by Calculated Risk on 6/04/2009 03:09:00 PM

Headline from the WSJ: The SEC is expected to approve civil fraud charges against former Countrywide executives as soon as today.

From CNBC: SEC to Charge Ex-Countrywide CEO: Sources

The SEC will charge Angelo Mozilo, former chairman and CEO of Countrywide Financial, with insider trading, according to people familiar with the situation.

The SEC will also charge the company's former chief operating officer, David Sambol, and former financial chief, Eric Sieracki, with securities fraud for failing to disclose the firm's relaxed lending standards in its 2006 annual report.

The charges, which are expected to be announced by the SEC later today, will not be accompanied by any criminal indictments.

by Calculated Risk on 6/04/2009 12:24:00 PM

Note: some of the decline in occupancy rate is seasonal, and the rate should increase during the Summer months - especially since leisure travel has not declined as much as business travel and Summer has a higher mix of vacation travel (see: Hotels: "By the numbers" )

From HotelNewsNow.com: STR reports US performance for week ending 30 May 2009

In year-over-year measurements, the industry’s occupancy fell 10.2 percent to end the week at 51.6 percent. Average daily rate dropped 9.6 percent to finish the week at US$93.00. Revenue per available room [RevPAR] for the week decreased 18.9 percent to finish at US$47.96.

Click on graph for larger image in new window.

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

The three week average is off 11.4% from the same period in 2008.

The average daily rate is down 9.6%, so RevPAR is off 18.9% from the same week last year.

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

by Calculated Risk on 6/04/2009 09:53:00 AM

From Bloomberg: Corus Bankshares Said to Draw Interest From Colony, Related

... Colony Capital LLC and ... Related Cos. have indicated they may seek to buy the assets of Corus Bankshares Inc. ...

Corus ... hired Bank of America Corp. to solicit capital this month or sell the entire firm to avoid being shuttered ... Investors may offer to buy the lender while it’s still in business or to purchase its assets out of receivership, said the people, who requested anonymity because the process isn’t public.
...
Federal regulators found that Corus was undercapitalized and may place the bank into receivership if it fails to satisfy capital requirements, according to the May filing. Its nonperforming assets more than quadrupled to $2.5 billion as of March 31, the filing showed. It had reserves of $338.6 million and reported a first-quarter loss of $285 million.
emphasis added

From the Corus 10-Q in May:

In its report dated April 6, 2009, our independent registered public accounting firm stated that our net losses raise substantial doubts about our ability to continue as a going concern. Our ability to continue as a going concern is in doubt as a result of the continued deterioration of our loan portfolio and is subject to our ability to service our existing loans in a manner that will return the Company to profitability or, in the alternative, identify and consummate a strategic transaction, including the potential sale of the Company.
...
The Bank may be subject to a federal conservatorship or receivership if it cannot comply with the OCC Order, the Prompt Corrective Action requirements, or if its condition continues to deteriorate.

This is similar to BankUnited, except we don't have a date. Something to watch for tomorrow.

by Calculated Risk on 6/04/2009 08:35:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending May 30, the advance figure for seasonally adjusted initial claims was 621,000, a decrease of 4,000 from the previous week's revised figure of 625,000. The 4-week moving average was 631,250, an increase of 4,000 from the previous week's revised average of 627,250.
...
The advance number for seasonally adjusted insured unemployment during the week ending May 23 was 6,735,000, a decrease of 15,000 from the preceding week's revised level of 6,750,000.

Click on graph for larger image in new window.

This graph shows weekly claims and continued claims since 1971.

Continued claims declined slightly to 6.73 million after increasing for 19 consecutive weeks. This is 5.0% of covered employment.

Note: continued claims peaked at 5.4% of covered employment in 1982 and 7.0% in 1975. So this isn't a record as a percent of covered employment.

The four-week average of weekly unemployment claims increased this week by 4,000, and is now 27,500 below the peak of 7 weeks ago. There is a reasonable chance that claims have peaked for this cycle, but it is still too early to be sure, and if so, continued claims should peak soon.

The level of initial claims (over 621 thousand) is still very high, indicating significant weakness in the job market.

In other employment news, the Monster Employment Index declined slightly in May:

The Monster Employment Index edged two points lower in May, as U.S. online recruitment activity eased slightly following a seasonal rise in April. Year-over-year, the Index was down 29 percent, a slight improvement from the previous month, indicating the rate of slowdown in the labor market may have stabilized.

by Calculated Risk on 6/03/2009 10:08:00 PM

The Daily Show With Jon Stewart	M - Th 11p / 10c
BiG Mess
thedailyshow.com
Daily Show Full Episodes Political Humor Economic Crisis

by Calculated Risk on 6/03/2009 05:50:00 PM

From the FDIC: FDIC Statement on the Status of the Legacy Loans Program

The FDIC today formally announced that development of the Legacy Loans Program (LLP) will continue, but that a previously planned pilot sale of assets by open banks will be postponed. In making the announcement, Chairman Bair stated, "Banks have been able to raise capital without having to sell bad assets through the LLP, which reflects renewed investor confidence in our banking system. As a consequence, banks and their supervisors will take additional time to assess the magnitude and timing of troubled assets sales as part of our larger efforts to strengthen the banking sector."

As a next step, the FDIC will test the funding mechanism contemplated by the LLP in a sale of receivership assets this summer. This funding mechanism draws upon concepts successfully employed by the Resolution Trust Corporation in the 1990s, which routinely assisted in the financing of asset sales through responsible use of leverage. The FDIC expects to solicit bids for this sale of receivership assets in July.

Chairman Bair added, "The FDIC will continue its work on the LLP and will be prepared to offer it in the future as an important tool to cleanse bank balance sheets and bolster their ability to support the credit needs of the economy."

Yeah, they will be prepared to offer the program.

Just more wasted letters ... MLEC!

by Calculated Risk on 6/03/2009 03:39:00 PM

Note: Market graph at bottom of post.

Mark Lomanno, President of Smith Travel Research gave a presentation on hotel performance in New York. Stacey Higgins at HotelNewsNow has some details: NYU: By the numbers

When contrasting this downturn with others, one of the most important differences is that as demand has declined at historically low rates, supply is still increasing.
...
Another noteworthy trend is the weakness of weekday performance, according to Lomanno.

Here are a couple of graphs from Lomanno's presentation:

Click on graph for larger image in new window.

The first graph shows the 12 month moving average for hotel room supply and demand.

As Lomanno noted, this is very unusual for supply to be increasing while demand is falling - and this is probably because of the huge surge in hotel construction in recent years (and these projects are just now being completed).

The second graph shows investment in lodging (based on data from the BEA) as a percent of GDP through Q1 2009.

The recent boom in lodging investment has been stunning. Lodging investment peaked at 0.33% of GDP in Q3 2008 and is now declining sharply (0.28% in Q1 2009).

Notice that lodging investment continued to grow right into the recession - suggesting very loose lending for new hotel construction.

And the final chart - also from Lomanno's presentation - shows that weekday lodging (business travel) has fallen off much more than weekend lodging (leisure travel).

For weekdays, occupancy is off 14.4% and RevPAR (revenue per available room) is off 21.4%.

This suggests there might be a little increase in occupancy later this year as businesses gain confidence.

************************

By popular demand ... 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 6/03/2009 02:40:00 PM

From Kansas Fed President Thomas Hoenig: An Economy at Risk: Tough Decisions Ahead. A few excerpts:

"While I am convinced the economic recovery we all want will develop, it will be slower and more fragile than we hope for."
...
"I would direct you to an article by Martin Barnes, the managing editor of Bank Credit Analyst, published in May. In estimating the effect on consumption growth if the annual savings rate steadily increased from zero to 8 percent between now and the end of 2013, the article suggests that consumer spending would grow at an average rate of only 1.3 percent per year. This would be a significant reduction of consumption growth, the slowest since the 1930s."
...
"The markets won't be fooled by artificially low rates for long. Market participants realize that a period of high deficits and accommodative monetary policy are an invitation to increased inflationary pressure. I suspect we are experiencing the first signs of the markets' concerns in the rising rates and increased volatility in longer-term Treasury markets. I suggest strongly that we need to be alert to the markets' message and begin in earnest to bring monetary policy into better balance before inflation forces our hand."

It is interesting that Hoenig believes growth will be sluggish for some time, and he is still advocating raising rates. This will not happen any time soon.

by Calculated Risk on 6/03/2009 12:54:00 PM

Click on cartoon for larger image in new window.

Eric Lewis sent me this great cartoon this morning!

I'm sure many homeowners are saying "Uh oh!"

Enjoy ...

by Calculated Risk on 6/03/2009 11:01:00 AM

This was released earlier this morning ...

From the ISM: May 2009 Non-Manufacturing ISM Report On Business®

The NMI (Non-Manufacturing Index) registered 44 percent in May, 0.3 percentage point higher than the 43.7 percent registered in April, indicating contraction in the non-manufacturing sector for the eighth consecutive month, but at a slightly slower rate. The Non-Manufacturing Business Activity Index decreased 2.8 percentage points to 42.4 percent. The New Orders Index decreased 2.6 percentage points to 44.4 percent, and the Employment Index increased 2 percentage points to 39 percent. The Prices Index increased 6.9 percentage points to 46.9 percent in May, indicating a slower decrease in prices from April.
...
Some respondents indicate that there are signs of stabilization, while others continue to have a negative outlook on the economy.

Still contracting, but at a slower pace.