Unemployment leapt from 13.9 per cent in the fourth quarter of 2008, the biggest quarterly jump since 1976. Joblessness in Spain has almost doubled in a year.
...
Dominic Bryant, an economist with BNP Paribas, said: “The momentum is clearly there for something well above 20 per cent, it's odds on, really. My forecast is that it gets to something around about 23 per cent.”

And in Britain, from the Telegraph: British economy shrinks at fastest pace for 30 years during first quarter of 2009

Gross domestic product (GDP) fell by 1.9pc in the first quarter ... a sharper decline than the 1.6pc fall in the final quarter of 2008 when Britain officially entered recession.

It was the sharpest quarterly fall in GDP since 1979, when it fell by 2.4pc in the third quarter.

In the U.S. the headline GDP number is the real (inflation adjusted) quarterly change, seasonally adjusted at an annual rate (SAAR). In Britain and the EU, the headline GDP number is the real quarterly change, but it is not the annual rate. So a 1.9% decline in the U.K. is about the same as a 7.6% decline (SAAR) in the U.S. Ouch!

by Calculated Risk on 4/24/2009 10:04:00 PM

Note to the Fed: Clearly some analysts have the 12 categories and related indicative loss rates. To be fair, the Fed should release this additional information ASAP.

A few analyst quotes via Bloomberg: Rosner, Davis, Investors Comment on Fed Model for Stress Tests

“The anticipation over the white paper appears to be much ado about nothing. The most significant numbers provided by the Fed in the paper appear to be the page numbers.”
Josh Rosner, an analyst at Graham Fisher & Co. in New York.

“[C]ompletely worthless. We were looking for the translation of the economic forecasts to loan losses and we didn’t get that.”
David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia.

“The assumptions the regulators have used here seem to imply that they’re anticipating a bottoming out of the economic downturn. The momentum in the economy might potentially make the alternative more adverse scenario the baseline scenario.”
Jeff Davis, director of research at Howe Barnes Hoefer & Arnett in Chicago.

Each analyst makes a key point.

I think the only interesting number in the white paper was "12"; the Fed noted that the banks were "instructed to project losses for 12 separate categories of loans".

Based on how the Fed reports Charge-off and Delinquency Rates, we can guess the 12 categories (Update: these are listed in the appendix):

Residential real estate first liens, three categories: Prime, Alt-A, Subprime.

Residential real estate 2nd liens, two categories: closed end juniors, HELOCs.

Commercial real estate (CRE), three categories: Construction & Development (C&D), Multi-family, and other (nonfarm, nonresidential) Note: this is how the Fed breaks up CRE.

Consumer Loans, two categories: Credit Cards, Other.

Commercial & Industrial (C&I)

All other (agricultural, leases).

As David Trone noted, why didn't the Fed provide the "translation of the economic forecasts to loan losses"? The Fed noted that the banks "were provided with a range of indicative two‐year cumulative loss rates for each of the 12 loan categories for the baseline and more adverse scenarios." Why not provide these indicative loss rates?

Heck, the WSJ has leaked some of these loss rates:

The Wall Street Journal released details of a confidential document that the Federal Reserve gave banks in February. The document provided details about the formulas regulators used to assess loan losses in a worsening economic environment.
...
One scenario that assumed a 10.3% unemployment rate at the end of 2010 required banks to calculate two-year cumulative losses of 8.5% on mortgage portfolios, 11% on home-equity lines of credit, 8% on commercial and industrial loans, 12% on commercial real-estate loans and 20% on credit-card portfolios.

Click on graph for larger image in new window.

Under those assumptions, 13 of the banks undergoing the stress tests could be hit with $240 billion of losses, according to Westwood Capital LLC.

Clearly Westwood Capital has the indicative loss rates - doesn't that create an unfair playing field that some people have the information and others do not?

And finally, as Jeff Davis noted (and I've been writing for some time), the "more adverse" scenario is the new baseline.

by Calculated Risk on 4/24/2009 08:07:00 PM

Like mushrooms at night
"First Bank..." souring everywhere
Outbreak in spud land.
by Soylent Green is People
From the FDIC: U.S. Bank, Minneapolis, Minnesota, Assumes All of the Deposits of First Bank of Idaho, Fsb, Ketchum, Idaho

First Bank of Idaho, FSB, Ketchum, Idaho, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with U.S. Bank, Minneapolis, Minnesota, to assume all of the deposits, excluding those from brokers, of First Bank of Idaho.
...
As of December 31, 2008, First Bank of Idaho had total assets of approximately $488.9 million and total deposits of $374.0 million. U.S. Bank paid a premium of 0.55 percent to acquire the deposits of First Bank of Idaho.
...
The FDIC estimates that the cost to the Deposit Insurance Fund will be $191.2 million. U.S. Bank's acquisition of the deposits of First Bank of Idaho was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. First Bank of Idaho is the 29th bank to fail in the nation this year and the first in the state. The last FDIC-insured institution to fail in Idaho was Northwestern Federal Savings and Loan Association, Boise, on August 26, 1988.

That makes four ...

by Calculated Risk on 4/24/2009 08:03:00 PM

Unbelievable !!!
Irresponsibility =
Assimilation :(
by Soylent Green is People

From the FDIC: FDIC Approves the Payout of the Insured Deposits of First Bank of Beverly Hills, Calabasas, California

The Federal Deposit Insurance Corporation (FDIC) approved the payout of the insured deposits of First Bank of Beverly Hills, Calabasas, California. The bank was closed today by the California Department of Financial Institutions, which appointed the FDIC as receiver.

For insured deposits placed directly with the bank and not through a broker, the FDIC will mail these customers checks for their insured funds on Monday. ...

First Bank of Beverly Hills, as of December 31, 2008, had total assets of $1.5 billion and total deposits of $1 billion. It is estimated that the bank has $179,000 of uninsured deposits.
....
First Bank of Beverly Hills is the 28th FDIC-insured institution to fail this year and the fourth in California. The last bank to be closed in the state was County Bank, Merced, on February 6, 2009. The FDIC estimates the cost of the failure to its Deposit Insurance Fund to be approximately $394 million.

That is three. No one wanted this one ...

by Calculated Risk on 4/24/2009 06:38:00 PM

Heritage failed,
A legacy for our kids.
Debt slaves forever.
by Soylent Green is People
From the FDIC: Level One Bank, Farmington Hills, Michigan, Assumes All of the Deposits of Michigan Heritage Bank, Farmington Hills

Michigan Heritage Bank, Farmington Hills, Michigan, was closed today by the Michigan Office of Financial and Insurance Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Level One Bank, Farmington Hills, Michigan, to assume all of the deposits, excluding those from brokers, of Michigan Heritage.
...
As of December 31, 2008, Michigan Heritage had total assets of approximately $184.6 million and total deposits of $151.7 million. Level One paid a premium of 1.16 percent to acquire the deposits of Michigan Heritage.
...
The FDIC estimates that the cost to the Deposit Insurance Fund will be $71.3 million. Level One's acquisition of all the deposits of Michigan Heritage was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. Michigan Heritage is the 27th bank to fail in the nation this year and the first in the state. The last bank to fail in Michigan was Main Street Bank, Northville, on October 10, 2008.

Two down today.

by Calculated Risk on 4/24/2009 04:50:00 PM

Update: Summary of posts today:

Two posts on New Home sales: New Home Sales: 356 Thousand SAAR in March and Home Sales: The Distressing Gap

Stress Test white paper from the Federal Reserve. This just outlined how the tests are being performed.

A large credit union failed, and one small FDIC insured bank (the 26th this year).



Here is the CNBC feed.

And a live feed from C-SPAN.

by Calculated Risk on 4/24/2009 04:47:00 PM

Fiduciary
A strange word to bankers
Result: ...takeover.
by Soylent Green is People

From the FDIC: Bank of North Georgia, Alpharetta, Georgia, Assumes All of The Deposits of American Southern Bank, Kennesaw, Georgia

American Southern Bank, Kennesaw, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Bank of North Georgia, Alpharetta, Georgia, to assume all of the deposits, excluding those from brokers, of American Southern Bank.
...
As of March 30, 2009, American Southern Bank had total assets of approximately $112.3 million and total deposits of $104.3 million. Bank of North Georgia paid a premium of 0.003 percent to acquire the deposits of American Southern Bank.
...
In addition to acquiring $55.6 million of the failed bank's deposits, Bank of North Georgia agreed to purchase approximately $31.3 million in assets. The FDIC will retain any remaining assets for later disposition.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $41.9 million. Bank of North Georgia's acquisition of all the deposits of American Southern Bank was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. American Southern Bank is the 26th bank to fail in the nation this year and the fifth in the state. The last bank to fail in Georgia was Omni National Bank, Atlanta, on March 29.

It is Friday!

by Calculated Risk on 4/24/2009 04:00:00 PM

Update: C-SPAN is showing the Geithner press conference at 4:45 PM ET:

Here is the CNBC feed.

And a live feed from C-SPAN.

Here is something to discuss while we wait for Treasury Secretary Geithner's press conference and the FDIC ... (although a significant credit union was already seized today).

Click on graph for larger image in new window.

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

These are the four worst S&P 500 / DOW bear market in the U.S.

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

For a comparison to the Nikkei, and NASDAQ crashes, see Doug's: "The Mega-Bear Quartet and L-Shaped Recoveries".

And here is another update on the Chrysler first lien negotiations. Note: I have no idea why this is so public.

The diagram shows the offers and counteroffers from the banks.

From the WSJ: Chrysler's Lenders to Make New Offer on Debt

The lending group has proposed cutting the $6.9 billion Chrysler owes them down to $3.75 billion, according to a person familiar with the offer.
...
The lenders decided not to lower the 40% equity stake in Chrysler they are seeking ... The creditors also dropped their request for $1 billion of preferred stock in Chrysler and that Fiat SpA put $1 billion of cash into Chrysler

Just 6 days to go ...

by Calculated Risk on 4/24/2009 03:17:00 PM

Press Release: Eastern Financial Florida Credit Union Placed In Conservatorship (ht Will)

The National Credit Union Administration (NCUA) today assumed control of the operations of Eastern Financial Florida Credit Union, a state-chartered, federally insured credit union headquartered in Miramar, Florida.
...
Eastern Financial Florida Credit Union was originally chartered in 1937 and today serves Broward, Miami-Dade, Palm Beach, Hillsborough, Pinellas counties and the Jacksonville area. The credit union has approximately $1.6 billion in assets and just over 200,000 members.

The National Credit Union Administration (NCUA) is the independent federal agency that charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government...

An early start to BFF (bank failure friday).