by Calculated Risk on 5/01/2009 07:54:00 PM

From the WSJ: Citi Said to Need Up to $10 Billion

Citigroup Inc. may need to raise as much as $10 billion in new capital, according to people familiar with the matter ...

The bank ... is negotiating with the Federal Reserve and may need less if regulators accept the bank's arguments about its financial health ... In a best-case scenario, Citigroup could wind up having a roughly $500 million cushion above what the government is requiring.

If Citi isn't required to raise capital, I doubt there will be much confidence in the stress test results. I was expecting a much higher number than $10 billion.

Also, from the NY Times: Citigroup to Sell Japanese Units for $5.56 Billion

Citigroup said Friday that it would sell its Japanese brokerage and investment banking units for $5.56 billion, securing much-needed capital before results due this coming week from a U.S. government “stress test” of its financial health.
...
Citigroup said it would realize a loss of $200 million on the transaction, which would generate $2.5 billion in tangible common equity, a measure of financial health.

by Calculated Risk on 5/01/2009 05:05:00 PM

What is that I smell?
Mixing money aroma...
Two Jersey banks merge.
by Soylent Green is People
From the FDIC: North Jersey Community Bank, Englewood Cliffs, New Jersey, Assumes All of the Deposits of Citizens Community Bank, Ridgewood, New Jersey

Citizens Community Bank, Ridgewood, New Jersey, was closed today by the New Jersey Department of Banking and Insurance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with North Jersey Community Bank, Englewood Cliffs, New Jersey, to assume all of the deposits of Citizens Community Bank.
...
As of December 31, 2008, Citizens Community Bank had total assets of approximately $45.1 million and total deposits of $43.7 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund will be $18.1 million. North Jersey Community Bank's acquisition of the deposits of Citizens Community Bank was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives.

Citizens Community Bank is the 31st bank to fail in the nation this year and the first in New Jersey. The last FDIC-insured institution to fail in the state was Dollar Savings Bank, Newark, on February 14, 2004.

by Calculated Risk on 5/01/2009 04:14:00 PM

First Friday fizzle
Silverton Bank, crash and burn.
May might be hectic
by Soylent Green is People
From the FDIC: FDIC Creates Bridge Bank to Take Over Operations of Silverton Bank, National Association, Atlanta, Georgia

The Federal Deposit Insurance Corporation (FDIC) created a bridge bank to take over the operations of Silverton Bank, National Association, Atlanta, Georgia, after the bank was closed today by the Office of the Comptroller of the Currency (OCC). ...

Silverton Bank did not take deposits directly from the general public nor did it make loans to consumers. It was a commercial bank that provided correspondent banking services to its client banks.

Silverton Bank had approximately 1,400 client banks in 44 states, and operated six regional offices. It provided a variety of services for its clients, including credit card operations, clearing accounts, investments, consulting, purchasing loans, and selling loan participations. Since the FDIC created a new bank to take over the operations of Silverton Bank, there is not expected to be any meaningful impact on the bank's clients.
...
At the time of its closing, Silverton Bank had approximately $4.1 billion in assets and $3.3 billion in deposits, all of which are expected to be within the FDIC's insurance limits.
...
The FDIC estimates that the cost to the Deposit Insurance Fund will be $1.3 billion. Silverton Bank is the 30th bank to fail in the nation this year and the sixth in Georgia. The last FDIC-insured institution to fail in the state was American Southern Bank, Kennesaw, on April 24

by Calculated Risk on 5/01/2009 03:24:00 PM

Click on graph for larger image in new window.

This graph shows the historical vehicle sales from the BEA (blue) and an estimate for April (light vehicle sales of 9.32 million SAAR from AutoData Corp).

Note: this graph includes a small number of heavy vehicle sales to compare to the BEA.

On a seasonally adjusted basis, total sales were still above the February level, but not much.

A few quotes:

"Industrywide, April felt more like a dust bowl than a spring garden for new car sales."
Jim O'Donnell, president of BMW in North America, May 1, 2009.

"It's kind of like the anchor bouncing a long on the bottom of the lake. It has found bottom and it's tripping along a little bit. I think we have found the bottom in aggregate."
Mark LeNeve, GM vice president for sales and marketing, sales conference call, May 1, 2009.

"The industry appears to have stabilized, as it's been fairly level for the past four months. We know where the bottom is, and as the economy struggles to recover, vehicle sales should follow."
Chrysler President Jim Press, May 1, 2009.

by Calculated Risk on 5/01/2009 03:00:00 PM

Here is a common question:

Q: I was looking at the Q1 Advance GDP report, and it showed that PCE was up 2.2%. However the March Personal Income and Outlay report showed that real March PCE was off -0.2%, after increasing 0.1% in February, and 0.9% in January. How did they get 2.2% for Q1 PCE growth? How does that compare to the monthly numbers?

A: First, the reported change in the Personal Income report is from the previous month (not annualized). The quarterly GDP report is the annualized change from Q4 to Q1.

Second, the quarterly change is from the average PCE in Q4 to the average PCE in Q1. Look at the following chart ...


Click on graph for larger image in new window.

Note: graph doesn't start at zero to show the change. All numbers are in billions.

This shows both the quarterly (red) and monthly (blue) PCE data (2000 dollars).

If you average October, November and December PCE, you get the Q4 PCE. And Q1 PCE is the average of January, February and March.

The math is simple: $8,214.2 (Q1 2009) divided by $8170.5 (Q4 2008) equals 1.00535. Take that to the 4th power (to annualize), subtract 1, and that gives the annualized rate of change in real PCE from Q4 to Q1: 2.2%.

Notice that the month-to-month change isn't useful in comparing to the quarterly change. Also notice that I didn't even report the March PCE numbers - that was mostly captured in the Q1 GDP report - and the monthly series is noisy.

The first two Personal Income reports each quarter are much more useful than the final month. When the April Personal Income report is released, the media will focus on the month-to-month change. However I will compare April PCE to January PCE - and then May PCE to February. This is the "two month" estimate for Q2 PCE (notice the calculation compares to the same month of the previous quarter, not the previous month).

For some time I had been forecasting a slump in consumer spending, and then using the two month method, I was able to declare the slump had arrived, see: Personal Income for August Indicates Consumer Recession and Estimating PCE Growth for Q3 2008

[T]his will be the first decline in PCE since Q4 1991. This is strong evidence that the indefatigable U.S. consumer is finally throwing in the towel.

I was also among the first to point out PCE would probably be positive in Q1: February PCE and Personal Saving Rate

This suggests that PCE will make a positive contribution to GDP in Q1.

The monthly data is extremely useful for forecasting - especially the first two months of each quarter.