by Calculated Risk on 3/13/2010 11:15:00 AM

From Tom Abate at the San Francisco Chronicle: Financial leaders dissect meltdown

"What is quite shocking," [John Lipsky, a senior official of the International Monetary Fund] said, is how inadequate the world's regulatory supervisors were in curbing the lax lending standards at the heart of the housing and credit bubbles.

Shocked? Hmmm ...

by Calculated Risk on 3/13/2010 08:26:00 AM

Note: this data is not seasonally adjusted. There is a very distinct seasonal pattern for imports, but not for exports. LA area ports handle about 40% of the nation's container port traffic.

Sometimes port traffic gives us an early hint of changes in the trade deficit. The following graph shows the loaded inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.

Click on graph for larger image in new window.

Loaded inbound traffic was up 33.8% compared to February 2009. (up 9.5% compared to last year using three month average).

Of course trade collapsed in February 2009, so this is a very easy comparison. Inbound traffic was still down 18.3% vs. two years ago (Feb 2008).

Loaded outbound traffic was up 32.7% from February 2009. (+33.5% using three months average) This was also an easy YoY comparison for exports, because U.S. exports fell off a cliff in near the end of 2008.

Just as with imports, exports are still off from 2 years ago (off 10.0%).

And more from Ronald White at the LA Times: Trade numbers climb sharply at Southland ports

Trade numbers at the ports of Los Angeles and Long Beach, the nation's busiest seaport complex, rose sharply in February compared with the same month last year, lending strength to the arguments of some experts who believe that a stronger-than-anticipated recovery may be underway.
...
"Our feeling is that consumers are coming back. They are spending a bit more of their money. They are less concerned about losing their jobs than they have been in the last three months," said Ben Hackett, founder of Hackett Associates, which tracks international trade at the nation's busiest seaports for the National Retail Federation.

Hackett said his firm had scaled back its expectations for trade growth in 2010, "but we think we'll be seeing a relatively strong year at a 10% to 14% increase. We should see steady improvement, minus the usual seasonal adjustments."

The LA Times article is using the YoY numbers. However looking at the graph (red line), exports recovered in the first half of 2009, but export traffic has been mostly flat since last summer. The YoY increase for March will be much less than for February!

It is harder to tell about imports (blue line) because of the large seasonal swings.

by Calculated Risk on 3/12/2010 10:01:00 PM

A couple excerpts from American Banker: Regulatory Actions Hit a Record Level in '09

"Bank regulators issued 1,143 formal enforcement actions against banks and their holding companies last year, a new record and more than double the 2008 tally."

"Informal actions by the agencies, which are not made public and often go untracked, also doubled during that time, reaching 1,099 last year, according to data provided to American Banker."

According to the FDIC quarterly banking profile, there were 8,012 insured banks at the end of 2009. Some of these actions are double counts since regulators might issue an informal action and then a formal action against the same bank (or multiple formal actions), so we can't say the percentage of banks operating under enforcement actions (either formal or informal), but it could be in the 20% to 25% range.

A couple of quotes from the article:

"For the bank failures that have occurred so far, every one of the large loss reports the inspector general has done or any GAO investigation has concluded the reason the bank has failed is the regulator did not take early enough action or severe enough action." said [Bob Clarke, a senior partner at Bracewell & Giuliani LLP and former comptroller of the currency] said.

I've posted a few of the inspector general reports, and it appears the field examiners identified the problems early - but then insufficient actions was taken. And to put it more bluntly:

"The regulators were asleep for 10 years during the boom and there's now this remarkable turf war under way with regulatory reform," said Chris Low, chief economist for First Horizon National Corp.'s FTN Financial.

by Calculated Risk on 3/12/2010 06:07:00 PM

Bair's troops march South, East
Two gulf banks, engulfed by fail
Will they rise again?
by Soylent Green is People
From the FDIC: Centennial Bank, Conway, Arkansas, Assumes All of the Deposits of Old Southern Bank, Orlando, Florida

Old Southern Bank, Orlando, Florida, was closed today by the Florida Office of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of December 31, 2009, Old Southern Bank had approximately $315.6 million in total assets and $319.7 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $94.6 million. ... Old Southern Bank is the 29th FDIC-insured institution to fail in the nation this year, and the fourth in Florida. The last FDIC-insured institution closed in the state was Marco Community Bank, Marco Island, February 19, 2010.

From the FDIC: Home Bank, Lafayette, Louisiana, Assumes All of the Deposits of Statewide Bank, Covington, Louisiana

Statewide Bank, Covington, Louisiana, was closed today by the Louisiana Office of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of December 31, 2009, Statewide Bank had approximately $243.2 million in total assets and $208.8 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $38.1 million. ... Statewide Bank is the 30th FDIC-insured institution to fail in the nation this year, and the first in Louisiana. The last FDIC-insured institution closed in the state was The Farmers Bank & Trust of Cheneyville, Cheneyville, December 17, 2002.

Louisiana makes an appearance ...

by Calculated Risk on 3/12/2010 05:07:00 PM

Start Spread'n the news
Park Avenue's failed today
Old Blue Eyes would weep...
by Soylent Green is People
From the FDIC: Valley National Bank, Wayne, New Jersey, Assumes All of the Deposits of the Park Avenue Bank, New York, New York

The Park Avenue Bank, New York, New York, was closed today by the New York State Banking Department, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ..

As of December 31, 2009, The Park Avenue Bank had approximately $520.1 million in total assets and $494.5 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $50.7 million. .... The Park Avenue Bank is the 28th FDIC-insured institution to fail in the nation this year, and the second in New York. The last FDIC-insured institution closed in the state was LibertyPointe Bank, New, York, New York, on March 11, 2010.

OK, now it is Friday.

by Calculated Risk on 3/12/2010 04:16:00 PM

Earlier I linked to this podcast from Planet Money: We Bought A Toxic Asset! And the story is here: We Bought A Toxic Asset; You Can Watch It Die.

And here is a PDF with the details of the bond (ht daddyo, based on details in story). There are many details in the PDF - a brief excerpt:

At a 1-10 ½ price (bond notation, 1 plus 10.5/32), which is what they apparently paid, and at current 1-month prepayment speeds and severities, this bond will be gone in September. Total cashflows of $957, for an annualized yield of -41%.
...
The bond is very sensitive to your assumptions (not all bonds are like this). At 3m, 6m, and 12m historical speeds, the bond has positive yield. So the question is, do you think things are getting better, or worse? Remember, this is an Option ARM pool with recasts ramping in the summer. When will the default wave occur on the troubled borrowers? If you think it doesn’t happen until after the summer, you’ll be a-ok in this bond.

Also, remember in article, prices on this stuff are all over the place. If it was bought at a 1.8 price, it’s a loss in any scenario, and if it’s bought at a sub-dollar price, it’s a win.

And here is a tracking graphic from Planet Money.

by Calculated Risk on 3/12/2010 02:07:00 PM

From Treasury: Administration Releases February Loan Modification Report

Click on graph for larger image in new window.

Over 168,000 modifications are now permanent. 88,663 trial modificatons have been cancelled (and another 1,499 permanent mods cancelled).

Here is the report. See here for a list of reports.

Lets see: there were 553,051 cumulative HAMP trial modifications in September. There are 168,708 permanent mods - and about 90,000 cancelled. What happened to the 300 thousand or so other trial mods? Sure another 91,800 have been "approved" for a permanent modification, but that still leaves a huge number missing.

There is a note in the report that says "32% of trials started at least three month ago have been approved for converstion to permanent". But what about the over two-thirds?

The second graph shows the cumulative HAMP trial programs started.

Notice that the pace of new trial modifications has slowed sharply from over 150,000 in Septmenber to just over 70,000 in February 2010. This is slowest pace since May 2009 and is probably because of two factors: 1) servicers are now pre-qualifying borrowers, and 2) servicers are running out of eligible borrowers.

by Calculated Risk on 3/12/2010 11:30:00 AM

From Planet Money: Podcast: We Bought A Toxic Asset!

And the story is here: We Bought A Toxic Asset; You Can Watch It Die. An excerpt:

Finally, we find a beautiful, totally toxic asset at what [Wit Solberg, a former Wall Street trader] thinks is a good price: $36,000. Back in the bubble, somebody paid $2.7 million for this thing. We buy a piece from Solberg for $1,000. It's going to be our encyclopedia of the financial crisis.

What Our Toxic Asset Looks Like

Our toxic asset has 2,000 mortgages, many of them in hard-hit states like California, Arizona and Florida. A lot of the people in our bond are really struggling. Almost half are behind on their mortgage payments, and 15 percent of the homes are already in foreclosure.

At some point those homes will be taken over and sold for a loss. Every time that happens, the bond shrinks. Eventually, our part of the bond will disappear entirely.

Until then, we get a little money every month from people paying off their mortgages. We just got a check for $141. If it goes to Thanksgiving, we could double our money.

By the way, we bought the asset with our own money. Any proceeds will go to charity. If we lose money, we take the loss.

Listen to the podcast - it is pretty funny!

by Calculated Risk on 3/12/2010 10:00:00 AM

The Manufacturing and Trade Inventories and Sales report from the Census Bureau today showed that the inventory-to-sales ratio was mostly back to normal in January.

Manufacturers' and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,310.2 billion, virtually unchanged (±0.1%)* from December 2009 and down 8.6 percent (±0.3%) from January 2009.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of January was 1.25. The January 2009 ratio was 1.46.

Click on graph for larger image in new window.

This graph shows the 3 month change (annualized) in manufacturers’ and trade inventories. The inventory correction was slow to start in the 2007 recession, but it now appears the inventory adjustment is over. Growth in inventories will depend on increases in underlying demand.

The second graph shows the inventory to sales ratio. This has declined sharply to 1.25 (SA) from the peak of 1.46 back in Dec 2008. This could decline further - the trend is definitely down over time - but clearly most of the inventory adjustment is over.

This is important because the change in inventory added significantly to Q4 GDP growth. (See BEA line 13: the contribution to GDP in Q4 from 'Change in private inventories' was 3.88 of the 5.9 percent annualized increase in GDP.)

Any boost to Q1 GDP from inventory changes will be minor in comparison to Q4.

by Calculated Risk on 3/12/2010 08:30:00 AM

On a monthly basis, retail sales increased 0.3% from January to February (seasonally adjusted, after revisions), and sales were up 4.5% from February 2009 (easy comparison).

UPDATE: January was revised down sharply. Jan was originally reported at $355.8 billion, an increase of 0.5% from December.

February was reported at $355.5 billion - a decline without the revision to January.

January has been revised down to $354.3 or an increase of 0.1% from December.

Click on graph for larger image in new window.

This graph shows retail sales since 1992. This is monthly retail sales, seasonally adjusted (total and ex-gasoline).

The red line shows retail sales ex-gasoline and shows the increase in final demand ex-gasoline has been sluggish.

Retail sales are up 6.0% from the bottom, but still off 6.4% from the peak. Retail ex-gasoline are up 3.6% from the bottom and still off 5.4% from the peak.

The second graph shows the year-over-year change in retail sales (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 2.1% on a YoY basis (4.5% for all retail sales). The year-over-year comparisons are easy now since retail sales collapsed in late 2008. Retail sales bottomed in December 2008.

Here is the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $355.5 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.9 percent (±0.5%) above February 2009.
...
Gasoline stations sales were up 24.0 percent (±1.5%) from February 2009 and nonstore retailers sales were up 11.8 percent (±1.7%) from last year.