by Calculated Risk on 1/08/2011 07:48:00 AM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Jan 7, 2011.

Changes and comments from surferdude808:

The FDIC got back to work closing some banks and updating their structure database, which contributed to most of the seven removals this week. Also, there were four additions this week. The net changes leave the Unofficial Problem Bank List standing at 932 institutions with aggregate assets of $410 billion.

The removals include two failures -- First Commercial Bank of Florida, Orlando, FL ($598 million); and Legacy Bank, Scottsdale, AZ ($151 million); four unassisted mergers -- Bank of Smithtown, Smithtown, NY ($2.3 billion Ticker: PBCT); The Bank of Currituck, Moyock, NC ($173 million); Century Bank, Parma, OH ($128 million); and Texas Country Bank, Lakeway, TX ($54 million); and one action termination -- Savings Bank of Maine, Gardiner, ME ($861 million).

The additions were MetaBank, Storm Lake, IA ($1.0 billion Ticker: CASH); Tidelands Bank, Mount Pleasant, SC ($566 million Ticker: TDBK); Community First Bank, Boscobel, WI ($244 million); and Americantrust Federal Savings Bank, Peru, IN ($105 million).

The OCC may release its actions through mid-December 2010 next week, but since the 15th falls on Saturday it would not surprise if they did not release it until the 21st of January.

by Calculated Risk on 1/07/2011 11:01:00 PM

From Ronald White at the LA Times: Gasoline prices' rise evokes 2008

"It's just ridiculous. Every day it's another big bite out of my income. I've gone from $40 for a fill-up to $60 for a fill-up in just the past several weeks," said Eric Ott, a 47-year-old Valley Glen resident.
...
Oil closed Friday at $88.03 a barrel in New York futures trading.
...
"[W]e cannot expect brisk economic growth with oil at $120, $130, $140 a barrel and gasoline at $4 a gallon and higher ... Those kind of prices can spawn a tremendous amount of demand destruction." said Tom Kloza, chief oil analyst for the Oil Price Information Service

Back in early 2008 we saw clear signs of demand destruction. No obvious signs yet in 2011, but I had a similar reaction as Mr. Ott when I filled up my tank this week - ouch!

Jim Hamilton discussed this last month: Worrying about oil prices

Earlier Employment posts:
• Employment: The Declining Participation Rate
• Employment Summary and Part Time Workers, Unemployed over 26 Weeks
• December Employment Report: 103,000 Jobs, 9.4% Unemployment Rate

by Calculated Risk on 1/07/2011 07:28:00 PM

Debt has exploded
Assets evaporated
I am Legacy
by Soylent Green is People
From the FDIC: Enterprise Bank & Trust, St. Louis, Missouri, Assumes All of the Deposits of Legacy Bank, Scottsdale, Arizona

As of September 30, 2010, Legacy Bank had approximately $150.6 million in total assets and $125.9 million in total deposits ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $27.9 million. ... Legacy Bank is the second FDIC-insured institution to fail in the nation this year, and the first in Arizona

by Calculated Risk on 1/07/2011 06:12:00 PM

Twenty Eleven
First Commercial Bank Failure
Inauspicious start.
by Soylent Green is People
From the FDIC: First Southern Bank, Boca Raton, Florida, Assumes All of the Deposits of First Commercial Bank of Florida, Orlando, Florida

As of September 30, 2010, First Commercial Bank of Florida had approximately $598.5 million in total assets and $529.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $78.0 million. ... First Commercial Bank of Florida is the first FDIC-insured institution to fail in the nation this year, and the first in Florida.

And so it begins ...

by Calculated Risk on 1/07/2011 02:12:00 PM

An interesting question is why the unemployment rate fell so sharply, even with relatively few payroll jobs added (103,000 jobs added in December).

First, it is important to remember that there are two separate surveys for the Employment Situation Summary. The unemployment rate comes from the Current Population Survey (CPS: commonly called the household survey), a monthly survey of about 60,000 households.

The payroll jobs number comes from Current Employment Statistics (CES: payroll survey), a sample of "approximately 140,000 businesses and government agencies representing approximately 410,000 worksites". See this post for a discussion of the two surveys.

The following table is based on the Household survey (all seasonally adjusted):

Household Survey (000s)	November	December	Change
Civilian noninstitutional population (16 and over)	238,715	238,889	174
Civilian labor force	153,950	153,690	-260
Employed	138,909	139,206	297
Unemployed	15,041	14,485	-556
Participation Rate	64.49%	64.34%	-0.16%
Unemployment Rate	9.77%	9.42%	-0.35%

The household survey measures percentages for the 60,000 households (unemployment rate, participation rate) and then the BLS derives the other numbers based on the population estimate.

So the estimated number of unemployed dropped by 556,000. Some of this decline was due to higher employment, but some was also due to the decline in participation - even while the population increased.

The table helps explain why the reported unemployment rate fell from 9.8% to 9.4%. A key reason was the decline in the participation rate. If the participation rate had held steady at 64.5%, then the unemployment rate would have only declined to 9.64%.

So almost 2/3rds of the decline in the unemployment rate was related to the decline in the participation rate. Some of the decline might be from workers going back to school, but some is probably due to people just giving up.

A large portion of the decline in the participation rate was for people in the 16 to 24 age group. According to the BLS, the 16 to 24 civilian labor force declined by 244 thousand. Most of these people will probably return to the labor force as the economy improves - and that will put upward pressure on the unemployment rate.

Another group that saw a decline in the participation rate was men in the key 25 to 54 age group. I wonder if these people are just giving up?

Click on graph for larger image.

Here is a repeat of the graph showing the unemployment rate (red), the participation rate (blue), and the employment-population ratio (black).

The participation rate has fallen sharply from 66% at the start of the recession to 64.3% in December. That is almost 4 million workers who are no longer in the labor force and not counted as unemployed in U-3, although most are included as "discouraged workers" or "Marginally Attached to Labor Force" in U-6.

A decline in the unemployment rate mostly due to a decline in the participation rate is not good employment news.

Earlier Employment posts:
• Employment Summary and Part Time Workers, Unemployed over 26 Weeks
• December Employment Report: 103,000 Jobs, 9.4% Unemployment Rate

by Calculated Risk on 1/07/2011 12:53:00 PM

From Bloomberg: Banks Lose Pivotal Massachusetts Foreclosure Case

The state Supreme Judicial Court today upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts.

“We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,” Justice Ralph D. Gants wrote.

The concurring opinion by Justice Cordy helps clarify the situation:

I concur fully in the opinion of the court, and write separately only to underscore that what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets. There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure. Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order. Although there was no apparent actual unfairness here to the mortgagors, that is not the point. ...

The type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and, ultimately the sale of mortgaged-backed securities, are not barred nor even burdened by the requirements of Massachusetts law. The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments. The court's opinion clearly states that such assignments do not need to be in recordable form or recorded before the foreclosure, but they do have to have been effectuated.

These are important points:
• The "assignments do not need to be in recordable form or recorded before the foreclosure". That is a key point.
• This case is really about the "utter carelessness with which the plaintiff banks documented the titles to their assets".

And this means that
• These issues are curable, but will be costly for the banks. As Tanta frequently argued, the upfront "cost savings" would be paid for in arrears!
• This does not appear to be a systemic risk.