by Calculated Risk on 8/11/2009 05:23:00 PM

From the WSJ: Bankruptcy Filing Near for Taylor Bean

A bankruptcy filing is "imminent" for Taylor, Bean & Whitaker Mortgage Corp., lawyers representing the mortgage lender said in a federal court filing last week.
...
Meanwhile, an internal email at Taylor Bean dated Monday, Aug. 10, referred to a new computer folder "to assemble all of our bankruptcy detailed spreadsheets and support."

No surprise.

Nothing new on Colonial Bank (or Corus Bank, or Guaranty Bank in Texas).

CIT created a little stir this morning with an NT 10-Q SEC filing. This was just a notice of CIT being unable to file on time - because the executives are busy - and that CIT expects to file by August 17th (just happens to be the date of the cash tender offer).

CIT reiterated in the NT 10-Q that:

If the tender offer is successfully completed, the Company intends to use the proceeds of the Credit Facility to complete the tender offer and make payment for the August 17 notes. Further, the Company and a Steering Committee of the bond holder lending group do not intend for the Company to seek relief under the U.S. Bankruptcy Code, but rather will pursue restructuring efforts as part of the comprehensive restructuring plan to enhance the Company’s liquidity and capital position. If the pending tender offer is not successfully completed, and the Company is unable to obtain alternative financing, an event of default under the provisions of the Credit Facility would result and the Company could seek relief under the U.S. Bankruptcy Code.
emphasis added

That isn't new.

CIT also reiterated that there are substantial doubts that the company will continue as a going concern.

In addition, as disclosed in the same Current Report on Form 8-K, the Company’s funding strategy and liquidity position have been materially adversely affected by on-going stress in the credit markets, operating losses, credit ratings downgrades, and regulatory and cash restrictions such that there is substantial doubt about the Company’s ability to continue as a going concern.

Also nothing new.

by Calculated Risk on 8/11/2009 03:23:00 PM

From the Treasury:

... One of the most significant changes in the world of finance in recent decades has been the explosive growth and rapid innovation in the markets for credit default swaps (CDS) and other OTC derivatives. These markets have largely gone unregulated since their inception. Enormous risks built up in these markets – substantially out of the view or control of regulators – and these risks contributed to the collapse of major financial firms in the past year and severe stress throughout the financial system.

Under the Administration's legislation, the OTC derivative markets will be comprehensively regulated for the first time. The legislation will provide for regulation and transparency for all OTC derivative transactions; strong prudential and business conduct regulation of all OTC derivative dealers and other major participants in the OTC derivative markets; and improved regulatory and enforcement tools to prevent manipulation, fraud, and other abuses in these markets.

It appears the proposed bill would require standard derivative products to be traded on exchanges, and that all companies involved in derivative trading would be subject to federal regulation.

I haven't found any mention of banning 'naked' CDS (something that was discussed a couple weeks ago), but I haven't read the entire proposal.

by Calculated Risk on 8/11/2009 12:41:00 PM

From CB Richard Ellis: U.S. Retail Cap Rates

Average US retail capitalization rates increased 55 basis points in the 2nd quarter of 2009 to 8.12% ...

As some owners were unable to hold on, cap rates continued the upward march in the 2nd quarter. The 55 basis point gain is the largest quarterly increase we have ever measured, even trumping 2008 Q4. ... Our preliminary review of closed sales and escrows in the 3rd quarter indicate cap rates are continuing to rise.

Click on graph for larger image in new window.

This graph from CBRE shows the retail cap rate since 2003. Note that 2009 was based on just Q1 and Q2, and Q2 is already at 8.12% - and CBRE sees an additional cap rate increase in the early Q3 data.

From Reuters in July, see: Strip Mall Vacancy Rate Hits 10%, Highest Since 1992

During the second quarter, the vacancy rate at U.S. strip malls reached 10 percent, the highest level since 1992, [Reis] said. ... asking rent fell 1.7 percent from a year ago to $19.28 per square foot. Asking rent fell 0.7 percent from the prior quarter. It was the largest single-quarter decline since Reis began tracking quarterly figures in 1999.

Sharply lower rents, higher vacancy rates, reduced leverage and much higher cap rates - Brian calls this the "neutron bomb for RE equity"; destroys CRE investors, but leaves the buildings still standing.

by Calculated Risk on 8/11/2009 10:30:00 AM

Saturday I posted a description of the differences between the Current Population Survey (CPS: commonly called the household survey), and the Current Employment Statistics (CES: payroll survey).

The CPS gives the total number of people employed (and unemployed), and the CES gives the total number of positions (excluding some categories like the self-employed, and a person working two jobs counts as two positions).

So if you wanted to compare the number of men vs. the number of women in the labor force, which survey would you use? Not the CES because that is a measure of positions, and a person working two jobs would be counted twice. Instead you'd want to use the CPS (a count of people, not positions).

However, Professor Casey Mulligan writes in the NY Times Economix: When Will Women Become a Work-Force Majority?

It is possible that, for the first time in American history, women will make up a majority of the labor force late this summer.
emphasis added

Uh, no.

First Mulligan means "work force" or "employed", not percent of labor force (the labor force includes unemployed workers too).

But more importantly, Mulligan means women will hold a majority of the positions as measured by the CES. Remember the CES excludes self-employed and farm jobs, and those are probably largely male. And perhaps women are more likely to work two jobs (the CES counts that as two positions).

Click on graph for larger image in new window.

This graph shows the percent of men and women in the U.S. labor force. The percentage have been pretty stready for the last 15 years, although the current recession is impacting men more than women.

According to the BLS, there are 10.1 million more men in the labor force than women, but only 7.4 million more men are working.

The unemployment rate for men (20 & over) is 9.8% compared to 7.5% for women. Including teens (16 & over), the unemployment rate for men is 10.5% compared to 8.1% for women.

Catherine Rampell at the NY Times Economix picks up Mulligan's error: The Mancession

Casey B. Mulligan noted, for example, that for the first time in American history women are coming close to representing the majority of the national work force.

At least Rampell used "work force" instead of "labor force" but she repeats Mulligan's error. Women are coming close to holding a majority of payroll jobs, but not a majority of the work force or labor force. Back in February, Rampell phrased it better:

With the recession on the brink of becoming the longest in the postwar era, a milestone may be at hand: Women are poised to surpass men on the nation’s payrolls, taking the majority for the first time in American history.

To belabor this point: Say there were 50 women and 100 men in the work force, and each women worked two jobs (men only one). The CES would report 200 payroll positions; half for men, and half for women. The CPS would report 150 people had jobs, 50 women and 100 men. Would it be correct to say there were as many women in the work force as men? No.

Both surveys have value, and I'm using this to make a point: The CES is about positions. The CPS is about people.

by Calculated Risk on 8/11/2009 08:38:00 AM

From MarketWatch: Oversight panel: Losses could pose threat to small banks

According to a report from the Congressional Oversight Panel, which is charged with overseeing the $700 billion Troubled Asset Relief program, or TARP, the 18 largest financial institutions with over $600 million in assets would "be able to deal with" whole-loan portfolio losses.

However, the report's analysis of troubled whole loans -- based on a model developed by SNL Financial -- suggests they pose a threat to smaller public banks, those with $600 million to $100 billion in assets.

Here is the report: August Oversight Report: The Continued Risk of Troubled Assets

The problem of troubled assets is especially serious for the balance sheets of small banks. Small banks‘ troubled assets are generally whole loans, but Treasury‘s main program for removing troubled assets from banks‘ balance sheets, the PPIP will at present address only troubled mortgage securities and not whole loans. The problem is compounded by the fact that banks smaller than those subjected to stress tests also hold greater concentrations of commercial real estate loans, which pose a potential threat of high defaults. Moreover, small banks have more difficulty accessing the capital markets than larger banks. Despite these difficulties, the adequacy of small banks‘ capital buffers has not been evaluated under the stress tests.
emphasis added

The FDIC will stay very busy.