by Calculated Risk on 3/26/2009 08:37:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending March 21, the advance figure for seasonally adjusted initial claims was 652,000, an increase of 8,000 from the previous week's revised figure of 644,000. The 4-week moving average was 649,000, a decrease of 1,000 from the previous week's revised average of 650,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending March 14 was 5,560,000, an increase of 122,000 from the preceding week's revised level of 5,438,000.

Click on graph for larger image in new window.

The first graph shows weekly claims and continued claims since 1971.

The four week moving average is at 649,000.

Continued claims are now at 5.56 million - the all time record.

The second graph shows the 4-week average of initial weekly unemployment claims (blue, right scale), and total insured unemployed (red, left scale), both as a percent of covered employment.

This normalizes the data for changes in insured employment, and shows the initial unemployment and continued claims are both at the highest level since the early '80s.

This is another very weak report and shows continued weakness for employment.

by Calculated Risk on 3/25/2009 11:41:00 PM

From the WaPo: Geithner to Propose Vast Expansion Of U.S. Oversight of Financial System

Treasury Secretary Timothy F. Geithner plans to propose today a sweeping expansion of federal authority over the financial system ...

The Obama administration's plan ... would extend federal regulation for the first time to all trading in financial derivatives and to companies including large hedge funds and major insurers such as American International Group. The administration also will seek to impose uniform standards on all large financial firms, including banks, an unprecedented step that would place significant limits on the scope and risk of their activities.
...
The administration's signature proposal is to vest a single federal agency with the power to police risk across the entire financial system. The agency would regulate the largest financial firms, including hedge funds and insurers not currently subject to federal regulation. It also would monitor financial markets for emergent dangers.

Geithner plans to call for legislation that would define which financial firms are sufficiently large and important to be subjected to this increased regulation. Those firms would be required to hold relatively more capital in their reserves against losses than smaller firms, to demonstrate that they have access to adequate funding to support their operations, and to maintain constantly updated assessments of their exposure to financial risk.
...
The government also plans to push companies to pay employees based on their long-term performance, curtailing big paydays for short-term victories.
emphasis added

Geithner is definitely busy ...

by Calculated Risk on 3/25/2009 09:14:00 PM

From Lingling Wei at the WSJ: Commercial Property Faces Crisis (ht Mark, Patrick)

Commercial real-estate loans are going sour at an accelerating pace, threatening to cause tens or possibly even hundreds of billions of dollars in losses to banks already hurt by the housing downturn.

The delinquency rate on about $700 billion in securitized loans backed by office buildings, hotels, stores and other investment property has more than doubled since September to 1.8% this month ... Foresight Analytics in Oakland, Calif., estimates the U.S. banking sector could suffer as much as $250 billion in commercial-real-estate losses in this downturn. The research firm projects that more than 700 banks could fail as a result of their exposure to commercial real estate.
...
In contrast to home mortgages -- the majority of which were made by only 10 or so giant institutions -- hundreds of small and regional banks loaded up on commercial real estate. As of Dec. 31, more than 2,900 banks and savings institutions had more than 300% of their risk-based capital in commercial real-estate loans, including both commercial mortgages and construction loans.
...
At First Bank of Beverly Hills in Calabasas, Calif., , the amount of commercial-property debt outstanding was 14 times the bank's total risk-based capital as of the end of last year. Delinquencies reached 12.9%, compared with the average of 7% among the nation's banks and thrifts.

"In perfect hindsight, we would have done less commercial real-estate lending," said Larry B. Faigin, president and CEO.

Perfect hindsight? This CRE bust has been obvious for a few years ... maybe a little foresight would have helped.

by Calculated Risk on 3/25/2009 07:43:00 PM

Earlier today, I commented that I hadn't seen any "Reaganvilles" like in the early '80s.

Oops ... spoke too soon.

From the NY Times: Cities Deal With a Surge in Shanty Towns

... Like a dozen or so other cities across the nation, Fresno is dealing with an unhappy déjà vu: the arrival of modern-day Hoovervilles, illegal encampments of homeless people that are reminiscent, on a far smaller scale, of Depression-era shanty towns. ...

While encampments and street living have always been a part of the landscape in big cities like Los Angeles and New York, these new tent cities have taken root — or grown from smaller homeless enclaves as more people lose jobs and housing — in such disparate places as Nashville, Olympia, Wash., and St. Petersburg, Fla.

In Seattle, homeless residents unhappy with the city’s 100-person encampment dubbed it Nickelsville, an unflattering reference to the mayor, Greg Nickels. ...

The sudden and surging number of homeless people in Fresno, a city of 500,000 people, has been a surprise. City officials say they have three major encampments near downtown, and smaller settlements along two local highways. All told, as many 2,000 people are homeless here ...

I guess I need to get out more. Still it's nothing like the early '80s, at least not yet.

by Calculated Risk on 3/25/2009 06:08:00 PM

From the American Trucking Association: ATA Truck Tonnage Rose 1.7 Percent in February

Click on graph for larger image in new window.

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index edged 1.7 percent higher in February 2009, marking the second consecutive month-to-month increase. Still, the gain over the past two months, totaling 4.8 percent, did not even erase the 7.8 percent contraction in December 2008. In February, the seasonally adjusted tonnage index equaled just 106.5 (2000 = 100), which is still extremely low. Also in February, the fleets reported lower volumes than in January, as the not seasonally adjusted index fell another 2 percent last month on top of January’s 4.4 percent drop. In February, the not seasonally adjusted index equaled 95.3.

Compared with February 2008, tonnage contracted 9.2 percent, which was the third-worst year-over-year decrease of the current cycle.

ATA Chief Economist Bob Costello was very cautious about reading too much into February’s seasonally adjusted month-to-month improvement. “As I said last month, tonnage will not fall every month on a seasonally adjusted basis, and just because it rose again in February doesn’t mean the economy is on the mend,” Costello said. “Tonnage plunged again on a year-over-year basis, which highlights the current weakness in the freight environment.” Costello also noted that fleets are still witnessing a tough environment and there is nothing that suggests freight volumes are about to embark on a sustained recovery.
emphasis added

The good news is the cliff diving might be over. The bad news is trucking is at the bottom of the cliff (after a 9.2% year-over-year decline).

by Calculated Risk on 3/25/2009 02:31:00 PM

Earlier today I posted some graphs of new home sales, inventory and months of supply.

A few key points:

Please do not confuse a bottom in new home sales with a bottom in existing home prices. Please see: Housing: Two Bottoms

New home sales numbers are heavily revised and there is a large margin of error. Regarding the sales for February, the Census Bureau reported:

This is 4.7 percent (±18.3%) above the revised January rate of 322,000, but is 41.1 percent (±7.9%) below the February 2008 estimate of 572,000.

The "rebound" in February was very small, and this is the worst February since the Census Bureau started tracking new home sales in 1963.

Click on graph for larger image in new window.

This graph shows the February "rebound".

You have to look closely - this is an eyesight test - and you will see the increase in sales (if you expand the graph).

Not only was this the worst February in the Census Bureau records, but this was the 2nd worst month ever on a seasonally adjusted annual rate basis (only January was worse).

Still, I believe there is a good chance new home sales will bottom in 2009. See Looking for the Sun. Because the data is heavily revised, we won't know until many months after the bottom occurs. Also, as Dr. Yellen noted earlier, we need to distinguish between growth rates and levels. Any bottom would be at a very grim level, and any recovery would probably be very sluggish because of the huge overhang of existing homes (especially distressed homes). It is theoretically possible for new home sales to go to zero (very unlikely), and it is also possible that January was the bottom. We just don't know ...

Anecdotally, I just spoke to two SoCal builders - both told me sales had picked up in the last week or so (March). Of course sales in SoCal have been close to zero, so this is like a few rain drops to a thirsty man lost in a desert - it seems like a flood!

For a healthy market, the distressing gap between new and existing home sales will probably close.

This graph shows existing home sales and new home sales through February.

For a number of years the ratio between new and existing home sales was pretty steady. After activity in the housing market peaked in 2005, the ratio changed. This change was caused by distressed sales - in many areas home builders cannot compete with REO sales, and this has pushed down new home sales while keeping existing home sales activity elevated.

To close the gap, existing home sales need to fall or new home sales increase - or a combination of both. This will probably take several years ...

If housing bottoms (or even if the decline in residential investment just slows), this will remove a significant drag on GDP growth. This would be a positive sign for the economy.

The following table, from Business Cycle: Temporal Order, shows a simplified typical temporal order for emerging from a recession.

When Recovery Typically Starts

During Recession	Lags End of Recession	Significantly Lags End of Recession
Residential Investment	Investment, Equipment & Software	Investment, non-residential Structures
PCE	Unemployment(1)

There are a number of reasons why housing and personal consumption won't rebound quickly, but they will probably bottom soon. And that means the recession is moving to the lagging areas of the economy. But we know the first signs to watch: Residential Investment (RI) and PCE.

(1) In recent recessions, unemployment significantly lagged the end of the recession. That is very likely this time too.

Finally, even though some signs of a bottom might emerge (housing starts, new home sales, auto sales), it is worth repeating that any recovery will probably be very sluggish. Here are a few key reasons: house prices are still too high, there is too much housing inventory (especially distressed properties), households have too much debt and need to improve their balance sheets, the recession is global, and the Obama administration has chosen a less than optimal (and very expensive) approach to fixing the financial system.

by Calculated Risk on 3/25/2009 01:11:00 PM

From San Francisco Fed President Janet Yellen: The Uncertain Economic Outlook and the Policy Responses.

Dr. Yellen does an excellent job of describing the economy (pretty grim comments!), but I'd like to focus on just a short section:

With the caveat that my forecast is subject to exceptional uncertainty in the present environment, my best guess is similar to that of most forecasters, who expect to see moderately positive real GDP growth rates beginning later this year or early in 2010, followed by a gradual recovery.

However, I am well aware that my views are strikingly more optimistic than those I hear from the vast majority of my business contacts. They tend to see conditions as dire and getting worse. In fact, many of them can’t believe I would even suggest what they see as such a patently rosy scenario! So why is it that so many of us who prepare forecasts seem to be more optimistic than many others? I think there are several reasons. First, as forecasters, we distinguish between growth rates and levels. It’s true that the Blue Chip consensus shows moderate positive growth rates in output in the second half of this year. But even so, the level of the unemployment rate would still rise throughout 2009 and into 2010. So, in this sense, the worst of the recession is not expected to occur until next year. And, even by the end of 2011, I would expect the unemployment rate to be above its full-employment level. So I wouldn’t call this a particularly rosy scenario.

Second, it takes less than many people think for real GDP growth rates to turn positive. Just the elimination of drags on growth can do it. For example, residential construction has been declining for several years, subtracting about 1 percentage point from real GDP growth. Even if this spending were only to stabilize at today’s very low levels—not a robust performance at all—a 1 percentage point subtraction from growth would convert into a zero, boosting overall growth by 1 percentage point. A decline in the pace of inventory liquidation is another factor that could contribute to a pickup in growth. Inventory liquidation over the last few months has been unusually severe, especially in motor vehicles—a typical recession pattern. All it would take is a reduction in the pace of liquidation—not outright inventory building—to raise the GDP growth rate. In addition, pent-up demand for autos, durable goods, or even housing could emerge and boost demand for these items once their stocks have declined to low enough levels.
emphasis added

This is a very important point for forecasters - to distinguish between growth rates and levels. Even if the economy "bottoms" in the 2nd half of this year, it will be at a very low level compared to the last few years, and the recovery will probably be very sluggish. This means unemployment will continue to rise in 2010 - and it will still feel like a recession to many people.

by Calculated Risk on 3/25/2009 11:28:00 AM

From the LA Times: UCLA Anderson Forecast: dark days (ht Brad)

UCLA economists are coming out with a new forecast today that offers a grim picture of the year ahead.

Nationwide, the unemployment rate will worsen -- peaking late next year at 10.5%. And in California, which has been battered by tumbling housing, retail and manufacturing sectors, the jobless rate will soar to 11.9% by mid-2010, the latest UCLA Anderson Forecast says.

"The national economic outlook remains bleak," wrote David Shulman, a senior economist for UCLA.

"As a result of the prolonged contraction, the economy will likely lose 7.5 million jobs peak to trough and unemployment will soar."
...
The researchers cite the unprecedented losses to U.S. balance sheets -- $9 trillion in stocks and $5.5 trillion in home values.

The financial crisis, they say, has swelled into such a global problem that national policy may be ineffectual. The United States needs its international trading partners to reverse their slowdowns and reignite the exchange of imports and exports.

Nationally, the UCLA forecasters say the economy will begin to grow slowly by the fourth quarter of this year. That's when residential construction should also begin to turn around, but exports will continue to slide downward until the beginning of 2010.

And from the Sacramento Bee: 12% jobless rate forecast for state, followed by slow recovery

California unemployment will peak at just over 12 percent late this year, setting a modern record, according to the latest forecast from the University of the Pacific.

Recovery will come slowly. Unemployment won't sink back into single digits until late 2011, or some two years after the recession is expected to officially end, according to a forecast released Tuesday by UOP.
...
At 12 percent, unemployment would be the highest since modern record-keeping began in 1976. The old record is 11 percent, reached three times in the early 1980s.

The California unemployment rate hit 10.5% in February.

In the early '80s, I remember seeing many more homeless people than now, and there were a number of "Reaganvilles" in my area (a take-off on the Hoovervilles of the Great Depression). So far this recession looks and feel less severe than the early '80s, although the unemployment rate is about the same - and forecast to go higher.

by Calculated Risk on 3/25/2009 10:00:00 AM

The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate of 337 thousand. This is slightly above the record low of 322 thousand in January.

Click on graph for larger image in new window.

The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted).

Note the Red column for 2009. This is the lowest sales for February since the Census Bureau started tracking sales in 1963. (NSA, 27 thousand new homes were sold in February 2009; the previous low was 29 thousand in February 1982).

As the graph indicates, sales in February 2009 are substantially worse than the previous years.

The second graph shows New Home Sales vs. recessions for the last 45 years. New Home sales have fallen off a cliff.

Sales of new one-family houses in February 2009 were at a seasonally adjusted annual rate of 337,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.

This is 4.7 percent (±18.3%) above the revised January rate of 322,000, but is 41.1 percent (±7.9%) below the February 2008 estimate of 572,000.

And one more long term graph - this one for New Home Months of Supply.

There were 12.2 months of supply in February - just below the al time record of 12.9 months of supply set in January.

The seasonally adjusted estimate of new houses for sale at the end of February was 330,000. This represents a supply of 12.2 months at the current sales rate.

Update: Corrected Y-Axis label.

The final graph shows new home inventory. For new homes, both sales and inventory are falling quickly - since starts have fallen off a cliff.

Note that new home inventory does not include many condos (especially high rise condos), and areas with significant condo construction will have much higher inventory levels.

This is a another extremely weak report. Even with the small increase in sales, sales are near record lows. And months of supply is also just off the record high. I'll have more on new home sales later today ...

by Calculated Risk on 3/25/2009 09:01:00 AM

Martin Wolf writes in the Financial Times: Successful bank rescue still far away. (ht Bierca) An except on the Geithner Toxic Plan:

[W]ill it work? That depends on what one means by “work”. This is not a true market mechanism, because the government is subsidising the risk-bearing. Prices may not prove low enough to entice buyers or high enough to satisfy sellers. Yet the scheme may improve the dire state of banks’ trading books. This cannot be a bad thing, can it? Well, yes, it can, if it gets in the way of more fundamental solutions, because almost nobody – certainly not the Treasury – thinks this scheme will end the chronic under-capitalisation of US finance.
...
Why might this scheme get in the way of the necessary recapitalisation? There are two reasons: first, Congress may decide this scheme makes recapitalisation less important; second and more important, this scheme is likely to make recapitalisation by government even more unpopular.
...
[I]magine what happens if, after “stress tests” of the country’s biggest banks are completed, the government concludes – surprise, surprise! – that it needs to provide more capital. How will it persuade Congress to pay up?

The danger is that this scheme will, at best, achieve something not particularly important – making past loans more liquid – at the cost of making harder something that is essential – recapitalising banks.

This matters because the government has ruled out the only way of restructuring the banks’ finances that would not cost any extra government money: debt for equity swaps, or a true bankruptcy.
...
I fear, however, that the alternative – adequate public sector recapitalisation – is also going to prove impossible. Provision of public money to banks is unacceptable to an increasingly enraged public, while government ownership of recapitalised banks is unacceptable to the still influential bankers. This seems to be an impasse.
...
The conclusion, alas, is depressing. Nobody can be confident that the US yet has a workable solution to its banking disaster. On the contrary, with the public enraged, Congress on the war-path, the president timid and a policy that depends on the government’s ability to pour public money into undercapitalised institutions, the US is at an impasse.
...
If this is not frightening, I do not know what is.

by Calculated Risk on 3/25/2009 08:43:00 AM

From the Census Bureau:

New orders for manufactured durable goods in February increased $5.5 billion or 3.4 percent to $165.6 billion, the U.S. Census Bureau announced today. This increase follows six consecutive monthly decreases, including a 7.3 percent January decrease. Excluding transportation, new orders increased 3.9 percent. Excluding defense, new orders increased 1.7 percent.

This appears to be a small bounce back from six consecutive monthly declines in durable goods.

This is still a decline of 22% from February 2008.

by Calculated Risk on 3/25/2009 01:03:00 AM

By popular request, an open thread and a few sources for futures and the foreign markets.

The U.S. futures are about neutral right now ahead of the durable goods and new home sales reports Wednesday morning.

Bloomberg Futures.

CBOT mini-sized Dow

CME Globex Flash Quotes

Futures from barchart.com

And the Asian markets. The Asian market are about even too.

And a graph of the Asian markets.

And here is Krugman on Bloomberg: 'Geithner plan won't work' (ht bearly)

Best to all.

by Calculated Risk on 3/24/2009 09:07:00 PM

Earlier today I graphed the mortgage equity extraction data for Q4 2008 from Dr. James Kennedy at the Fed.

Thanks again to Dr. Kennedy for all the data!

For those interested, here is the equity extraction data from the Fed (excel file) Enjoy!

IMPORTANT NOTE: If you use this data, please read this note from the Fed:

Attached are the estimates of home equity extraction and related data through the fourth quarter of 2008, courtesy of Jim Kennedy. Please note that there will be no further updates to this data series.

These data are the product of a research project undertaken by Jim and Alan Greenspan. The data are not an official publication or product of the Federal Reserve Board. If you cite these data, please reference one of the two papers that Jim wrote with Alan Greenspan. For example, a reference might read something like this:

"Updated estimates provided by Jim Kennedy of the mortgage system presented in "Estimates of Home Mortgage Originations, Repayments, and Debt On One-to-Four-Family Residences," Alan Greenspan and James Kennedy, Federal Reserve Board FEDS working paper no. 2005-41."

Since the fall of 2005, when the first paper Jim wrote with Alan Greenspan was released, Jim has updated the data periodically, usually quarterly, a few days after publication of the Flow of Funds data.

Here is a repeat of the total MEW graph:

Click on graph for larger image in new window.

For Q4 2008, Dr. Kennedy has calculated Net Equity Extraction as minus $77 billion, or negative 2.9% of Disposable Personal Income (DPI).

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, both in billions of dollars quarterly (not annual rate), and as a percent of personal disposable income.

by Calculated Risk on 3/24/2009 07:50:00 PM

UPDATE: Form the WSJ: Obama Says 'Signs of Progress' Emerging in Economy

Here is the CNBC feed.

Here is the FOX feed.

by Calculated Risk on 3/24/2009 04:55:00 PM

On inflation (from Dow Jones):

“One historic way of getting yourself out of this situation — or trying to — is to inflate. Either you do it deliberately or you allow it to happen,” [Vlocker] said. “And if we permit that to happen then I think all these dollars will come tumbling down on us.” ...

“I get a little nervous when I see the Federal Reserve announcements that they want have the amount of inflation that’s conducive to recovery,” Volcker said. “I don’t know what ‘the amount of inflation that’s conducive to recovery’ would be appropriate. I’d much rather they say that they want to maintain stability in the currency, which is conducive to confidence and recovery.”

And on China:

“I think the Chinese are a little disingenuous to say, ‘Now isn’t it so bad that we hold all these dollars.’ They hold all these dollars because they chose to buy the dollars, and they didn’t want to sell the dollars because they didn’t want to depreciate their currency. It was a very simple calculation on their part, so they shouldn’t come around blaming it all on us.”

by Calculated Risk on 3/24/2009 03:00:00 PM

From the New York Fed: New York Fed Issues Tentative Operation Schedule, FAQs for Treasury Purchases, Updated FAQs for Agency Debt and Agency MBS Purchases

The first outright Treasury coupon purchase will be conducted on Wednesday, March 25, 2009, and will settle Thursday, March 26, 2009. Results will be posted on the New York Fed’s website following the operation.

Starting on Wednesday, April 1, 2009, and continuing every two weeks, the New York Fed will issue a tentative operation schedule for its purchases of longer-dated Treasury securities, including the maturity sector or sectors to be targeted.

According to the current schedule, the Fed will be buying 7 to 10 year securities tomorrow. On Friday they will be buying 2 to 3 year securities. And on Monday they will buying in the 17 to 30 year range.

by Calculated Risk on 3/24/2009 01:40:00 PM

From TPM: We Don't Need No Stinkin' Contingencies

Rep. Gresham Barrett: What is the backup plan?

Secretary Geithner: This plan will work.

by Calculated Risk on 3/24/2009 11:37:00 AM

Here are the Kennedy-Greenspan estimates (NSA - not seasonally adjusted) of home equity extraction for Q4 2008, provided by Jim Kennedy based on the mortgage system presented in "Estimates of Home Mortgage Originations, Repayments, and Debt On One-to-Four-Family Residences," Alan Greenspan and James Kennedy, Federal Reserve Board FEDS working paper no. 2005-41.

Click on graph for larger image in new window.

For Q4 2008, Dr. Kennedy has calculated Net Equity Extraction as minus $77 billion, or negative 2.9% of Disposable Personal Income (DPI).

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, both in billions of dollars quarterly (not annual rate), and as a percent of personal disposable income.

Dr. Kennedy provides several other measures of equity extraction. The second graph shows what Dr. Kennedy calls "active MEW" (Mortgage Equity Withdrawal). This is defined as "Gross cash out" plus the change in the balance of "Home equity loans".

This measure is near zero ($7.2 billion for the quarter) and is probably a better estimate of the impact of MEW on consumption. When people refinance with cash out or draw down HELOCs, they usually spend the money.

The Fed's Flow of Funds report shows the amount of mortgages outstanding is declining, and this is partially because of debt cancellation per foreclosure sales, and partially due to homeowners paying down their mortgages (as opposed to borrowing more). Note: most homeowners pay down their principal a little each month (unless they have an IO or Neg AM loan), so with no new borrowing, equity extraction would always be negative.

Clearly the Home ATM has now been closed for a few quarters.

Note: This will be the last update of MEW from Dr. Kennedy. My thanks to Jim Kennedy and the other contributors to the MEW updates.

by Calculated Risk on 3/24/2009 10:20:00 AM

From Paul Jackson at Housing Wire: MBA: Originations Could Top $2.7 Trillion in 2009

[T]he Mortgage Bankers Association, which said that it had increased its forecast of mortgage originations in 2009 by over $800 billion, due to a refinancing boom ... The MBA said it now expects originations to total $2.78 trillion, which would make 2009 the fourth highest originations year on record, behind only 2002, 2003, 2005.
...
“This boost is due entirely to the expected increase in mortgage refinancing activity motivated by the drop in interest rates following last week’s Federal Reserve’s announcement on the Treasury bond and mortgage-backed securities purchases programs and the Fannie Mae and Freddie Mac refinance programs,” the mortgage lobbying and trade group said in a press statement.
...
This origination boom, however, will differ from recent years past — while previous record origination years of 2002, 2003 and 2005 had large amounts of subprime loans and jumbo loans, the MBA said it expects 2009 originations to consist almost entirely of conforming and/or FHA-eligible mortgages.
...
The MBA projected that total existing home sales for 2009 will drop 2.5 percent from 2008 to 4.8 million units, while new home sales will decline a far sharper 39 percent in 2009 to 293,000 units.

It sounds like the mortgage brokers will be busy this year!

This refinance boom will lower the payments for homeowners with conforming loans, but that doesn't help much in the higher priced areas.

by Calculated Risk on 3/24/2009 09:07:00 AM

Geithner and Bernanke are scheduled to testify at 10AM ET.

From Bloomberg: Geithner to Call for New Powers to Avoid AIG Repeat

U.S. Treasury Secretary Timothy Geithner will call for expanded government powers to deal with failing non-bank financial institutions such as American International Group Inc., an administration official said.

Geithner, who testifies today before the House Financial Services Committee on AIG’s rescue, is expected to focus on the need for new tools for financial institutions other than banks, similar to those that the Federal Deposit Insurance Corp. has for winding down failed lenders and insuring consumer bank deposits, the official said.

The authority would allow the Treasury, in collaboration with the Federal Reserve, regulators and the president, to step in and more easily combat problems at systemically important institutions on the verge of failure ...