by Calculated Risk on 8/23/2009 12:36:00 AM

Here: Good News/Bad News - America's Recession

by Calculated Risk on 8/22/2009 09:02:00 PM

Excerpt from Paul Krugman: Some call it recovery

The real problem here is that the standard language doesn’t make much allowance for the kind of gray zone we’re now in; that’s because in the pre-1990 era recessions tended to be V-shaped, so that jobs snapped back as soon as GDP turned around. I don’t think what we’re going through is good news — but GDP is almost surely rising, so the recession, as normally defined, is over.
...
But the economy is not recovering in the most crucial area, job creation ...

Excerpt from The Economist: U, V or W for recovery

The world economy has stopped shrinking. That’s the end of the good news

... a rebound based on stock adjustments is necessarily temporary, and one based on government stimulus alone will not last. Beyond those two factors there is little reason for cheer. America’s housing market may yet lurch down again as foreclosures rise, high unemployment takes its toll and a temporary home-buyers’ tax-credit ends (see article). Even if housing stabilises, consumer spending will stay weak as households pay down debt. In America and other post-bubble economies, a real V-shaped bounce seems fanciful.

It does appear the cliff diving is over, and that the U.S. economy will grow in the 3rd quarter. But there are still more problems ahead for consumer spending and housing (I think housing is still the key - and I'll discuss this soon).

An immaculate recovery seems remote.

by Calculated Risk on 8/22/2009 06:40:00 PM

Here is a followup story on the Inland Empire in California, from the NY Times: A Cul-de-Sac of Lost Dreams, and New Ones

This quote caught my eye:

"You have to think of it like a gold-mining town in a Clint Eastwood movie,” Mr. [John Husing, an economist whose expertise is Southern California] said. “Money comes to a place where there has never been any, and next there are tool stores, a saloon, a general store and so on. But the saloon doesn’t exist without the gold mine, and the gold mine here was construction.”

Exactly. And the gold mine closed a few years ago.

Here is how I saw it in 2006 for the Inland Empire:

As the housing bubble unwinds, housing related employment will fall; and fall dramatically in areas like the Inland Empire. The more an area is dependent on housing, the larger the negative impact on the local economy will be.

So I think some pundits have it backwards: Instead of a strong local economy keeping housing afloat, I think the bursting housing bubble will significantly impact housing dependent local economies.

by Calculated Risk on 8/22/2009 01:37:00 PM

From Felix Salmon at Reuters: Fed official: rates to be kept low past upturn (ht Anthony)

Financial markets have not fully understood that the U.S. Federal Reserve's pledge to keep interest rates exceptionally low for an extended period means they will stay low beyond when officials normally would raise them, a top Fed official said on Friday.

"I don't think markets have really digested what that means," St Louis Fed President James Bullard said in an interview.

The Fed's strategy is aimed at promoting a future rise in inflation, which should provide an immediate boost in activity in anticipation of a future boom, but that hasn't happened, Bullard said.

Bullard is repeating the FOMC statement:

The Committee ... continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

Bullard thinks the markets haven't "digested what that means" - rates will be low for a long time - maybe through much or all of 2010.

Here is an interview with Bullard on a few other subjects, expects slow growth, discusses unwinding current policy.

by Calculated Risk on 8/22/2009 08:34:00 AM

As a companion to the Problem Bank List (unofficial), below is a list of failed banks since Jan 2007.

But first a few graphs ...

Click on graph for larger image in new window.

The graph shows the cumulative estimated losses to the FDIC Deposit Insurance Fund (DIF) and the quarterly assets of the DIF (as reported by the FDIC). Note that the FDIC takes reserves against future losses in the DIF, and collects fees and special assessments - so you can't just subtract estimated losses from assets to determine the assets remaining in the DIF.

The FDIC closed four more banks on Friday, and that brings the total FDIC bank failures to 81 in 2009. The following graph shows bank failures by week in 2009.

Note: Week 1 on graph ends Jan 9th.

The FDIC is seizing about 4 to 5 banks per week recently, and with over four months to go in 2009, this suggests close to 150 bank failures this year.

At the current pace there will be more failures in 2009 than in the early years of the S&L crisis. From 1982 thorough 1984 there were about 100 failures per year, and then the number of failures really increased as the 2nd graph shows.

The 2nd graph covers the entire FDIC period (annually since 1934).

For a graph that includes the 1920s and early '30s (before the FDIC was enacted) see the 3rd graph here.

Of course the number of banks isn't the only measure. Many banks today have more branches, and far more assets and deposits.

Failed Bank List

Deposits, assets and estimated losses are all in thousands of dollars.

Losses for failed banks in 2009 are the initial FDIC estimates. The percent losses are as a percent of assets.

See description below table for Class and Cert (and a link to FDIC ID system).

The table is wide - use scroll bars to see all information!

NOTE: Columns are sortable - click on column header (Assets, State, Bank Name, Date, etc.)





Class: from FDIC

The FDIC assigns classification codes indicating an institution's charter type (commercial bank, savings bank, or savings association), its chartering agent (state or federal government), its Federal Reserve membership status (member or nonmember), and its primary federal regulator (state-chartered institutions are subject to both federal and state supervision). These codes are:

N National chartered commercial bank supervised by the Office of the Comptroller of the Currency

SM State charter Fed member commercial bank supervised by the Federal Reserve

NM State charter Fed nonmember commercial bank supervised by the FDIC

SA State or federal charter savings association supervised by the Office of Thrift Supervision

SB State charter savings bank supervised by the FDIC

Cert: This is the certificate number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. You can click on the number and see "the last demographic and financial data filed by the selected institution".

by Calculated Risk on 8/21/2009 09:01:00 PM

From Bloomberg at Jackson Hole: (ht km4)

We are up to 81 bank failures this year, and 109 since the crisis started. With 391 banks on the unofficial problem bank list (and more to come), I think 300 is probably low. I'll take the over ...

by Calculated Risk on 8/21/2009 07:09:00 PM

A mushroom cloud forms
Deep in the heart of Texas
Guaranty is ash
by Soylent Green is People
From the FDIC: BBVA Compass, Birmingham, Alabama, Assumes All of the Deposits of Guaranty Bank, Austin, Texas

Guaranty Bank, Austin, TX was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of June 30, 2009, Guaranty Bank had total assets of approximately $13 billion and total deposits of approximately $12 billion. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3 billion. ... Guaranty Bank is the 81st FDIC-insured institution to fail in the nation this year, and the second in Texas. The last FDIC-insured institution closed in the state was Millennium State Bank of Texas, Dallas, July 2, 2009.

Added by request from Soylent Green is People:

by Calculated Risk on 8/21/2009 06:10:00 PM

Birmingham failure
Georgia, running out of banks?
South will sink again...
by Soylent Green is People
From the FDIC: United Bank, Zebulon, Georgia, Assumes All of the Deposits of First Coweta, Newnan, Georgia

First Coweta, Newnan, Georgia was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver....

As of July 31, 2009, First Coweta had total assets of $167 million and total deposits of approximately $155 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $48 million. ... First Coweta is the 79th FDIC-insured institution to fail in the nation this year, and the eighteenth in Georgia. The last FDIC-insured institution closed in the state was ebank, Atlanta, earlier today.

From the FDIC: IBERIABANK, Lafayette, Louisiana, Assumes All of the Deposits of CapitalSouth Bank, Birmingham, Alabama

CapitalSouth Bank, Birmingham, Alabama, was closed today by the Alabama State Banking Department, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of June 30, 2009, CapitalSouth Bank had total assets of $617 million and total deposits of approximately $546 million....

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $151 million. ... CapitalSouth Bank is the 80th FDIC-insured institution to fail in the nation this year, and the second in Alabama. The last FDIC-insured institution closed in the state was Colonial Bank, Montgomery, on August 14, 2009.

by Calculated Risk on 8/21/2009 05:15:00 PM

Once Internet fave
Ebank has been pushed off-line
Now mere vapor ware.
by Soylent Green is People
From the FDIC: Stearns Bank, National Association, St. Cloud, Minnesota, Assumes All of the Deposits of ebank Atlanta, Georgia

ebank, Atlanta, Georgia, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of July 10, 2009, ebank had total assets of $143 million and total deposits of approximately $130 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $63 million. ... ebank is the 78th FDIC-insured institution to fail in the nation this year, and the seventeenth in Georgia. The last FDIC-insured institution closed in the state was Security Bank of Jones County, Gray, on July 24, 2009.

The costs to the DIF are esimtated at 44% of assets. Ouch.

It is Friday!

by Calculated Risk on 8/21/2009 04:00:00 PM

NEW Problem Bank List (Unofficial) Aug 21, 2009

Note: Market Graph at bottom ...

NOTE: the months line up with the lines on the following two graphs - sorry if that was confusing.

Click on graph for larger image in new window.

Here is another graph of inventory. This graph shows inventory since 2002 by year.

The dotted lines (2002 - 2004) are for the boom years. 2005 (dashed green) is the transition year at the end of the boom. And the solid colors are for the bust years.

The second graph shows months of supply for the same years.

Although inventory and months of supply are lower than in 2007 and 2008, the levels are still very high.

It is important to watch inventory levels very carefully. If you look at the 2005 inventory data, instead of staying flat for most of the year (like the previous bubble years), inventory continued to increase all year. That was one of the key signs that led me to call the top in the housing market!

Note: there is probably a substantial shadow inventory – foreclosures coming as shown by the MBA delinquency survey yesterday, and homeowners wanting to sell, but waiting for a better market - so existing home inventory levels will probably stay elevated for some time. There are also reports of REOs being held off the market, so inventory is probably under reported.

The third graph shows the year-over-year change in existing home inventory.

My guess is prices will probably continue to fall until the months of supply reaches more normal levels (closer to 6 months compared to the current 9.4 months), and that will take some time.

However this general trend of declining year-over-year inventory levels is a positive for the housing market (while remembering the shadow inventory).


Here is the market graph from Doug Short, Doug Short matching up the market bottoms for four crashes (with an interim bottom for the Great Depression).

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