by Calculated Risk on 8/29/2011 01:48:00 PM

Perhaps some progress on the next bailout for Greece ...

From Dow Jones: Finland Working To Resolve Collateral Issue - Foreign Minister

Finland expects a solution to be found for its demand for collateral from Greece before contributing to the bailout fund, the country's European Affairs and Foreign Minister said Monday.

"Finland is not out to cause problems, but to find solutions," Alexander Stubb told a joint news conference in Helsinki, after a lunch with German Deputy Foreign Minister Werner Hoyer

From Bloomberg: Germany’s Hoyer Tells Finns to ‘Not Rock the Boat’ on Euro

German Deputy Foreign Minister Werner Hoyer warned euro-area countries not to destabilize the currency after Finland demanded collateral in return for agreeing to a second Greek aid package.

The euro is “of utmost importance to all of us in Europe, in particular for countries like Finland and Germany,” Hoyer told reporters at a joint news conference in Helsinki today with Finnish Foreign Trade Minister Alexander Stubb. “So let us not rock the boat.”
...
Germany is “approaching the question with care” and will wait to see the outcome of the collateral model that transpires, Hoyer said. “Finland doesn’t have the reputation as a troublemaker, so I’m very optimistic.”

The Greek 2 year yield is at 45.6% and the 10 year yield increased to 18.1% today.

Here is a graph of the 10 year spread (Italy to Germany) from Bloomberg. And for Spain to Germany. The Italian spread is at 286, down from 389 on Aug 4th, and the Spanish spread is at 279, down from 398 on Aug 4th. Moving sideways.

The Portuguese 2 year yield is down a little to 13.2%. Also the Irish 2 year yield is at 8.6%. And the French 10 year is at 2.9%. So this is a Greek issue right now.

Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year

Earlier:
• Personal Income increased 0.3% in July, Spending increased 0.8%
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th

by Calculated Risk on 8/29/2011 10:30:00 AM

From the Dallas Fed: Texas Manufacturing Activity Flat

Texas factory activity was largely unchanged in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained positive but fell from 10.8 to 1.1, suggesting growth stalled this month.

The new orders index fell from 16 to 4.8 this month, suggesting order volumes continued to increase, but at a decelerated pace. ... The capacity utilization index dipped into negative territory in August, with one-quarter of manufacturers noting a decrease ... The employment index came in at 5.4, down from 12.1 in July. Twenty-three percent of manufacturers reported hiring new workers, while 17 percent reported layoffs. The hours worked index fell from 7.9 to –2.2, suggesting average workweeks shrank.

This was above the consensus view of -6.

This is the last of the regional Fed surveys for August. The regional surveys provide a hint about the ISM manufacturing index - and the regional surveys were very weak in August.

Click on graph for larger image in graph gallery.

The New York and Philly Fed surveys are averaged together (dashed green, through August), and five Fed surveys are averaged (blue, through August) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through July (right axis).

The early surveys in August were especially weak (Philly Fed and Empire State), although the surveys later in the month were a little better. Both the Kansas City and Texas surveys showed slight expansion in August, although the Richmond survey showed contraction. The ISM index for August will be released Thursday, Sept 1st, and the consensus is for a decrease to 48.5 from 50.9 in July.

Earlier:
• Personal Income increased 0.3% in July, Spending increased 0.8%
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th

by Calculated Risk on 8/29/2011 10:00:00 AM

From the NAR: Pending Home Sales Slip in July but Up Strongly From One Year Ago

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 1.3 percent to 89.7 in July from 90.9 in June but is 14.4 percent above the 78.4 index in July 2010. The data reflects contracts but not closings.
...
The PHSI in the Northeast declined 2.0 percent to 67.5 in July but is 9.7 percent above July 2010. In the Midwest the index slipped 0.8 percent to 79.1 in July but is 18.8 percent above a year ago. Pending home sales in the South fell 4.8 percent to an index of 94.4 but are 9.5 percent higher than July 2010. In the West the index rose 3.6 percent to 110.8 in July and is 20.6 percent above a year ago.

The consensus was for a 1% decrease in the index. This suggests existing home sales will stay weak.

Earlier:
• Personal Income increased 0.3% in July, Spending increased 0.8%
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th

by Calculated Risk on 8/29/2011 08:30:00 AM

The BEA released the Personal Income and Outlays report for July:

Personal income increased $42.4 billion, or 0.3 percent ... in July ... Personal consumption expenditures (PCE) increased $88.4 billion, or 0.8 percent.
...
Real PCE increased 0.5 percent ... The price index for PCE increased 0.4 percent in July

The following graph shows real Personal Consumption Expenditures (PCE) through July (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image in graph gallery.

PCE increased 0.8 in July, and real PCE increased 0.5% as the price index for PCE increased 0.4 percent in July.

Note: The PCE price index, excluding food and energy, increased 0.2 percent, the same increase as in June.

The personal saving rate was at 5.0% in July.

Personal saving -- DPI less personal outlays -- was $582.8 billion in July, compared with $638.6 billion in June. Personal saving as a percentage of disposable personal income was 5.0 percent in July, compared with 5.5 percent in June.

This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the June Personal Income report.

Real PCE was revised up a little for Q2 too. This was a solid increase in spending and above the consensus of 0.5% - however I expect August to be weaker due to the confidence shattering debt ceiling debate.

by Calculated Risk on 8/29/2011 12:00:00 AM

Nothing new, but a summary of some of the headwinds for the large banks face - and the prospects for more layoffs (ht Brian).

From Eric Dash at the NY Times: As Fortunes Dim, Banks Confront a Leaner Future

Battered by a weak economy, the nation’s biggest banks are cutting jobs, consolidating businesses and scrambling for new sources of income ... UBS has announced 3,500 layoffs, 5 percent of its staff, and Citigroup is quietly cutting dozens of traders. Bank of America could cut as many as 10,000 jobs, or 3.5 percent of its work force. ABN Amro, Barclays, Bank of New York Mellon, Credit Suisse, Goldman Sachs, HSBC, Lloyds, State Street and Wells Fargo have in recent months all announced plans to cut jobs — tens of thousands all told.
...
Lending, the prime driver of revenue, has been depressed for several years and is not expected to pick up anytime soon ... Trading profits have also been waning amid a slowdown in volumes, and Wall Street’s once-lucrative mortgage packaging business is unlikely to bring in the blockbuster fees it earned during the housing boom.

On top of that, the financial regulations enacted by Congress last year are causing banks to add more risk managers and compliance staff ...

Yesterday:
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th

by Calculated Risk on 8/28/2011 05:21:00 PM

Last week I noted that 1-4 family Real Estate Owned (REO) by FDIC insured institutions declined to an estimated 80,600 in Q2. As Tom Lawler noted, the FDIC does not collect data on the number of properties held by FDIC-insured institutions, instead they aggregate the carrying value of 1-4 family residential REO on FDIC-insured institutions’ balance sheets.

Here is a graph of the 1-4 family REO carrying value for FDIC insured institutions since Q1 2003.

For Q2 2011, the FDIC reported (See Table V-A) the value was $12.09 billion, down from $13.28 billion in Q1, and down from a high of $14.76 billion in Q3 2010.

Click on graph for larger image in new window.

The left scale is the dollars reported in the FDIC Quarterly Banking Profile, and the right scale is an estimate of REOs using an average of $150,000 per unit. Using this estimate for the average per REO, that gives 80.6 thousand REO at the end of Q2, down from 88.5 thousand at the end of Q1. This is about 5 times the carrying value in 2003.

Note: FDIC insured institutions have other REO and this is just the 1-4 family residential REO (other REO includes Construction & Development, Commercial, Farm Land).

Of course this is just a small portion of the total REO. Here is a repeat of the graph I posted last week showing REO inventory for Fannie, Freddie, FHA, Private Label Securities (PLS), and FDIC insured institutions. (economist Tom Lawler has provided some of this data).

Total REO decreased to 493,000 in Q2 from almost 550,000 in Q1.

As Tom Lawler noted: "This is NOT an estimate of total residential REO, as it excludes non-FHA government REO (VA, USDA, etc.), credit unions, finance companies, non-FDIC-insured banks and thrifts, and a few other lender categories." However this is the bulk of the REO - probably 90% or more. Rounding up the estimate (using 90%) suggests total REO is around 548,000 in Q2.

Important: REO inventories have declined over the last couple of quarters. This is a combination of more sales and fewer acquisitions due to the slowdown in the foreclosure process. There are many more foreclosures coming - see my earlier post on Mortgage Delinquencies and REOs.

Yesterday:
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th

by Calculated Risk on 8/28/2011 11:35:00 AM

From CNBC: Major Exchanges in NY Still Expect to Open Monday

Main U.S. stock exchanges Nasdaq, NYSE and BATS expect to open trading on Monday as usual despite Hurricane Irene, although a final decision, especially on opening the Big Board floor, is yet to come.

The main question right now is whether public transportation in New York City will be restored by Monday morning. ... The U.S. Securities and Exchange Commission and market operators NYSE Euronext, Nasdaq OMX Group and others plan a conference call at 1 p.m. ET Sunday to discuss power outages and New York City transportation ...

Best wishes to all in Irene's path.

Yesterday:
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th

by Calculated Risk on 8/28/2011 08:50:00 AM

From the International Monetary Fund Managing Director, Christine Lagarde: Global Risks Are Rising, But There Is a Path to Recovery. Some excerpts:

The global economy continues to grow, yet not enough. Some of the main causes of the 2008 crisis have been addressed, yet not adequately. There remains a path to recovery, yet we do not have the luxury of time.
...
Developments this summer have indicated that we are in a dangerous new phase. The stakes are clear: we risk seeing the fragile recovery derailed. So we must act now.
...
[European] banks need urgent recapitalization. They must be strong enough to withstand the risks of sovereigns and weak growth. This is key to cutting the chains of contagion. If it is not addressed, we could easily see the further spread of economic weakness to core countries, or even a debilitating liquidity crisis. The most efficient solution would be mandatory substantial recapitalization—seeking private resources first, but using public funds if necessary. One option would be to mobilize EFSF or other European-wide funding to recapitalize banks directly, which would avoid placing even greater burdens on vulnerable sovereigns.

Sounds like the TARP.

Yesterday:
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th

by Calculated Risk on 8/27/2011 07:46:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Aug 27, 2011.

Changes and comments from surferdude808:

Activities of the FDIC contributed to many changes to the Unofficial Problem Bank List this week as they released their enforcement actions through July 2011. In all, there were eight additions and four removals, which leaves the list at 988 institutions with assets of $403.0 billion compared with 984 institutions and assets of $412.5 billion last week. Asset figures were updated from 2011q1 to 2011q2, which caused aggregate assets to drop by $11.1 billion. The net of additions and removals this week caused assets to rise $1.7 billion.

For the month of August, there were 14 additions, eight unassisted mergers, seven failures, and six action terminations for a net decline of seven institutions. On a monthly basis, the list has experienced a net decline in three of the past five months mainly from a slowing of new additions, increasing unassisted mergers, and a steady pace of failures.

The removals this week were all action terminations by the FDIC against Bank of the Bluegrass and Trust Company, Lexington, KY ($219 million); CrossFirst Bank Leawood (f/k/a Town & Country Bank), Leawood, KS ($86 million); Princeville State Bank, Princeville, IL ($62 million); and Utah Community Bank, Sandy, UT ($30 million).

Among the eight additions this week are Alliance Bank, Lake City, MN ($624 million); International Finance Bank, Miami, FL ($419 million); First State Bank, Lonoke, AR ($264 million); and The Citizens Bank of Logan, Logan, OH ($256 million).

Other additions include the FDIC issuing Prompt Corrective Action orders against Central Progressive Bank, Lacombe, LA ($398 million) and SunFirst Bank, Saint George, UT ($213 million).

The following demographic changes were made to the list: First Capital Bank, Marianna, FL ($44 million) changes its name to Chipola Community Bank; Golden Coast Bank, Long Beach, CA ($41 million) changed its name to Evergreen International Bank; Atlantic Coast Bank, Waycross, GA ($804 million) moved its headquarters to Jacksonville, FL; Heritage First Bank, Orange Beach, Al ($54 million) moved its headquarters to Gulf Shores; The Palmetto Bank, Laurens, SC ($1.3 billion) moved its headquarters to Greenville; and United Trust Bank, Bridgeview, IL ($42 million) moved its headquarters to Palos Heights.

CR note: The FDIC released the Q2 Quarterly Banking Profile last week. The FDIC reported:

The number of institutions on the FDIC's "Problem List" fell for the first time in 19 quarters. The number of "problem" institutions declined from 888 to 865. This is the first time since the third quarter of 2006 that the number of "problem" banks fell. Total assets of "problem" institutions declined from $397 billion to $372 billion.

The differences are due to timing and definition. The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public. (CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.)

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

Earlier:
• Summary for Week Ending August 26th (with plenty of graphs)
• Schedule for Week of Aug 28th

by Calculated Risk on 8/27/2011 02:19:00 PM

Earlier:
• Summary for Week ending August 26th (with plenty of graphs)

This will be a busy week for economic data. The key release is the August employment report on Friday. Other key releases will be the July Personal Income & Outlays report on Monday, Case-Shiller house prices on Tuesday, the ISM manufacturing index on Thursday, and auto sales also on Thursday.

Also the FOMC minutes for the August 9th meeting, to be released on Tuesday, might include a discussion of additional policy options.

----- Monday, Aug 29th -----
8:30 AM: Personal Income and Outlays for July. The following graph shows real Personal Consumption Expenditures (PCE) through June (2005 dollars).

Click on graph for larger image in graph gallery.

PCE decreased 0.2 in June, and real PCE decreased less than 0.1% as the price index for PCE decreased 0.2 percent in June. On a quarterly basis, PCE barely increased in Q2 from Q1.

The consensus is for a 0.3% increase in personal income in July, and a 0.5% increase in personal spending, and for the Core PCE price index to increase 0.2%.

10:00 AM: Pending Home Sales Index for July. The consensus is for a 1% decrease in the index.

10:30 AM: Dallas Fed Manufacturing Survey for August. The Texas production index increased 10.8 in July. The consensus is for a reading of -6 (contraction) in August. This is the last of the regional surveys, and most of the surveys have been weak.

----- Tuesday, Aug 30th -----
9:00 AM: S&P/Case-Shiller Home Price Index for June. Although this is the June report, it is really a 3 month average of April, May and June.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The consensus is for flat prices in June. The CoreLogic index showed a 0.7% increase in June.

10:00 AM: Conference Board's consumer confidence index for August. The consensus is for a decrease to 52.5 from 59.6 last month due to the debt ceiling debate.

2:00 PM: FOMC Minutes, Meeting of Aug 9, 2011. The minutes could include a discussion of additional policy options.

----- Wednesday, Aug 31st -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last several months and was at the lowest level in 15 years last week.

8:15 AM: The ADP Employment Report for August. This report is for private payrolls only (no government). The consensus is for +100,000 payroll jobs in August, down from the +114,000 reported in July.

9:45 AM: Chicago Purchasing Managers Index for August. The consensus is for a decrease to 53.5, down from 58.8 in July.

10:00 AM: Manufacturers' Shipments, Inventories and Orders for July (Factory Orders). The consensus is for a 1.8% increase in orders.

----- Thursday, Sept 1st-----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decrease to 407,000 from 417,000 last week.

10:00 AM: Construction Spending for July. The consensus is for a 0.1% increase in construction spending.

10:00 AM: ISM Manufacturing Index for August. The consensus is for a decrease to 48.5 from 50.9 in July. Based on the regional manufacturing surveys, the ISM index will probably be below 50 in August for the first time since July 2009 (indicating contraction).

All day: Light vehicle sales for August. Light vehicle sales are expected to decrease to 12.1 million (Seasonally Adjusted Annual Rate), from 12.2 million in July.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the May sales rate.

Edmunds is forecasting:

An estimated 1,087,000 new cars will be sold in August for a projected Seasonally Adjusted Annualized Rate (SAAR) of 12.3 million, forecasts Edmunds.com, the premier online resource for automotive information. The sales pace is virtually flat compared to July’s 12.2 million SAAR.

----- Friday, Sept 2nd -----
8:30 AM: Employment Report for August.

The consensus is for an increase of 67,000 non-farm payroll jobs in August, down from the 117,000 jobs added in July. The lower number is partially related to the Verizon strike that is now over.

This graph shows the net payroll jobs per month (excluding temporary Census jobs) since the beginning of the recession. The consensus forecast for August is in blue.

The consensus is for the unemployment rate to hold steady at 9.1% in August.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions. This shows the severe job losses during the recent recession.

Through the first seven months of 2011, the economy has added 930,000 total non-farm jobs or just 133 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.8 million fewer payroll jobs than at the beginning of the 2007 recession.