by Calculated Risk on 5/07/2009 03:32:00 PM

Initial leaks suggested State Street would need to raise capital.

Now, from the WSJ: State Street Doesn't Need to Boost Capital

State Street Corp. does not need to boost its capital levels as a result of the government's recently concluded stress tests ...

The stress test results will be released at 5 PM ET.

UPDATE: Morgan Stanley to raise $5 billion through stock, debt offerings

Wells to sell $6 billion in new common stock

by Calculated Risk on 5/07/2009 02:10:00 PM

From Bloomberg: Commercial Mortgage Delinquencies in U.S. Rise to 11-Year High

The percentage of loans 30 days or more behind in payments rose to 2.45 percent, Trepp LLC said in a report. The delinquency rate was more than five times the year-ago number, Trepp said. The New York-based researcher’s records go back to 1998.
...
Commercial property values fell 21.5 percent through February from their October 2007 peak, according to Moody’s Investors Service.

Properties bought in 2006 are now worth on average 11 percent less than their original price, and those bought in 2007 are worth almost 20 percent less, Moody’s said.
...
Mortgages on rental apartment buildings posted the highest delinquency rate of securitized commercial property loans in April, rising to 5.24 percent from 3.86 percent in March, Trepp said.

These are delinquencies - not losses - but it will be interesting to see the expected losses (and loss rates) for multifamily and non-residential real estate reported this afternoon.

The Fed provides charge-off and delinquency rate for commercial real estate back to 1991. However, the Fed data includes C&D (construction and development) in CRE, so isn't directly comparable to the Trepp data.

by Calculated Risk on 5/07/2009 11:06:00 AM

"OK, so now it’s official. The first quarter of 2009 experienced the worst year-over-year revenue per available room drop in the U.S. lodging industry’s organized history."
Jeff Higley: Catching up on hotel topics

Note: RevPAR is Revenue per available room - a key measure in the hotel industry.

From HotelNewsNow.com: STR reports U.S. data for week ending 2 May

In year-over-year measurements, the industry’s occupancy fell 11.6 percent to end the week at 55.7 percent. Average daily rate dropped 8.6 percent to finish the week at US$99.42. Revenue per available room for the week decreased 19.1 percent to finish at US$55.33.

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 11.1% from the same period in 2008.

The average daily rate is down 8.6%, so RevPAR is off 19.1% from the same week last year.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 5/07/2009 09:36:00 AM

There is no question that the Fed failed to adequately perform their regulatory responsibilities during the housing and credit bubble. However part of the problem was supervisory responsibility were split between various state and Federal regulators. As Fed Chairman Ben Bernanke notes in this speech, under the Gramm-Leach-Bliley Act of 1999, the Fed "serves as consolidated supervisor of all bank holding companies, including financial holding companies." Although the Fed missed significant problems at these holding companies, many of the problems were at mortgage brokers, and commercial banks that were not regulated by the Fed.

The regulators that I spoke with in 2005, at various agencies, were all concerned about the impact of the housing bubble and lax lending standards. But it was difficult to get the various regulators to coordinate. And several people told me confidentially that the Fed and the OTS were blocking efforts to tighten lending standards. So more consolidated supervision is required - but part of the problem during the bubble was that a few key individuals were able to block the efforts of other regulators.

So I think a framework to identify systemic problems would be an important addition.

Fed Chairman Ben Bernanke offers some suggestions: Lessons of the Financial Crisis for Banking Supervision

Looking forward, I believe a more macroprudential approach to supervision--one that supplements the supervision of individual institutions to address risks to the financial system as a whole--could help to enhance overall financial stability. Our regulatory system must include the capacity to monitor, assess, and, if necessary, address potential systemic risks within the financial system. Elements of a macroprudential agenda include

monitoring large or rapidly increasing exposures--such as to subprime mortgages--across firms and markets, rather than only at the level of individual firms or sectors;

assessing the potential systemic risks implied by evolving risk-management practices, broad-based increases in financial leverage, or changes in financial markets or products;

analyzing possible spillovers between financial firms or between firms and markets, such as the mutual exposures of highly interconnected firms;

ensuring that each systemically important firm receives oversight commensurate with the risks that its failure would pose to the financial system;

providing a resolution mechanism to safely wind down failing, systemically important institutions;

ensuring that the critical financial infrastructure, including the institutions that support trading, payments, clearing, and settlement, is robust;

working to mitigate procyclical features of capital regulation and other rules and standards; and

identifying possible regulatory gaps, including gaps in the protection of consumers and investors, that pose risks for the system as a whole.

Precisely how best to implement a macroprudential agenda remains open to debate. Some of these critical functions could be incorporated into the practices of existing regulators, or a subset of them might be assigned to a macroprudential supervisory authority. However we proceed, a principal lesson of the crisis is that an approach to supervision that focuses narrowly on individual institutions can miss broader problems that are building up in the system.

by Calculated Risk on 5/07/2009 08:37:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending May 2, the advance figure for seasonally adjusted initial claims was 601,000, a decrease of 34,000 from the previous week's revised figure of 635,000. The 4-week moving average was 623,500, a decrease of 14,750 from the previous week's revised average of 638,250.
...
The advance number for seasonally adjusted insured unemployment during the week ending April 25 was 6,351,000, an increase of 56,000 from the preceding week's revised level of 6,295,000. The 4-week moving average was 6,207,250, an increase of 125,250 from the preceding week's revised average of 6,082,000.

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 623,500, off 35,250 from the peak 4 weeks ago.

Continued claims are now at 6.35 million - an all time record.

The second shows the four-week average of initial unemployment claims and recessions.

Typically the four-week average peaks near the end of a recession.

Also important - in the last two recessions, initial unemployment claims peaked just before the end of the recession, but then stayed elevated for a long period following the recession - a "jobless recovery". There is a good chance this recovery will be very sluggish too, and we will see claims elevated for some time (although below the peak).

The 35,250 decline in the four-week average from the peak appears significant, and there is a good chance that we've seen the peak for weekly unemployment insurance claims. If this is the peak, continued claims should peak soon.

The level of initial claims (over 600 thousand) is still very high, indicating significant weakness in the job market.