by Calculated Risk on 6/10/2009 12:29:00 AM

By request, here is an open thread for discussion.

Futures are up slightly ...

Futures from barchart.com

Bloomberg Futures.

CBOT mini-sized Dow

CME Globex Flash Quotes

And the Asian markets are mostly up.

Best to all.

by Calculated Risk on 6/09/2009 10:36:00 PM

From Reuters: US commercial loan servicers seek longer extensions

U.S. commercial real estate mortgage servicers are seeking to extend maturing loans for up to five years in a bid to prevent borrowers from defaulting and giving up office, retail and apartment buildings at distressed levels, an industry executive said on Tuesday.
...
Modifying loans has consumed the $700 billion market for commercial mortgage securities this year.
...
The urgency has also risen since the fourth quarter of 2008 as special servicers have taken on hundreds of new loans due to default or a reduction in cash flow that may presage a default.

Also on CMBS from Fitch: U.S. Super Senior CMBS Expected To Hold Onto 'AAA' Ratings

While rating actions across the capital structure of many recent vintage U.S. CMBS transactions will be substantial, mezzanine and super-senior 'AAA'-rated classes are expected to stay 'AAA' for the foreseeable future, according to Fitch Ratings as it continues its review of 2006-2008 fixed-rate conduit and fusion transactions.

While rating actions on the most senior tranches are not anticipated, Fitch expects to downgrade approximately 75%-85% of subordinate 'AAA' (A-J) classes from these recent vintages as a result of its revised loss forecasts. Downgrades across all classes are expected to average two rating categories.

Fitch assumes the following factors in forecasting losses:

--Peak-to-trough value declines of 35%;

--Immediate and sustained income declines of 15%;

Unlike S&P, Fitch believes the "AAA" rated classes will not be downgraded - but a large percentage of the other classes will be cut. Note that S&P assumed current or market rents, and then decreased rents a further 6 to 30% depending upon property type. Fitch is only assuming an "Immediate and sustained income declines of 15%". We know from recent reports that incomes for hotels are already off more than 15%.

by Calculated Risk on 6/09/2009 07:36:00 PM

From SCOTUS Blog: Court clears Chrysler sale

Ending four days of intense, round-the-clock and high-stakes legal maneuvering in the Supreme Court, the Justices on Tuesday evening removed a legal obstacle to sale of the troubled auto industry giant, Chrysler.

Insisting that it was denying a postponement “in this case alone,” the two-page order said the challengers had not met their burden of showing that a delay was justified. The order allows a closing of the deal as of next Monday, because it lifts a temporary stay that Justice Ruth Bader Ginsburg had issued on Monday, apparently to give the Court time to ponder the issue.

The Court said nothing about the biggest issue lurking in the case: the legality of using federal “bailout” money to pay for the rescue of an auto manufacturer. In fact, the order stressed that “a denial of a stay is not a ddecision on the merits of the underlying legal issues.”

More at link ...

by Calculated Risk on 6/09/2009 05:15:00 PM

From the AP: Judge OKs Chrysler plan to terminate franchises. The AP is reporting that U.S. Judge Arthur Gonzalez said Chrysler can terminate 789 dealers effective immediately.

From the SCOTUS Blog: Chrysler and the meaning of June 15

[I]t seemed clear that Ginsburg — and perhaps the full Court — were awaiting the new round of briefing on what a widely disputed June 15 “deadline” means.

It is not clear how central this dispute is to the Justices’ ultimate view of the legal and financial situation, but there was no doubt of the vigor with which all sides were debating that question.

The Indiana funds, in a somewhat triumphant though brief filing, contended Tuesday that they had undermined the claims that Fiat would back out and the deal would collapse if it is not closed by next Monday. Its evidence was a brief wire story on Bloomberg News quoting a Fiat executive as saying it “would never walk away” from the pact.

By early afternoon, the three main defenders of the rescue plan joined the new battle, with Fiat saying that the benefit funds’ new thrust was “unwarranted.” The deal, by its own express terms, “will terminate automatically” if not closed “on or before June 15.” (emphasis in the original).

And from Steve Jakubowski at the Bankruptcy Litigation Blog: What's Bothering Ruthie? Chrysler Bankruptcy Sale Opinion Analysis - Part II

I'm guessing, though, that what bothers her most -- and frankly what's really been bothering me most (hence Part II) -- is the sale's treatment of tort claimants, both present and future, and Judge Gonzalez's cursory justification for such treatment.

And other auto news from CNBC: US House Passes 'Cash for Clunkers' Plan

[T]he House approved a plan Tuesday to provide vouchers of up to $4,500 for consumers who turn in their gas-guzzling cars and trucks for more fuel-efficient vehicles.

by Calculated Risk on 6/09/2009 04:02:00 PM

Click on graph for larger image in new window. The first graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears". Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

Here are aggregate hours index for the last six recessions, with the index normalized to 100 for the last month of the recession. (ht Bob_in_MA)

Notes: Recessions are labeled based on the starting year. The 1980 line (green) ended early because of the 1981 recession. The 2007 recession is not included since we don't when it will end!

This shows the weak labor market following the 1990 recession - the red line hovers around 100 for about a year following the official end of the recession.

This also shows the aggregate hours index was flat for a few months following the 2001 recession (blue line) and then declined until mid-2003.