by Calculated Risk on 8/28/2009 12:16:00 AM

From MarketWatch: Japan reports record unemployment rate for July

Japan [reported] a record unemployment rate and the biggest decline in consumer prices in roughly 38 years.

Japan's Ministry of Internal Affairs and Communications said the country's unemployment rate rose to 5.7% in July from 5.4% in the previous month.

The unemployment rate was higher than the 5.5% expected by economists, according to Dow Jones Newswires, and is the highest on record since World War II.
...
Meanwhile Japan's average monthly income per household fell 2.4% in nominal terms in July, while consumption expenditures fell 4.5% nominally ...

Japan's recession may be over, but I bet it doesn't feel like it to many workers.

by Calculated Risk on 8/27/2009 10:26:00 PM

From the WSJ: Recession Finally Hits Down on the Farm (ht Bob_in_MA)

The Agriculture Department forecast Thursday that U.S. farm profits will fall 38% this year, indicating that the slump is taking hold in rural America. ... The Agriculture Department said it expects net farm income -- a widely followed measure of profitability -- to drop to $54 billion in 2009, down $33.2 billion from last year's estimated net farm income of $87.2 billion, which was nearly a record high.

And from the Chicago Fed August AgLetter:

Farmland values for the second quarter of 2009 were 3 percent lower than a year ago in the Seventh Federal Reserve District. ... Almost 30 percent of the responding bankers expected farmland values to fall in the third quarter of 2009, whereas 71 percent expected stable farmland values.

This will probably mean lower food prices, from the WSJ:

For most Americans, the chill in the farm belt is related to one of the few positives they see in this economy: slowing inflation. Prices farmers are receiving for everything from corn and wheat to hogs are down sharply from last year.

by Calculated Risk on 8/27/2009 06:01:00 PM

A little history from Paul Kasriel, Chief Economist at Northern Trust: The Rhyming of History – Bloomberg and the RFC?

On November 7, 2008, Bloomberg LP sued the Federal Reserve Board under terms of the Freedom of Information Act to obtain the names of borrowers of funds from the Federal Reserve as well as lists of the collateral posted by the borrowers. On August 25, 2009, a U.S. District judge ruled in favor of Bloomberg, ordering the Federal Reserve Board to turn over to Bloomberg the requested information within five days. At this writing, the Fed has yet to comply and has yet made a decision to appeal the ruling.

CR Notes, from Bloomberg: The Fed has asked the Judge to stay the order until the U.S. Court of Appeals in New York can hear the case.

The Fed has been reluctant to reveal the names of its borrowers allegedly out of a concern that such a revelation could have an adverse competitive impact on the borrowers.

The reason I bring this up is that it is similar to a situation that arose in 1932 with the Reconstruction Finance Corporation (RFC). The RFC was established by an act of Congress on January 22, 1932, for the purpose of making loans to financial institutions, railroads and to extend credit for crop loans. The Treasury provided some capital to the RFC and the RFC was permitted to borrow from the Treasury. Initially, the RFC granted credit primarily to banks. These loans coincided with a reduction in bank failures and currency held outside the banks declined.

On July 21, 1932, the RFC was authorized to make loans for self-liquidating public works projects, and to states to provide relief and work relief to needy and unemployed people. This legislation also required that the RFC report to Congress, on a monthly basis, the identity of all new borrowers of RFC funds. On orders from the Speaker of the House of Representatives, commencing in August 1932, the names of banks borrowing from the RFC became public information. This publication of the names of banks borrowing from the RFC discouraged current borrowers from continuing their borrowing and prospective borrowers from commencing borrowings out of a fear that depositors would judge this borrowing as a sign of financial weakness. By November 1932, the outstanding amount of RFC loans to banks had decreased.

In mid February of 1933, a Detroit bank began having difficulties. The RFC was willing to lend to this bank, but because of a dispute between one of the Michigan senators and Henry Ford, a large depositor in the bank, the RFC loan was not allowed to be made. A bank panic started in Michigan as a result. This Michigan bank panic served as a catalyst for a nationwide bank panic.

The failure of the Detroit bank was not because the bank was reluctant to borrow from the RFC. But one can only speculate as to whether other banks in Michigan and nationwide were reluctant to borrow from the RFC because their names would have been published. And one can only speculate that if these other banks had willing to borrow from the RFC if a nationwide bank could have been averted.

Today, we have federal deposit insurance. Therefore, the probabilities and magnitude of depositor runs on banks are much reduced compared with 1933. Yet, we can see “runs” by stockholders and other creditors of banks if there is a suspicion of financial problems. If the Fed is required to publish the names of financial institutions to which it has extended credit and this publication induces financial institutions to refrain from borrowing from the Fed, one can only speculate if this would be the tinder for another liquidity conflagration in the coming months.

Would we see another liquidity crisis because of concerns about the level of borrowing by certain banks from the Fed? I don't think so - but this is the concern. Doesn't everyone already suspect that Citi and BofA will be near the top of the list?

I suppose some second tier bank might have a problem if the data is disclosed.

by Calculated Risk on 8/27/2009 02:13:00 PM

From HotelNewsNow.com: STR reports US performance for week ending 22 August 2009

In year-over-year measurements, the industry’s occupancy fell 7.2 percent to end the week at 60.4 percent. Average daily rate dropped 10.2 percent to finish the week at US$95.70. Revenue per available room for the week decreased 16.7 percent to finish at US$57.84.

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 7.3% from the same period in 2008.

The average daily rate is down 10.2%, and RevPAR is off 16.7% from the same week last year.

Comments: This is a multi-year slump. Although the occupancy rate was off 7.3 percent compared to last year, the occupancy rate is off over 11 percent compared to the same week in 2007.

The end of July through the beginning of August is usually the peak leisure travel period. So the peak occupancy rate for 2009 was probably a month ago at 67%. And that is far below normal.

Earlier this year business travel was off much more than leisure travel. So it was expected that the summer months would not be as weak as earlier in the year. September - after Labor Day (Sept 7th) - will be the real test for business travel, and for the hotel industry.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 8/27/2009 11:57:00 AM

From the Financial Times: ‘Cash-for-clunkers’ sales disappoint Detroit (ht James)

[S]igns are already emerging that overall sales will fall back sharply now that the incentives have expired.
...
[Edmunds.com] estimates that, based on visits to its websites, “purchase intent” is down 11 per cent from the average in June ...
excerpted with permission

It now appears that sales in August were at about a 16 million SAAR (auto sales for August will be released next week).

This follows an 11.22 million SAAR in July. The Cash-for-clunkers program started on July 24th.

If sales in September are 11% below June - that would put sales at under 9 million SAAR - the lowest sales for this cycle, and perhaps at the lowest rate since the early '70s. Of course the program just ended, but it will be interesting to see how much Cash-for-Clunkers cannibalized future sales.

by Calculated Risk on 8/27/2009 10:00:00 AM

The FDIC released the Q2 Quarterly Banking Profile today. The FDIC listed 416 banks with $299.8 billion in assets as “problem” banks in Q2, up from 305 banks with $220.0 billion in assets in Q1, and 252 and $159.4 billion in assets in Q4 2008.

Note: Not all problem banks will fail - and not all failures will be from the problem bank list - but this shows the problem is significant and still growing.

The Unofficial Problem Bank List shows 391 problem banks - and will probably increase this week.

Click on graph for larger image in new window.

This graph shows the number of FDIC insured "problem" banks since 1990.

The 416 problem banks reported at the end of Q2 is the highest since 1993.

There has been some concern that the FDIC has been slow to add banks to the problem list - and a number of failed banks were apparently never on the official list.

The second graph shows the assets of "problem" banks since 1990.

The assets of problem banks are the highest since 1993.

And the banking industry posted a net loss for the quarter:

Burdened by costs associated with rising levels of troubled loans and falling asset values, FDIC-insured commercial banks and savings institutions reported an aggregate net loss of $3.7 billion in the second quarter of 2009. Increased expenses for bad loans were chiefly responsible for the industry’s loss. Insured institutions added $66.9 billion in loan-loss provisions to their reserves during the quarter, an increase of $16.5 billion (32.8 percent) compared to the second quarter of 2008. Quarterly earnings were also adversely affected by writedowns of asset-backed commercial paper, and by higher assessments for deposit insurance.

On the Deposit Insurance Fund:

On June 30, 2009, a special assessment was imposed on all insured banks and thrifts. For 8,106 institutions, with assets of $9.3 trillion, the special assessment was 5 basis points of each institution’s assets minus Tier 1 capital; 89 other institutions, with assets of $4.0 trillion, had their special assessment capped at 10 basis points of their second quarter assessment base.

The Deposit Insurance Fund (DIF) decreased by $2.6 billion (20.3 percent) during the second quarter to $10.4 billion (unaudited). Accrued assessment income from the regular and the special assessment increased the fund by $9.1 billion. Interest earned, combined with realized gains on securities and debt guarantee surcharges from the Temporary Liquidity Guarantee Program added $1.1 billion to the fund. Unrealized losses on available-for-sale securities combined with operating expenses reduced the fund by $1.3 billion.

The reduction in the DIF was primarily due to an $11.6 billion increase in loss provisions for bank failures. Twenty-four insured institutions with combined assets of $26.4 billion failed during the second quarter of 2009, the largest number of quarterly failures since the fourth quarter of 1992, when 42 insured institutions failed. For 2009 through the end of the second quarter, 45 insured institutions with combined assets of $35.9 billion failed at an estimated current cost to the DIF of $10.5 billion.

The DIF’s reserve ratio was 0.22 percent on June 30, 2009, down from 0.27 percent at March 31, 2009, and 1.01 percent one year ago. The June figure is the lowest reserve ratio for the combined bank and thrift insurance fund since March 31, 1993, when the reserve ratio was 0.06 percent.

by Calculated Risk on 8/27/2009 08:30:00 AM

The DOL reports weekly unemployment insurance claims decreased to 570,000:

In the week ending Aug. 22, the advance figure for seasonally adjusted initial claims was 570,000, a decrease of 10,000 from the previous week's revised figure of 580,000. The 4-week moving average was 566,250, a decrease of 4,750 from the previous week's revised average of 571,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending Aug. 15 was 6,133,000, a decrease of 119,000 from the preceding week's revised level of 6,252,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 4,750 to 566,250, and is now 92,500 below the peak in April. It appears that initial weekly claims have peaked for this cycle.

The number of initial weekly claims is still very high (at 570,000), indicating significant weakness in the job market. The four-week average of initial weekly claims will probably have to fall below 400,000 before the total employment stops falling.

by Calculated Risk on 8/27/2009 12:16:00 AM

From Reuters: U.S. mortgage delinquencies up in July: Equifax

Among U.S. homeowners with mortgages, a record 7.32 percent were at least 30 days late on payments in July, up from about 4.5 percent a year earlier and 7.23 percent in June, according to monthly data from the Equifax credit bureau.

There numbers aren't directly comparable to the MBA quarterly numbers, but this shows that delinquencies are still rising.

by Calculated Risk on 8/26/2009 07:56:00 PM

From the DOT: Cash for Clunkers Stats

Number Submitted: 690,114
Dollar Value: $2,877.9M

This should push light vehicle sales to about 16 million (SAAR) in August. Of course the real question is what happens in September.

Darn - Floyd Norris beat me to it, but my table is sortable.

Using the Census Bureau population estimates, here is a table of dollars per person.

New Hampshire is the "Clunker State" by 'Dollars per person'. What happened in D.C.? No one wanted a new car? (UPDATE: several people told me almost everyone in D.C. buys cars in Virginia or Maryland)

NOTE: Columns are sortable - click on column headers: State (includes territories), Clunker dollars, Population, Dollars per person.

by Calculated Risk on 8/26/2009 05:48:00 PM

From Bloomberg: FDIC Sets Standards for Private-Equity Firms to Buy Shut Banks (ht Anthony)

The Federal Deposit Insurance Corp. approved guidelines for private-equity firms to buy failed banks ... agreeing to lower to 10 percent from the proposed 15 percent the Tier 1 capital ratio private-equity investors must maintain after buying a bank.

From the FDIC: Attachment: Final Statement of Policy of Qualifications for Failed Bank Acquisitions

As a reminder, the deadline for Corus Bank bids is reported to be next week. So this is just in time.

Also, the Q2 FDIC Quarterly Banking Profile will probably be released tomorrow AM (including stats on the Deposit Insurance Fund and the number of problem banks at the end of Q2).