by Calculated Risk on 9/25/2011 08:36:00 PM

The clock is ticking ...

From Bloomberg: ‘Barrier’ Around Greece Needed: Merkel

German Chancellor Angela Merkel said euro-region leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states ...

“We have to be in a position to react,” Merkel said. “We have to be able to put up a barrier.” Even so, “I don’t rule out at all that at some point we will have the question whether one can do an insolvency of states just like with banks.”

Merkel rejected Greece leaving the euro area, saying that “we can’t force it, but I don’t believe in that in any case” ... “Maybe Greece leaves, the next country leaves and then the next country after that,” she said. “They would speculate against all the countries.” ...

Merkel suggested that Greece may be able to get the next tranche of bailout aid, after a team of officials from the IMF, the ECB and the European Commission assess the Greek government’s progress ... Merkel is due to host Greek Prime Minister George Papandreou for talks in Berlin on Sept. 27, two days before German lawmakers vote on the enhanced rescue fund...

From the NY Times: Investors Ask if Anything Can Save Greece From Default

Under intense pressure from the United States, euro zone leaders spent the weekend in Washington working to craft a rescue plan to bolster sickly banks and buy the bonds of weak countries like Italy. But past efforts to bring an end to the debt crisis in Europe — including a second, €109 billion rescue plan for Greece forged by Europe and the International Monetary Fund in July — have failed to stand up. Investors remain skeptical that another plan will be any different.
...
With Greek government debt trading on the open market below 40 cents on the dollar, it is quickly approaching what debt experts call the recovery rate — the price investors would get for their bonds if the country officially defaulted.

In effect, that means investors have given up.

I'm not sure what the barrier will be, but just about everyone is now accepting that Greece will default (except a few Greek politicians). The question remains when - and what happens after they default.

by Calculated Risk on 9/25/2011 04:14:00 PM

From Reuters: U.S. gasoline prices slide; more to come-survey

The average price for a gallon of gasoline in the United States tumbled 12.23 cents in the past two weeks and appeared poised to drop even more as crude oil prices weaken, the nationwide Lundberg survey showed on Sunday.

The national average price was $3.5446 on Sept. 23, down from $3.67 two weeks ago ...

Gasoline prices jumped from about $3.10 per gallon in early February to over $3.50 per gallon in early March as Brent crude oil prices increased from about $100 per barrel to over $120 per barrel. (WTI increased from around $85 per barrel to over $110 per barrel early this year).

Since oil prices have declined back to the early February levels (Bloomberg: WTI is at $80 per barrel and Brent is at $104), gasoline prices will probably decline too.

Note: This graph show oil prices for WTI; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

Yesterday:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd

by Calculated Risk on 9/25/2011 02:01:00 PM

I haven't updated this graph for some time ...

There have been 395 bank failures in this cycle (starting in 2007):

FDIC Bank Failures by Year
2007	3
2008	25
2009	140
2010	157
20111	73
Total	395
1Through Sept 23, 2011.

This graph shows the cumulative bank failures by week in 2008, 2009, 2010 and 2011.

The FDIC has slowed down recently, and it appears the FDIC will close around 100 banks this year.

There are still quite a few problem banks, so there are probably quite a few banks failures to come.

by Calculated Risk on 9/25/2011 09:23:00 AM

A little Sunday morning speculation ...

From the Telegraph: Multi-trillion plan to save the eurozone being prepared

German and French authorities have begun work on a three-pronged strategy behind the scenes amid escalating fears that the eurozone’s sovereign debt crisis is spiralling out of control.
...
According to sources, progress has been made at the G20 meeting in Washington ... the world’s leading economies set themselves a six-week deadline to resolve the crisis – to unveil a solution by the G20 summit in Cannes on November 4.
...
First, Europe’s banks would have to be recapitalised with many tens of billions of euros to reassure markets that a Greek or Portuguese default would not precipitate a systemic financial crisis. ... Officials are confident that some banks could raise the funds privately, but if they are unable they would either be recapitalised by the state or by the European Financial Stability Facility (EFSF) ...

The second leg of the plan is to bolster the EFSF. Economists have estimated it would need about Eu2 trillion of firepower to meet Italy and Spain’s financing needs in the event that the two countries were shut out of the markets. Officials are working on a way to leverage the EFSF through the European Central Bank to reach the target.

The complex deal would see the EFSF provide a loss-bearing “equity” tranche of any bail-out fund and the ECB the rest in protected “debt”.
...
As quid pro quo for an enhanced bail-out, the Germans are understood to be demanding a managed default by Greece but for the country to remain within the eurozone.

Earlier:
• Schedule for Week of Sept 25th
• Summary for Week Ending Sept 23rd

by Calculated Risk on 9/24/2011 10:45:00 PM

From the NY Times: Europe Seeks to Ratchet Up Effort on Debt

Under increasing pressure from global investors and world leaders, European government officials indicated Saturday that they were working to intensify their response to the continent’s growing debt problems.
...
French and German officials here continued to insist publicly that they were focused on the July plan, but in private meetings this weekend they made clear that they now understand the need for a new proposal ...

“The threat of cascading default, bank runs and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally,” Treasury Secretary Timothy F. Geithner said in a statement on Saturday. “Decisions as to how to conclusively address the region’s problems cannot wait until the crisis gets more severe.

If this follows previous leaks, German Finance Minister Wolfgang Schaeuble will probably deny this tomorrow.