by Calculated Risk on 4/17/2009 04:00:00 PM

While we wait for the FDIC ...

Here is a link to Jim the Realtor on Nightline last night.

Click on graph for larger image in new window.

The first graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

This is still the 2nd worst S&P 500 / DOW bear market in the U.S. in 100 years.

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

The second graph shows the S&P 500 since 1990.

The dashed line is the closing price today.

The half off sale is over (for now), and the market is only off 44.4% from the peak.

by Calculated Risk on 4/17/2009 03:30:00 PM

From MarketWatch: Pessimistic scenario gains stress-test influence

Banks ... are under pressure to disclose the results of their stress tests to shareholders. Banks are expected to sign capital-assistance documents upon the completion of the stress tests, explaining whether they are seeking out immediate government capital infusions or they plan to spend six months raising capital before re-evaluating.

The signing of those documents could be a material agreement, which means banks must file an 8-K with the Securities and Exchange Commission, explaining what they've agreed to.

"It's a material event," said Gary Roth, partner at Alston & Bird LLP in New York. "When banks are given their results, they would be under a lot of pressure to disclose. When one discloses, it puts pressure on the other banks to disclose."

SEC officials are in discussions with bank regulators about disclosure responsibilities.

If the stress test shows a bank needs additional capital, (update for clarification) and the bank signs the agreement, there is no question that is a material event and must be disclosed to shareholders. Also, it appears everyone now understands the "more adverse" scenario is the baseline:

Alston & Bird's [Jeffrey] Hare said he believes that bank regulators are now using the pessimistic scenario as their baseline forecast.

by Calculated Risk on 4/17/2009 12:38:00 PM

From Fed Chairman Ben Bernanke: Financial Innovation and Consumer Protection (ht Rex)

The concept of financial innovation, it seems, has fallen on hard times. Subprime mortgage loans, credit default swaps, structured investment vehicles, and other more-recently developed financial products have become emblematic of our present financial crisis. Indeed, innovation, once held up as the solution, is now more often than not perceived as the problem. I think that perception goes too far, and innovation, at its best, has been and will continue to be a tool for making our financial system more efficient and more inclusive. But, as we have seen only too clearly during the past two years, innovation that is inappropriately implemented can be positively harmful. In short, it would be unwise to try to stop financial innovation, but we must be more alert to its risks and the need to manage those risks properly.
...
[W]ith hindsight, we can see that something went wrong in recent years, as evidenced by the currently high rates of mortgage delinquency and foreclosure ... And the damage from this turn in the credit cycle--in terms of lost wealth, lost homes, and blemished credit histories--is likely to be long-lasting. One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be.
...
Where does all this leave us? It seems clear that the difficulty of managing financial innovation in the period leading up to the crisis was underestimated ...

With hindsight? Hoocoodanode?

by Calculated Risk on 4/17/2009 11:26:00 AM

From the BLS: Regional and State Employment and Unemployment: March 2009

Regional and state unemployment rates were nearly all higher in March. Forty-six states recorded over-the-month unemployment rate increases, North Dakota and the District of Columbia registered rate decreases, and 3 states had no change in their rate ...

In March, Michigan again reported the highest jobless rate, 12.6 percent. The states with the next highest rates were Oregon, 12.1 percent; South Carolina, 11.4 percent; California, 11.2 percent; North Carolina, 10.8 percent; Rhode Island, 10.5 percent; Nevada, 10.4 percent; and Indiana, 10.0 percent. Nine additional states and the District of Columbia recorded unemployment rates of at least 9.0 percent. The California and North Carolina rates were the highest on record for those states.
emphasis added, records started in 1976.

Probably more records coming ...

by Calculated Risk on 4/17/2009 09:47:00 AM

First, Citi has committed to "tell the market exactly" the results of the stress tests:

[I]t made sense to delay the launch of the exchange offer until we could tell the market exactly what the results of the stress test are.
Citigroup, April 17, 2009

And from the investor presentation:

Click on graph for larger image in new window.

Note the rapid rise in card NCLs. NCLs jumped from 8.04% in Q4 to 10.18% in Q1 2009.

Mortgage NCLs are rising sharply too.

The second graph shows the 90+ Days Past Due (DPD) trend for 1st and 2nd mortgages, and the Net Credit Losses.

The 90+ DPD is increasing rapidly for 1st mortgages - jumping from 5.71% in Q4, to 7.15% in Q1 2009.

Credit losses are still rising rapidly at Citi.