by Calculated Risk on 9/19/2009 11:55:00 AM

From Kenneth Harney at the LA Times: Homeowners who 'strategically default' on loans a growing problem

National credit bureau Experian teamed with consulting company Oliver Wyman to identify the characteristics and debt management behavior of the growing numbers of homeowners who bail out of their mortgages with none of the expected warning signs, such as nonpayments on other debts.
...
[Some results:]
...

The number of strategic defaults is far beyond most industry estimates -- 588,000 nationwide during 2008, more than double the total in 2007. ...

Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. ...

Strategic defaults are heavily concentrated in negative-equity markets ...

This fits with recent research from Guiso, Sapienza and Zingales: See New Research on Walking Away and here is their paper: Moral and Social Constraints to Strategic Default on Mortgages

by Calculated Risk on 9/19/2009 08:36:00 AM

I've been asked many times what people should do financially during a recession. My first answer has always been "Keep your job if you can!"

Earlier this week, David Leonhardt at the NY Times wrote: Wages Grow for Those With Jobs, New Figures Show

Even though unemployment has reached its highest level in 26 years, most workers have received a raise over the last year.

That contrast highlights what I think is one of the more overlooked features of the Great Recession. In the job market, at least, the recession’s pain has been unusually concentrated.
...
People who have lost their jobs are struggling terribly to find new ones. Since the downturn began in 2007, companies have been extremely reluctant to hire new workers, and few new companies have started. The economy and the job market are churning very slowly.
...
Try thinking of it this way: All of the unemployed people in the country are gathered in a huge gymnasium that’s been turned into a job search center. The fact that this recession is the worst in a generation means that there are many, many people in the gym. The fact that the economy is churning so slowly means that there is not much traffic into and out of the gym.

If you’re inside, you will have a hard time getting out. Yet if you’re lucky enough to be outside the gym, you will probably be able to stay there. The consequences of a job loss are terribly high, but — given that the unemployment rate is almost 10 percent — the odds of job loss are surprisingly low.

From an earlier post, here is a graph of hires and separations from the BLS "Job Openings and Labor Turnover Survey" (JOLTS) survey. The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers.

Note: Remember the CES (Current Employment Statistics, payroll survey) is for positions, the CPS (Current Population Survey, commonly called the household survey) is for people. See Jobs and the Unemployment Rate for a comparison of the two surveys.

The following graph shows hires (Green Line), Quits (blue bars) and Layoff, Discharges and other (red bars) from the JOLTS. Red and blue added together equals total separations. Unfortunately this is a new series and only started in December 2000.

Click on graph for larger image in new window.

Notice that hires (green line) and separations (red and blue together) are pretty close each month. When the green line is above total separations, the economy is adding net jobs, when the green line is below total separations, the economy is losing net jobs.

Total separation and hires have both declined recently - the lower "churn" that Leonhardt discusses, and the reason so many people are stuck in the "gymnasium".

by Calculated Risk on 9/18/2009 09:15:00 PM

This is an unofficial list of Problem Banks.

Note: Bank failures today, Irwin Union Bank, F.S.B., Louisville, KY, and Irwin Union Bank and Trust Company, Columbus, IN, were on this list.

Changes and comments from surferdude808:

There were large changes to Unofficial Problem Bank List as the OCC released some of its newly issued actions for late July and early August.

The list increased by a net of 12 institutions to 436 from 424 last week. Assets increased by $7.4 billion to $294 billion. There were five removals with assets of $8.5 including three failures -- Corus Bank, N.A. ($7 billion), Venture Bank ($991 million), and Brickwell Community Bank ($72.5 million); and two action terminations (First National Bank of Colorado City and Cumberland Valley National Bank).

Interestingly, last week Hometown National Bank, Longview, WA was removed as the OCC terminated a Formal Agreement only for them to be added back to this week’s list as the OCC subsequently placed Hometown under a Cease & Desist Order.

Of the 17 additions this week are several subsidiary banks of the privately controlled bank holding company FBOB Corporation based in Chicago, IL. These include the Park National Bank, Chicago, IL ($4.8 billion), San Diego National Bank, San Diego, CA ($3.4 billion), and Pacific National Bank, San Francisco, CA ($2.1 billion). The Federal Reserve issued a Written Agreement against FBOB Corporation on Sept 14, 2009. FBOB Corporation has assets of $18.3 billion and controls nine institutions supervised by either the OCC or FDIC with five subject to a formal enforcement action.

Other sizable additions to the list this week include the $1.2 billion asset Metrobank, National Association, Houston, TX, and the $1.1 billion asset Atlantic Southern Bank, Macon, GA.

The list is compiled from regulator press releases or from public news sources (see Enforcement Action Type link for source). The FDIC data is released monthly with a delay, and the Fed and OTC data is more timely. The OCC data is a little lagged. Credit: surferdude808.

See description below table for Class and Cert (and a link to FDIC ID system).

For a full screen version of the table click here.

The table is wide - use scroll bars to see all information!

NOTE: Columns are sortable - click on column header (Assets, State, Bank Name, Date, etc.)





Class: from FDIC

The FDIC assigns classification codes indicating an institution's charter type (commercial bank, savings bank, or savings association), its chartering agent (state or federal government), its Federal Reserve membership status (member or nonmember), and its primary federal regulator (state-chartered institutions are subject to both federal and state supervision). These codes are:

N National chartered commercial bank supervised by the Office of the Comptroller of the Currency

SM State charter Fed member commercial bank supervised by the Federal Reserve

NM State charter Fed nonmember commercial bank supervised by the FDIC

SA State or federal charter savings association supervised by the Office of Thrift Supervision

SB State charter savings bank supervised by the FDIC

Cert: This is the certificate number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. Click on the number and the Institution Directory (ID) system "will provide the last demographic and financial data filed by the selected institution".

by Calculated Risk on 9/18/2009 05:15:00 PM

New fuel for fire
Two Irwin Banks burn away
Incandescent heat
by Soylent Green is People
From the FDIC: First Financial Bank, National Association, Hamilton, Ohio, Assumes All of the Deposits of Irwin Union Bank, F.S.B., Louisville, Kentucky, and Irwin Union Bank and Trust Company, Columbus, Indiana

Federal and state regulators today closed Irwin Union Bank, F.S.B., Louisville, Kentucky, and Irwin Union Bank and Trust Company, Columbus, Indiana, respectively. The institutions are banking subsidiaries of Irwin Financial Corporation, Columbus, Indiana. The regulators immediately named the Federal Deposit Insurance Corporation (FDIC) as the receiver for the banks. ...

Irwin Union Bank and Trust Company, Columbus, Indiana, was closed by the Indiana Department of Financial Institutions. As of August 31, 2009, it had total assets of $2.7 billion and total deposits of approximately $2.1 billion. Irwin Union Bank, F.S.B., Louisville, Kentucky, was closed by the Office of Thrift Supervision. As of August 31, 2009, it had total assets of $493 million and total deposits of approximately $441 million.
...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for both institutions will be $850 million. ... The failure of the two institutions brings the nation's total number this year to 94. This was the first failure of the year in Indiana and Kentucky. The last FDIC-insured institutions closed in the respective states were The Rushville National Bank, Rushville, Indiana, on December 18, 1992, and Future Federal Savings Bank, Louisville, Kentucky, on August 30, 1991.

A two-fer to start BFF.

by Calculated Risk on 9/18/2009 04:11:00 PM

While we wait for the FDIC (HomeGnome has a poll each week in the comments!):

Click on graph for larger image in new window.

This 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.

And from Eric Dash at NY Times Economix: What’s Really Wrong With Wall Street Pay?

Note: “I.B.G. - Y.B.G.” stands for what happens - from a trader's perspective - if a huge trade goes South: "I’ll Be Gone and You’ll Be Gone"

And since we've been discussing the possible impact of Fed purchases on mortgage rates, from the Atlanta Fed weekly Financial Highlights:

From the Atlanta Fed:

On September 15, the Fed purchased $2.05 billion in Treasuries, roughly in the 10-17 year sector; on September 16, it purchased $1.799 billion in the one-to-two year sector. It has purchased a total of $285.2 billion of Treasury securities through September 16.

The Fed plans to purchase $300 billion by the end of October, or about six weeks from now, which makes for a pace of about $2.5 billion in purchases per week.

And from the Atlanta Fed:

The Fed has purchased a net total of $18.8 billion of agency MBS between September 3 and 9. It bought $3.6 billion of Freddie Mac, $12.4 billion of Fannie Mae, and $2.9 billion of Ginnie Mae.

The Fed’s cumulative MBS purchases have reached $840.1 billion, and it has announced plans to purchase up to $1.25 trillion by the end of the year.

The Treasury purchases have slowed and will end in six weeks. The MBS purchases are ongoing.