by Calculated Risk on 1/19/2010 08:10:00 AM

Press Release: Fourth Quarter Net Loss of $7.6 Billion

Citigroup today reported a full year 2009 net loss of $1.6 billion ... Managed revenues were $91.1 billion for the year. The fourth quarter 2009 net loss was $7.6 billion ...

"We ... cut costs by over $13 billion annually, reduced headcount by 100,000, and reduced assets by $500 billion from peak levels." [said Vikram Pandit, Chief Executive Officer of Citigroup]

More from Eric Dash at the NY Times: Citigroup Reports a $1.6 Billion Loss for Year

[L]osses in Citigroup’s domestic mortgages and credit units overwhelmed gains from investment banking, a trend that is likely to continue. Bank executives set aside another $700 million to cover consumer losses in the fourth quarter, bringing the total amount of reserves to about $36 billion at year’s end.

The confessional is still open.

by Calculated Risk on 1/18/2010 10:13:00 PM

Note: Here is a weekly summary and a look ahead.

Below is a sign on the Broadway Auto Row in Oakland on Broadway. This is where the Chrysler/Jeep/Kia dealer used to be - the "Heart of the Marketplace".

Now dark and for lease. A sign of the times (photo credit: Bob)

by Calculated Risk on 1/18/2010 06:45:00 PM

First, from the NY Times back in April: Vandals Strip a Vacant Villa in California

Suzy Brown ... was sued by her neighbors and ran afoul of the local planning department over plans to use the villa as a “spiritual retreat” and high-end drug rehabilitation center.

But none of that prepared Ms. Brown for what happened last month when the 16,000-square-foot house fell into foreclosure. Vandals ripped out $1 million worth of fixtures, including toilets, according to a crime report filed on March 26 by a broker for Chevy Chase Bank.
...
Ms. Brown said she and 60 co-investors put $13 million into the construction and maintenance of the property, which they called Vivienda Estate, from 2004 to 2006, combining a $6 million down payment with $7 million from two mortgages and a private loan.

By the time she left last month, she had failed to make payments for one year and owed the bank $6.5 million, she said.

And a video from Jim today, the banked owned property is listed at $2.7 million. Crazy!

by Calculated Risk on 1/18/2010 04:00:00 PM

From Crain's ChicagoBusiness: Illinois enters a state of insolvency (ht Walt)

While it appears unlikely or even impossible for a state to hide out from creditors in Bankruptcy Court, Illinois appears to meet classic definitions of insolvency: Its liabilities far exceed its assets, and it's not generating enough cash to pay its bills. ... "I would describe bankruptcy as the inability to pay one's bills," says Jim Nowlan, senior fellow at the University of Illinois' Institute of Government and Public Affairs. "We're close to de facto bankruptcy, if not de jure bankruptcy."
...
Despite a budget shortfall estimated to be as high as $5.7 billion, state officials haven't shown the political will to either raise taxes or cut spending sufficiently to close the gap.

... Unpaid bills to suppliers are piling up. State employees, even legislators, are forced to pay their medical bills upfront because some doctors are tired of waiting to be paid by the state. The University of Illinois, owed $400 million, recently instituted furloughs, and there are fears it may not make payroll in March if the shortfall continues.

There is much more in the article, including a discussion of how pension payments are rising sharply.

For more on the problems of states, see the recent Rockefeller Institute report: Recession or No Recession, State Tax Revenues Remain Negative

The first three quarters of 2009 were the worst on record for states in terms of the decline in overall state tax collections, as well as the change in personal income and sales tax collections. The Great Recession hit virtually every single source of tax revenue and pushed a number of states to revise revenue forecasts numerous times throughout fiscal 2009 and 2010, with significant impacts on services.

Preliminary data for the October-December quarter suggest that fiscal conditions remain weak. ... While December data could change this troubling picture, there is little reason to expect reported revenues for that month to be strong. Continued weakness in revenues, along with continued if more moderate growth in expenditures, make further mid-year budget revisions and spending cuts highly likely.

According to the National Conference of State Legislatures (NCSL), new budget gaps have opened in at least 31 states since FY 2010 began. ... The continued weakening of state tax revenues in fiscal 2010 will force states to take further drastic measures.

by Calculated Risk on 1/18/2010 02:02:00 PM

Here is a followup to my earlier post about more hotel rooms coming online amid the worst occupancy slump since the Great Depression ...

From Jane Levere at the NY Times: Ailing Hotel Industry Is on Brink of Major Expansion

Though it may seem counterintuitive at a time when many hotels around the country are having trouble filling their rooms, nearly 100 hotels are scheduled to open in major American cities this year.

New York will have the most new hotels, 46, according to Smith Travel Research, a hotel research company in Hendersonville, Tenn., followed by Houston with 30. New hotels are opening as well in Atlanta, Boston, Chicago, Dallas, Miami, Los Angeles and Washington, D.C. That does not include new hotels opening in the suburbs of these cities.

So how can so many hotels be opening even though the economy and travel remain so slow?

The answer, according to Mark Lomanno, president of Smith Travel Research, is that “hotel building cycles rarely mesh just right with economic cycles.” Planning a new hotel can take two to four years and construction another one to four years. ...

This is probably the final surge in hotel construction related to the CRE bubble.

Click on graph for larger image in new window.

This graph shows investment in lodging as a percent of GDP since 1959 through Q3 2009 (data from BEA).

Even though lodging investment is falling rapidly, the level is still very high from a historical perspective because, as Mark Lomanno noted, it takes several years to finish major hotel projects.

As these hotels are completed in 2010, lodging investment will fall to low levels for several years as happened in previous investment busts. And that means more construction job losses are coming.