by Calculated Risk on 2/01/2010 04:44:00 PM

More from the Q4 GDP underlying detail tables ...

Note: Residential investment (RI), according to the Bureau of Economic Analysis (BEA), includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

Back in Q4 2008 - for the first time ever - investment in home improvements exceeded investment in new single family structures. This has continued through Q4 2009.

Click on graph for larger image in new window.

This graph shows the various components of RI as a percent of GDP for the last 50 years. The most important components are investment in single family structures followed by home improvement.

Investment in home improvement was at a $153.3 billion Seasonally Adjusted Annual Rate (SAAR) in Q4, significantly above the level of investment in single family structures of $110.9 billion (SAAR).

Home improvement spending, as a percent of GDP, is close to the long term median. Brokers' commissions are above the median after being boosted by the homebuyer tax credit.

Of course investment in single family structures is still fairly close to the record low set in Q2 2009, and far below the normal level. Also far below normal is investment in multifamily structures. These two categories will not increase significantly until the number of excess housing units is reduced (I'll have more on the number of excess housing units tomorrow after the Census Bureau releases the Q4 Housing Vacancies and Homeownership report).

by Calculated Risk on 2/01/2010 02:00:00 PM

From the Fed: The January 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices

The January survey indicated that commercial banks generally ceased tightening standards on many loan types in the fourth quarter of last year but have yet to unwind the considerable tightening that has occurred over the past two years. The net percentages of banks reporting tighter loan terms continued to trend lower. Banks reported that loan demand from both businesses and households weakened further, on net, over the survey period.
emphasis added

In general banks have stopped tightening lending standards, however demand continues to weaken. For real estate - especially commercial real estate - the banks are still tightening standards:

Questions on residential real estate lending. Banks continued to tighten standards on residential real estate loans over the past three months. In line with recent patterns, a small net fraction of banks tightened standards on prime residential real estate loans over that period, and somewhat larger net fractions of banks tightened standards on nontraditional residential real estate loans. In addition, a moderate net fraction of banks reported weaker demand from prime borrowers for residential real estate loans.

Questions on commercial real estate lending. ... a substantial share of domestic banks, on net, reported having tightened standards on CRE loans and having experienced weaker demand for such loans again in the fourth quarter of 2009.

by Calculated Risk on 2/01/2010 12:43:00 PM

Here are graphs of office, mall and lodging investment through Q4 2009 based on the underlying detail data released by the BEA ...

Click on graph for larger image in new window.

This graph shows investment in offices as a percent of GDP. Office investment as a percent of GDP peaked at 0.46% in Q3 2008 and has declined sharply to a new all time low (as percent of GDP).

Reis reported that the office vacancy rate rose to a 15 year high in Q4 to 17.0%, from 16.5% in Q3 and from 15.9% in Q2. The peak vacancy rate following the 2001 recession was 16.9%. With the office vacancy rate rising, office investment will probably decline through 2010.

Office investment is usually the most overbuilt in a boom, but this time the office market struggled for a few years after the stock market bubble burst and there was comparatively more investment in malls and hotels.

The second graph is for investment in malls.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and has fallen by 50% (note that investment includes remodels, so this will not fall to zero). Mall investment will probably continue to decline through 2010.

Reis reported that the mall vacancy rate in Q4 was the highest on record at 8.8% for regional malls, and 10.6% for strip malls. From Reis economist Ryan Severino:

"Our outlook for retail properties as a whole is bleak ... we do not foresee a recovery in the retail sector until late 2012 at the earliest."

The third graph is for lodging (hotels).

The recent boom in lodging investment was stunning. Lodging investment peaked at 0.32% of GDP in Q2 2008 and has declined rapidly to 0.16% in Q4 2009.

I expect lodging investment to continue to decline through at least 2010, to perhaps one-third of the peak or even lower (investment as percent of GDP).

As projects are completed there will be little new investment in these categories probably at least through 2010. This will be a steady drag on GDP (nothing like the decline in residential investment though), and a steady drag on construction employment.

Notice that investment in all three categories typically falls for a year or two after the end of a recession, and then usually recovers very slowly. Something similar will probably happen again, and there will not be a recovery in these categories until the vacancy rates fall significantly.

by Calculated Risk on 2/01/2010 10:21:00 AM

Residential construction spending was off slightly in December, and is now about 10% above the bottom in June 2009. I expect some growth in residential spending in 2010, but the increases will probably be sluggish until the large overhang of existing inventory is reduced.

Non-residential increased slightly in December, but the trend is clearly down. The collapse in non-residential construction spending continues ...

Click on graph for larger image in new window.

The first graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

Residential construction spending decreased in December, and nonresidential spending increased slightly.

Private residential construction spending is now 61.5% below the peak of early 2006.

Private non-residential construction spending is 22.0% below the peak of October 2008.

The second graph shows the year-over-year change for private residential and nonresidential construction spending.

Nonresidential spending is off 17.7% on a year-over-year (YoY) basis.

Residential construction spending is down 10.3% from a year ago, and the negative YoY change is getting smaller.

Only over the last few months - for the first time since the housing bust started - has nonresidential spending been off more on a YoY basis than residential.

Here is the report from the Census Bureau: December 2009 Construction at $902.5 Billion Annual Rate

by Calculated Risk on 2/01/2010 10:00:00 AM

PMI at 58.4% in January, up sharply from 54.9% in December.

From the Institute for Supply Management: January 2009 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in January for the sixth consecutive month, and the overall economy grew for the ninth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the sixth consecutive month in January as the PMI rose to 58.4 percent, its highest reading since August 2004 when it registered 58.5 percent. This month's report provides significant assurance that the manufacturing sector is in recovery. Both the New Orders and Production Indexes are above 60 percent, indicating strong current and future performance for manufacturing. This month, 13 of 18 industries reported growth, up from nine industries last month, and this is a good indication that the impact of the recovery is expanding."
...
ISM's Employment Index registered 53.3 percent in January, which is 3.1 percentage points higher than the seasonally adjusted 50.2 percent reported in December. This is the second month of growth in manufacturing employment, and the highest reading since April 2006 (54.9 percent). An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
emphasis added

As noted, any reading above 50 shows expansion.

by Calculated Risk on 2/01/2010 08:30:00 AM

From the BEA: Personal Income and Outlays, November 2009

Personal Personal income increased $44.5 billion, or 0.4 percent, and disposable personal income (DPI) increased $45.9 billion, or 0.4 percent, in December, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $22.6 billion, or 0.2 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in December, compared with an increase of 0.4 percent in November.
...
Personal saving -- DPI less personal outlays -- was $534.2 billion in December, compared with $506.3 billion in November. Personal saving as a percentage of disposable personal income was 4.8 percent in December, compared with 4.5 percent in November.

Click on graph for large image.

This graph shows the saving rate starting in 1959 (using a three month centered average for smoothing) through the December Personal Income report. The saving rate was 4.8% in December.

I expect the saving rate to continue to rise over the next couple of years - possibly to 8% or more - slowing the growth in PCE.

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

The quarterly change in PCE is based on the change from the average in one quarter, compared to the average of the preceding quarter.

The colored rectangles show the quarters, and the blue bars are the real monthly PCE.

The question is what happens to PCE growth in 2010?

by Calculated Risk on 1/31/2010 10:43:00 PM

Note: earlier posts:

Weekly Summary and a Look Ahead

TARP Inspector General: Government Programs "risk re-inflating bubble"

Summers: "Statistical recovery and a human recession"

From the Financial Times: Obama plans $100bn jobs push

Robert Gibbs, ... called for a bill “somewhere in the $100bn range” ... Mr Obama championed the idea of a jobs bill in his State of the Union address last week – calling for $30bn for community bank lending to small businesses, a new small business tax credit and a tax incentive for all businesses to invest ...
excerpted with permission

And from the LA Times: Obama pairs a push for jobs with proposed spending cuts

The details aren't clear, but this is smaller than the bill approved by the House of Representatives in December.

by Calculated Risk on 1/31/2010 06:51:00 PM

The NY Post has an article: I'm walking from my underwater mortgage

I stopped paying my $1,450-a-month mortgage ... in September 2008 -- after making the hard decision to walk away from my mortgage because it is hopelessly underwater.

... in this case I had no practical solutions to my financial dilemma -- I lost my job, was turned down for a mortgage modification and owed a lot more than the house is worth.

I am a single parent with three children, one with medical issues. So, with only unemployment benefits and child-support money, I decided to pull the plug on my mortgage payments.
...
This house originally cost $100,000. In 2005, as the housing market heated up and I needed cash, I refinanced it. An appraiser said it was worth $154,000 ... I cashed out the house at that value.

Today, with the housing market in bad shape, the house is worth about $120,000. On top of that, it is starting to fall apart.

First, "walking away" usually means the homeowner can afford to pay their mortgage, but are choosing to strategically default (or in the language of servicers "ruthlessly default") simply because they owe more than their home is worth.

This homeowner lost her job and has other financial issues. Yes, she owes more than her house is worth, but this sounds like a normal foreclosure caused by financial distress.

Second, why is her mortgage payment $1,450 per month on a $154,000 mortgage? Is that a 10%+ interest rate? Is this PITI? Is there a 2nd with Tony Soprano? Perhaps the reporter could have explained this a little better.

Third, if she stopped paying her mortgage in September 2008, what has the bank been doing?

There are no foreclosure signs up -- because there is no bank forcing it.

Why isn't the bank foreclosing? What are the foreclosure laws in Pennsylvania? Are these recourse loans? Why isn't the reporter asking questions?

The only good thing about this article is it gives me an excuse to link to Tanta's advice to reporters from two years ago: Let's Talk about Walking Away

I actually believe that reporters should never abandon their skepticism anywhere, including here. ... the danger arises that an "echo chamber" starts to create conventional wisdom about default behavior, which may be hard to challenge if it turns out to be a bit of an exaggeration.

by Calculated Risk on 1/31/2010 02:38:00 PM

The most anticipated economic release this week is the BLS employment report on Friday. The consensus is for a small net gain in payroll jobs in January, on a seasonally adjusted (SA) basis, and the unemployment rate flat at 10.0%. My guess is the report will still show net job losses, and the unemployment rate will increase slightly. We will have a better idea after the ADP and ISM reports are released earlier in the week.

Two points on the employment report: 1) the annual benchmark revision for March 2009 will be released as part of the report. This will probably show over 800,000 more jobs lost than the original reports (my graphs will include the revisions), and 2) January is heavily adjusted for seasonal factors - even in good years there are around 2.5 million payroll jobs lost in January. The SA number is the one to follow.

On Monday the BEA will release the Personal Income and Spending report for December. The quarterly data was released on Friday, along with the GDP report, so we already have a good idea for December. Along with this release, the BEA will release supplemental data for hotel, office and mall investment.

Also on Monday the ISM Manufacturing report for January will be released (expectations are for a small decline from 55.9), construction spending for December (another decline is expected), and possibly the Fed's Senior Loan Officers’ Survey.

On Tuesday, auto sales for January will be reported (expect a small decline to under 11 million SAAR), Personal Bankruptcy Filings for January, Pending Home sales, and the Q4 Housing Vacancies and Homeownership report from the Census Bureau (expect a record vacancy rate). Also on vacancies, the NMHC Quarterly Survey of Apartment Market Conditions will probably be released this week.

On Wednesday, the ADP employment report (estimates are for around 40,000 jobs lost) will be released and the ISM non-manufacturing report (small increase expected).

On Thursday, Jobless Claims and Factory Orders.

And then on Friday, the BLS employment report, consumer credit and more bank failures.

And a summary of last week ...

BEA: GDP Increases at 5.7% Annual Rate in Q4

From the BEA:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.

And from my comments on the Q4 GDP report:

Any analysis of the Q4 GDP report has to start with the change in private inventories. This change contributed a majority of the increase in GDP, and annualized Q4 GDP growth would have been 2.3% without the transitory increase from inventory changes.

Unfortunately - although expected - the two leading sectors, residential investment (RI) and personal consumption expenditures (PCE), both slowed in Q4.

PCE slowed from 2.8% annualized growth in Q3 to 2.0% in Q4.

RI slowed from 18.9% in Q3 to just 5.7% in Q4.
...
The transitory boost from inventory changes is frequently a great kick start to the economy at the beginning of a recovery - as long as the leading sectors (PCE and RI) are also picking up. This report has to be viewed as concerning ... and is reminiscent of Q1 1981 and Q1 2002 ... both examples of inventory changes making large contributions to GDP, but underlying growth remained weak.

Existing Home Sales decline Sharply in December

Click on graph for larger image in new window.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in Dec 2009 (5.45 million SAAR) were 16.7% lower than last month, and were 15% higher than Dec 2008 (4.74 million SAAR).

Case Shiller House Prices Increase Slightly in November

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

The Composite 10 index is off 30.4% from the peak, and up about 0.2% in November.

The Composite 20 index is off 29.5% from the peak, and up 0.2% in November.

Prices decreased (SA) in 6 of the 20 Case-Shiller cities in October.

In Las Vegas, house prices have declined 56.2% from the peak. At the other end of the spectrum, prices in Dallas are only off about 4.6% from the peak. Several cities are showing price increases in 2009 including San Diego, San Francisco, Denver and Dallar. Prices have declined by double digits from the peak in 18 of the 20 Case-Shiller cities.

New Home Sales Decline Sharply in December

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

Note the Red columns for 2009. In December 2009, a record low 23 thousand new homes were sold (NSA); this ties the previous record low set in December 1966.

Sales in December 2008 were at 26 thousand.

The second graph shows New Home Sales vs. recessions for the last 45 years. New Home sales fell off a cliff, but after increasing slightly, are now only 4% above the low in January.

Sales of new one-family houses in December 2009 were at a seasonally adjusted annual rate of 342,000 ... This is 7.6 percent (±14.6%)* below the revised November rate of 370,000 and is 8.6 percent (±15.2%)* below the December 2008 estimate of 374,000.

Fannie Mae: Delinquencies Increase Sharply in November

Fannie Mae reported this week that the rate of serious delinquencies - at least 90 days behind - for conventional loans in its single-family guarantee business increased to 5.29% in November, up from 4.98% in October - and up from 2.13% in November 2008.

Some of these loans are in modification programs, but this is quite a hockey stick!

Other Economic Stories ...

From the NY Times: Huge N.Y. Housing Complex Is Returned to Creditors

The owners of Stuyvesant Town and Peter Cooper Village ... have decided to turn over the properties to creditors, officials said Monday morning.

From Diana Olick at CNBC on CRE and "walking away": Strategic Defaults

ATA Truck Tonnage Index Increases in December

From BofA: BofA is first to sign up for HAMP Second Lien Program

MBA: Mortgage Applications Decline

FOMC Statement: No Change

From the Chicago Fed: Index shows economic activity moved lower in December

Treasury releases new HAMP guidelines: From Treasury: Administration Updates Documentation Collection Process and Releases Guidance to Expedite Permanent Modifications.

Restaurant Index Improves in December

From Bloomberg: Lenders Pursue Mortgage Payoffs Long After Homeowners Default

Unofficial Problem Bank Lists Increases to 599

Best wishes to all.

by Calculated Risk on 1/31/2010 11:01:00 AM

To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

From Office of the Special Inspector General for the Troubled Asset Relief Program: Quarterly Report to Congress, January 30, 2010 (ht Ronald Orol, MarketWatch)

The following SIGTARP table shows the government support of the residential market (note: a few smaller program are not included for simplicity). This is from Section 3 of the report that discusses these programs:

Click on table for larger image in new window.
Section 3 concludes:

Mechanisms for Supporting Home Prices

Supporting home prices is an explicit policy goal of the Government. As the White House stated in the announcement of HAMP for example, “President Obama’s programs to prevent foreclosures will help bolster home prices.”384

In general, housing obeys the laws of supply and demand: higher demand leads to higher prices. Because increasing access to credit increases the pool of potential home buyers, increasing access to credit boosts home prices. The Federal Reserve can thus boost home prices by either lowering general interest rates or purchasing mortgages and MBS. Both actions, which the Federal Reserve is pursuing, have the effect of lowering interest rates, which increases demand by permitting borrowers to afford a higher home price on a given income. Similarly, the Administration is boosting home prices by encouraging bank lending (such as through TARP) and by instituting purchase incentives such as the First-Time Homebuyer Tax Credit. All of these actions increase the demand for homes, which increases home prices. In addition to direct Government activity, home prices can be lifted by general expectations among homebuyers of future price increases. Figure 3.7 provides a graphic representation of the relationship between possible Government actions and their impact on home prices.

This flow chart from the report shows the possible mechanisms for supporting house prices.

We've been discussing this for some time, and there is a good chance that house prices will fall further as the government support is withdrawn since house prices appear too high based on price-to-income and price-to-rent ratios.

Other key points:

• To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.
• To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.
• To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street.

by Calculated Risk on 1/31/2010 08:46:00 AM

Here is an OpEd in the NY Times from Paul Volcker: How to Reform Our Financial System

A few excerpts:

The further proposal set out by the president recently to limit the proprietary activities of banks approaches the problem from a complementary direction. The point of departure is that adding further layers of risk to the inherent risks of essential commercial bank functions doesn’t make sense, not when those risks arise from more speculative activities far better suited for other areas of the financial markets.

The specific points at issue are ownership or sponsorship of hedge funds and private equity funds, and proprietary trading — that is, placing bank capital at risk in the search of speculative profit rather than in response to customer needs. Those activities are actively engaged in by only a handful of American mega-commercial banks, perhaps four or five. Only 25 or 30 may be significant internationally.

Apart from the risks inherent in these activities, they also present virtually insolvable conflicts of interest with customer relationships, conflicts that simply cannot be escaped by an elaboration of so-called Chinese walls between different divisions of an institution. The further point is that the three activities at issue — which in themselves are legitimate and useful parts of our capital markets — are in no way dependent on commercial banks’ ownership. These days there are literally thousands of independent hedge funds and equity funds of widely varying size perfectly capable of maintaining innovative competitive markets. Individually, such independent capital market institutions, typically financed privately, are heavily dependent like other businesses upon commercial bank services, including in their case prime brokerage. Commercial bank ownership only tilts a “level playing field” without clear value added.
emphasis added

And Volcker concludes:

I am well aware that there are interested parties that long to return to “business as usual,” even while retaining the comfort of remaining within the confines of the official safety net. They will argue that they themselves and intelligent regulators and supervisors, armed with recent experience, can maintain the needed surveillance, foresee the dangers and manage the risks.

In contrast, I tell you that is no substitute for structural change, the point the president himself has set out so strongly.

I’ve been there — as regulator, as central banker, as commercial bank official and director — for almost 60 years. I have observed how memories dim. Individuals change. Institutional and political pressures to “lay off” tough regulation will remain — most notably in the fair weather that inevitably precedes the storm.

The implication is clear. We need to face up to needed structural changes, and place them into law. To do less will simply mean ultimate failure — failure to accept responsibility for learning from the lessons of the past and anticipating the needs of the future.

There is much more in the piece, but Volcker makes it clear:
1) There are huge competitive advantages of being "too big to fail", so naturally these banks want to continue with "business as usual".
2) Although improved regulation and capital requirements are important, structural changes are critical.

by Calculated Risk on 1/30/2010 10:31:00 PM

A little flashback from Jon Stewart: CNBC Financial Advice

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
CNBC Financial Advice
www.thedailyshow.com
Daily Show Full Episodes Political Humor Health Care Crisis

by Calculated Risk on 1/30/2010 05:44:00 PM

There have been 183 bank failures in this cycle (starting in 2007):

FDIC Bank Failures by Year
2007	3
2008	25
2009	140
2010	15
Total	183

Click on graph for larger image in new window.

The first graph shows bank failures by week in 2008, 2009 and 2010.

The FDIC is off to a fast start in 2010.

My prediction is the FDIC will close more banks in 2010 than in 2009 (more than 140), but fewer banks than in 1989 - peak of the S&L crisis (534 banks).

The second graph shows bank failures by year since the FDIC was started.

The 140 bank failures last year was the highest total since 1992 (181 bank failures).

And since people always ask, the third graph is of bank failures by number of institutions and assets, from the December Congressional Oversight Panel’s Troubled Asset Relief Program report.

Note: This is through Nov 30th for 2009.

From the report (page 45):

Figure 11 shows numbers of failed banks, and total assets of failed banks since 1970. It shows that, although the number of failed banks was significantly higher in the late 1980s than it is now, the aggregate assets of failed banks during the current crisis far outweighs those from the 1980s. At the high point in 1988 and 1989, 763 banks failed, with total assets of $309 billion.¹⁶⁷ Compare this to 149 banks failing in 2008 and 2009, with total assets of $473 billion.¹⁶⁸

Note: This is in 2005 dollars and this includes the failure of WaMu in 2008 with $307 billion in assets that didn't impact the DIF.

I'll update the losses for the Deposit Insurance Fund (DIF) over the next few weeks.

by Calculated Risk on 1/30/2010 02:16:00 PM

Quote of the day ...

""What we see in the United States and some other economies is a statistical recovery and a human recession."
Larry Summers, Davos, Jan 30, 2010 (via CNBC)

Click on graph for larger image in new winder.

This graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).

The current employment recession is the worst since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).

And the graph is before the annual benchmark revision that will be announced next Friday, and is expected to show the loss of an additional 824,000 jobs.

by Calculated Risk on 1/30/2010 11:15:00 AM

By request, the following graph is an update to: The Investment Slump in Q2

The following graph shows the rolling 4 quarter contribution to GDP from residential investment, equipment and software, and nonresidential structures. This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

Click on graph for larger image in new window.

Residential Investment (RI) has made a positive contribution to GDP the last two quarters, and the rolling four quarter change is moving up.

Equipment and software investment made a small positive contribution to GDP in Q3, and a larger contribution in Q4. The four quarter average is also moving up.

As expected, nonresidential investment in structures is now declining sharply as major projects are completed. The economy will recover long before nonresidential investment in structures recovers.

And as always, residential investment is the best leading indicator for the economy.

by Calculated Risk on 1/30/2010 08:53:00 AM

Here is an interesting podcast from NPR's Planet Money: To Stay Or Walk Away

NPR's Alex Blumberg and Chana Joffe-Walt interview Arizona attorney Mary Kinsley. She describes how a couple years ago homeowners would call her, in tears, trying desperately to save their homes from foreclosure.

Now homeowners call, their voices calm, and ask her the best way to strategically default - and in some cases how to get the banks to take back the houses they've been delinquent on for over a year. Pretty amazing. She thinks this is just the beginning of "walking away".

P.S. I appreciate the mention!

by Calculated Risk on 1/29/2010 10:29:00 PM

This is an unofficial list of Problem Banks compiled only from public sources.

Changes and comments from surferdude808:

The Unofficial Problem Bank List underwent significant changes since last as a net 15 institutions were added. Twenty-six institutions were added while 11 institutions were removed because of failure. Please note that the six failures were removed along with the five last Friday. Usually, failures are removed with a one-week lag.

After these changes, the list stands at 599 institutions with aggregate assets of $322.5 billion, up from 584 institutions with assets of $305.3 billion last week.

Among the eleven failures are First Regional Bank ($2.2 billion); Charter Bank ($1.25 billion); Community Bank & Trust ($1.2 billion); Columbia River Bank ($1.1 billion); Florida Community Bank ($875 million); and First National Bank of Georgia ($833 million).

The 26 institutions added this week have aggregate assets of $25.9 billion. Notable among the additions are Flagstar Bank, FSB, Troy, MI ($14.8 billion); The Stillwater National Bank and Trust Company, Stillwater, OK ($2.7 billion); Guaranty Bank and Trust Company, Denver, CO ($2.1 billion); Fireside Bank, Pleasanton, CA ($1.0 billion); Darby Bank & Trust Co., Vidalia, GA ($909 million); and LibertyBank, Eugene, OR ($856 million).

The list is compiled from regulator press releases or from public news sources (see Enforcement Action Type link for source). The FDIC data is released monthly with a delay, and the Fed and OTC data is more timely. The OCC data is a little lagged. Credit: surferdude808.

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

For a full screen version of the table click here.

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. Click on the number and the Institution Directory (ID) system "will provide the last demographic and financial data filed by the selected institution".

by Calculated Risk on 1/29/2010 09:04:00 PM

One five by two nine
The first month of twenty ten
Not a record....yet.
by Soylent Green is People
From the FDIC: Columbia State Bank, Tacoma, Washington, Assumes All of the Deposits of American Marine Bank, Bainbridge Island, Washington

American Marine Bank, Bainbridge Island, Washington, was closed today by the Washington Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 30, 2009, American Marine Bank had approximately $373.2 million in total assets and $308.5 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $58.9 million. ... American Marine Bank is the 15th FDIC-insured institution to fail in the nation this year, and the third in Washington. The last FDIC-insured institution closed in the state was Evergreen Bank, Seattle, on January 22, 2010.

That makes six.

by Calculated Risk on 1/29/2010 07:51:00 PM

L.A. bank failure,
Gobbled up by East coast bank.
Zero near partners?
by Soylent Green is People
From the FDIC: First-Citizens Bank & Trust Company, Raleigh, North Carolina, Assumes All of the Deposits of First Regional Bank, Los Angeles, California

First Regional Bank, Los Angeles, California, was closed today by the California Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 30, 2009, First Regional Bank had approximately $2.18 billion in total assets and $1.87 billion in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $825.5 million. ... First Regional Bank is the 14th FDIC-insured institution to fail in the nation this year, and the first in California. The last FDIC-insured institution closed in the state was Imperial Capital Bank, La Jolla, on December 18, 2009.

Five down, at almost a $2 billion cost to DIF.

by Calculated Risk on 1/29/2010 07:03:00 PM

Georgian Bank and Trust
"Community" is spot on.
Loss, absorbed by all.
by Soylent Green is People
From the FDIC: SCBT, N.A., Orangeburg, South Carolina, Assumes All of the Deposits of Community Bank and Trust, Cornelia, Georgia

Community Bank and Trust, Cornelia, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 30, 2009, Community Bank and Trust had approximately $1.21 billion in total assets and $1.11 billion in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $354.5 million. .... Community Bank and Trust is the 13th FDIC-insured institution to fail in the nation this year, and the second in Georgia. The last FDIC-insured institution closed in the state was First National Bank of Georgia, Carrollton, earlier today.

Four down and about $1 billion in losses today ...