by Calculated Risk on 6/17/2012 06:56:00 PM

Some analysts think the FOMC will announce QE3 this week, others think the FOMC will wait until August or September.

It is also possible that the Greek election will influence some FOMC participants to wait until "Operation Twist" ends in a few weeks and then see what happens.

Usually the Fed provides pretty clear signals in advance of additional accommodation, but this time the smoke signals have been a little confused. From Tim Duy: Communications Failure

Reading Cardiff Garcia's preview of next week's Fed meeting, I was struck by [a] chart from Nomura

The extensive discussion of options with arguments for and against reminded me of the fog that hangs over this next meeting. We really have no idea what the Fed is going to do or why they are going to do it. Reasonable analysis ranges from nothing to massive quantitative easing.

Goldman analysts recently put the odds of QE3 this week at 75%, from Goldman economist Sven Jari Stehn on June 8th:

Although the uncertainty is significant, our model points to a probability of easing of 75% at the June meeting. Moreover, financial conditions are critical: were European stress to ease between now and the meeting the estimated probability of easing could drop to around 50%. Conversely, any further tightening in financial conditions from here—such as turmoil surrounding the June 17 Greek election—would push up the likelihood of easing in June.

I think the odds of QE3 are very high, but I'm uncertain on the timing. One key is changes in the FOMC financial projections that will be released this week.  Here are the projections from the April meeting.

The following April chart shows when participants projected the initial increase in the target federal funds rate should occur.


Click on graph for larger image.

"The shaded bars represent the number of FOMC participants who project that the initial increase in the target federal funds rate (from its current range of 0 to ¼ percent) would appropriately occur in the specified calendar year."

I expect some movement towards later years - and that would be an argument for QE3 this week.

The following table shows the FOMC's projections for GDP. Given the recent weak data, I'd expect the June projections to be lower for 2012 than the April projections.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2012	2013	2014
April 2012 Projections	2.4 to 2.9	2.7 to 3.1	3.1 to 3.6
January 2012 Projections	2.2 to 2.7	2.8 to 3.2	3.3 to 4.0

¹ Projections of change in real GDP and in inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

It is also likely that the unemployment rate forecast will be unchanged or revised upwards. Currently the FOMC expects the unemployment rate to be in the 7.8% to 8.0% in Q4. Even that level argues for additional accommodation. At the same time, the recent inflation data suggests the FOMC's inflation forecasts will be revised down (or unchanged).

The data suggests the FOMC will announce QE3 soon. But it is hard to tell when, and maybe we will see some clearer signals tonight or tomorrow.

by Calculated Risk on 6/17/2012 02:56:00 PM

From Reuters: Greek conservatives to win election: official projection (ht curious)

Greece's New Democracy conservatives are set to win ... The projection showed New Democracy taking 29.5 percent of the vote, with SYRIZA in second place with 27.1 percent. The Socialist PASOK followed in third place with 12.3 percent.

The result translates into 128 seats for New Democracy and 33 seats for PASOK, giving the two pro-bailout parties a slender majority in the 300-seat parliament.

New Democracy and PASOK back an EU/IMF bailout providing Greece with funds to stay afloat.

From the Telegraph: Greek election: Live

Official exit numbers are in, and New Democracy are on course to win. The numbers: ND 29.5pc, Syriza 27.1pc, Pasok 12.3pc, Independent Greeks 7.6pc, Golden Dawn 7pc, Democratic Left 6.2pc, Communist Party of Greece 4.5pc. These are numbers from Singular Logic, commissioned for the job by the Greek government.

This suggests New Democracy will be able to form a government. New Democracy's leader, Antonis Samaras, will try to change the terms of the bailout agreement, but generally supports the bailout - and strongly supports staying in the euro.

With the Greek economy in free fall, this just buys a little time until the next review shows Greece is far short of the bailout goals.

by Calculated Risk on 6/17/2012 12:12:00 PM

The Greek media is reporting on some early exit polls. This shows that it is very close between New Democracy and Syriza:

New Democracy: 27.5% to 30.5%

Syriza: 27% to 30%

Pasok: 10 to 12%

The 1st place party gets a 50 seat bonus (out of 300 total seats) and the parties split the remaining seats by the percent of the vote (excluding all parties with less than 3% of the vote).

If ND wins, they will probably form a government with Pasok (it would be close with the 50 seat bonus). However if Syriza wins, no one knows.

by Calculated Risk on 6/17/2012 08:56:00 AM

Polls close at noon ET on Sunday and the first "safe" results are expected around 2:30 PM ET.

Meanwhile there is a forest fire raging near Athens.

A few stories ...

From the Athens News: Voting underway in crunch election

Voting in the second general election in as many months got underway at 7am [Athens time] on Sunday at over 20,000 polling stations in 56 constituencies across the country.
Polling stations will remain open until [12 PM ET].
...
Unofficial exit polls will be announced, via the media, by the country’s polling agencies shortly after the closing of polling stations.

The authorities expect the first official projections by [2:30 PM ET]. Counting should be completed in the early hours of Monday morning.

From the Financial Times: Greece vote set to end in stalemate

Greeks voted on Sunday in a second general election set to end in stalemate ... The centre-right New Democracy party had a three-point lead over the radical left Syriza coalition, but neither party would capture even 30 per cent of the vote, according to two private polls seen by the FT.
excerpt with permission

From the WSJ: Greeks Vote in High-Stakes Election

The vote is pitting the conservative New Democracy party—which mostly supports the country's latest European-led bailout—against its leftist rival, Syriza, which has denounced the deal and wants to tear up the austerity program that came with it.

From the NY Times: A Critical Vote in Greece on Its Standing in the Euro Zone

As world financial institutions braced for more political uncertainty and potential market turmoil on Monday, Greek political leaders said they understood the need to form a government as quickly as possible, no matter what the election results. ...

As they headed to the polls, Greeks were gripped by anxiety about the collapse of the economy and with it the middle class — and shaken by repeated warnings from European leaders that Greece’s exit from the single currency was likely. For many, the election was seen as a choice between hope and fear.

There will be no clear winner, and even if a government is formed, the path forward is uncertain.

by Calculated Risk on 6/16/2012 06:06:00 PM

Note: The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public. (CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.)

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

So this is an unofficial list of Problem Banks compiled only from public sources. (And only US banks).

Here is the unofficial problem bank list for June 15, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

As anticipated, the OCC released its actions through mid-May 2012. That release and several failures contributed to some changes to the Unofficial Problem Bank List. In all, there were six removals and two additions. The changes leave the list with 919 institutions with assets of $354.0 billion. A year ago, 996 institutions with assets of $416.7 billion.

The removals include three action terminations -- Baylake Bank, Sturgeon Bay, WI ($1.1 billion Ticker: BYLK); First National Bank South Dakota, Yankton, SD ($415 million Ticker: FINN); and Woodlands National Bank, Hinckley, MN ($133 million). The three failures were Putnam State Bank, Palatka, FL ($169 million); The Farmers Bank of Lynchburg, Lynchburg, TN ($164 million); and Security Exchange Bank, Marietta, GA ($151 million).

The additions were Lifestore Bank, West Jefferson, NC ($294 million Ticker: LSFG) and Fidelity National Bank, Medford, WI ($89 million).

Earlier:
• Summary for Week Ending June 15th
• Schedule for Week of June 17th