From the WaPo: a href=”http://www.washingtonpost.com/wp-dyn/content/article/2009/05/27/AR2009052703654.html”U.S. Weighs Single Agency to Regulate Banking Industry/a blockquoteSenior administration officials are considering the creation of a single agency to regulate the banking industry …br /br /They favor vesting the Federal Reserve with new powers as a systemic risk regulator, with broad responsibility for detecting threats to the financial system. The powers would include oversight of previously unregulated markets, such as the derivatives trade, and of market participants such as hedge funds. br /br /Officials also favor the creation of a new agency to enforce laws protecting consumers of financial products such as mortgages and credit cards. br /…br /Among these ideas is the creation of a single agency to regulate banks. The new regulator would assume responsibility for the safety and soundness of banks, currently divided among the Fed and three other agencies: the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corp. The OCC and the OTS would probably disappear, while the Fed and the FDIC would retain other responsibilities. br /…br /Officials also are considering giving the FDIC the power to seize large financial firms, such as the parent companies of banks, to prevent their collapse./blockquote Another potential problem was that many banks and mortgage lenders were regulated by the states. See a href=”http://www.csbs.org/AM/Template.cfm?Section=State_Banking_DepartmentsTemplate=/CustomSource/Directory/State_Department.cfm”Conference of State Bank Regulators/a (CSBS) emUpdate: Many state regulators did an excellent job (I was in contact with several in 2005) - however in making regulatory changes, we need to be aware of the role of the states./emdiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-4547357493493233465?l=www.calculatedriskblog.com’//div
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With the Ten Year Treasury yield hitting 3.7% today, mortgage rates will be increasing.br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1150,height=780,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://4.bp.blogspot.com/_pMscxxELHEg/Sh2KwCAk1eI/AAAAAAAAFYg/Kx-DRtLiLW8/s1600-h/TNX30year.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”30 Year Mortgage Rates vs. Ten Year Treasury Yield” src=”http://4.bp.blogspot.com/_pMscxxELHEg/Sh2KwCAk1eI/AAAAAAAAFYg/Kx-DRtLiLW8/s320/TNX30year.jpg” border=”0″ //a ibspan style=”font-size:85%;”Click on graph for larger image in new window./span/b/ibr /br /This graph shows the relationship between the Ten Year yield (x-axis) and the 30 year mortgage rate (y-axis, monthly from Freddie Mac) since 1971. The relationship isn’t perfect, but the correlation is very high.br /br /Based on this historical data, a Ten Year yield at 3.7% suggests a 30 year mortgage rate of around 5.6%.br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1150,height=780,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://4.bp.blogspot.com/_pMscxxELHEg/Sh2LC-4ZciI/AAAAAAAAFYo/uqKJUMFhueE/s1600-h/MortgageSpread.jpg”img style=”BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; FLOAT: right; MARGIN: 10px; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid” alt=”30 Year Mortgage Rates vs. Ten Year Treasury Yield” src=”http://4.bp.blogspot.com/_pMscxxELHEg/Sh2LC-4ZciI/AAAAAAAAFYo/uqKJUMFhueE/s320/MortgageSpread.jpg” border=”0″ //aThe second graph compares the weekly 30 year fixed rate conforming rate from Freddie Mac, and the 10 year treasury yield. The black line is the spread between the two rates.br /br /As the Ten Year yield increased earlier this year, the spread decreased, and mortgage rates only moved up slightly.br /br /However the spread has reached the lower end of the range, and the recent increase in the Ten Year yield will push up mortgage rates.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-3948375085853148157?l=www.calculatedriskblog.com’//div
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The lack of move up buyers is starting to get attention …br /br /From David Streitfeld at the NY Times: a href=”http://www.nytimes.com/2009/05/27/business/economy/27home.html”Home Prices Decline Again in March/a blockquoteIn many urban areas, including those tracked by Case-Shiller, the residential real estate market is essentially cleaved in two. The top half of the market is largely stagnant, with owners unwilling to sell and buyers unable to buy. “Move-up” families seeking another bedroom or a better kitchen are an endangered species./blockquoteAnd from Carolyn Said at the San Francisco Chronicle: a href=”http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/25/MNRB17JFHB.DTL”Signs of more trouble ahead for housing market/a blockquotestrongNo “move-up” buyers./strong In a normal real estate market, about 80 percent of buyers are “moving up” or “moving across” - people who sell one home before buying another, said Mark Hanson, principal of Walnut Creek’s the Field Check Group, a mortgage consultant. Remaining purchasers are split between first-time buyers and investors. br /br /In today’s market, about half of buyers are first-timers and a third are investors, leaving just 15 percent of what he calls “organic” buyers. Those first-timers and investors all troll for bargain-basement foreclosures - leaving few buyers who are interested in the homes being sold by “Ma and Pa Homeowner.” That, in turn, leaves Ma and Pa unable to move up to a nicer home. “The organic seller is left out in the cold,” he said. /blockquote This is going to be a serious problem for the mid-to-high end home sellers. Just wait … br /br /Note: Carolyn Said lists a number of additional problems …div class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-4573108372989860271?l=www.calculatedriskblog.com’//div
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Big week for housing data: Case-Shiller house prices will be released Tuesday, existing home sales on Wednesday, and new home sales on Thursday. br /br /The U.S. futures are flat tonight:br /br /a href=”http://www.cbot.com/cbot/pub/page/0,3181,1560,00.html”CBOT mini-sized Dow/abr /br /Futures from a href=”http://sites3.barchart.com/pl/vsn/default.asp”barchart.com/abr /br /a href=”http://www.cme.com/trading/dta/del/globex.html”CME Globex Flash Quotes /abr /br /And the a href=”http://finance.yahoo.com/intlindices?e=asia”Asian markets/a are mixed.br /br /Best to all.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-6045950622616088888?l=www.calculatedriskblog.com’//div
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blockquotei”These are times completely different than anything I have experienced in my lifetime. I didn’t see this coming, and when it hit it hit virtually overnight.”/ibr /Mayor Oscar Goodman told CNN, from John King: a href=”http://www.cnn.com/2009/POLITICS/05/22/sotu.vegas/index.html”Luck running low in Las Vegas/a /blockquoteAccording to the a href=”http://www.lvcva.com/press/statistics-facts/index.jsp”Las Vegas Convention and Visitors Authority/a, vistor volume is off 6.5% from last year, room rates are off 31.6%, and convention attendance is off 30%.br /br /This puts RevPAR (Revenue per available room) off 36%!br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1160,height=770,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://4.bp.blogspot.com/_pMscxxELHEg/ShmAtoRi_VI/AAAAAAAAFV4/IKj1IxLESxQ/s1600-h/LasVegasVisitors.jpg”img style=”BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; MARGIN: 10px; FLOAT: right; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” border=”0″ alt=”Las Vegas Visitors” src=”http://4.bp.blogspot.com/_pMscxxELHEg/ShmAtoRi_VI/AAAAAAAAFV4/IKj1IxLESxQ/s320/LasVegasVisitors.jpg” //a ibspan style=”font-size:85%;”Click on graph for larger image in new window./span /b/ibr /br /This graph shows visitor volume and convention attendance since 1970. Vistors are back to 1998 levels, however the number of rooms has increased 28.5% since then - from 109,365 rooms in 1998 to 140,529 in 2008. Ouch.br /br /Note: 2009 is estimated based on data through March.br /br /In addition to building too many hotel rooms, there is an oversupply of office and retail space too. From Voit Real Estate Services on Offices: blockquoteThe Las Vegas office market continued to report increased vacancies, weaker demand and reduced pricing through the first quarter of 2009. An strongimbalance in the commercial office sector/strong has clearly emerged as selected portions of the market reported strongvacancies well beyond historical high points/strong.br /…br /During the quarter, new supply entered the market as existing product reported a net loss in occupancies. strongThe valley-wide average vacancy rate reached 19.6 percent/strong, which represented a 2.0-point increase from the preceding quarter (Q4 2008). Compared to the prior year (Q1 2008), vacancies were up 4.9 points from 14.7 percent. As a point of reference, average vacancies bottomed out in the third quarter of 2005 at 8.1 percent.br /span style=”font-size:78%;”emphasis added/span/blockquoteAnd Voit on retail: blockquoteBy the close of the first quarter of 2009, the Las Vegas retail market continued to be impacted by a softening economic climate, reduced consumer spending and a number of corporate restructurings for retailers. Overall strongvacancies climbed to 9.3 percent/strong, which represented a 1.9-point rise from the preceding quarter. Compared to the same quarter of the prior year, vacancies were up 3.7 points from 5.6 percent.br /br /strongMarket expansions continued/strong to despite the downturn as a number of retail centers were well under construction by late-2008. Approximately 812,900 square feet completed construction, bringing total market inventory to 51.3 million square feet. As of March 31, 2009, stronga total of 2.5 million square feet was in some form of construction/strong. It is worth noting a couple of major retail projects have stalled construction (1.7 million square feet) …br /br /The market reported negative demand for the second consecutive quarter with strong221,000 square feet of negative net absorption/strong./blockquoteAnd, of course, Las Vegas had a huge housing bubble too:br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1180,height=746,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://4.bp.blogspot.com/_pMscxxELHEg/ShmFva6P4LI/AAAAAAAAFWA/NtZTEV3wObQ/s1600-h/LasVegasCaseShilller.jpg”img style=”BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; MARGIN: 10px; FLOAT: left; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” border=”0″ alt=”Las Vegas House Prices” src=”http://4.bp.blogspot.com/_pMscxxELHEg/ShmFva6P4LI/AAAAAAAAFWA/NtZTEV3wObQ/s320/LasVegasCaseShilller.jpg” //aThis graph shows the Case-Shiller house price index for Las Vegas. This is one of most exaggerated bubbles in the U.S.br /br /Prices almost doubled from January 2003 to the peak in early 2006 - and now are off almost 50% from the peak!br /br /And don’t forget the condos …br /br /a onclick=”window.open(this.href, ‘_blank’, ‘width=1040,height=790,scrollbars=yes,resizable=yes,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0′); return false” href=”http://4.bp.blogspot.com/_pMscxxELHEg/Sf9PRZw9JlI/AAAAAAAAFMQ/ynayg7al4GY/s1600-h/Vegas2.jpg”img style=”BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; MARGIN: 10px; FLOAT: right; BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid” border=”0″ alt=”ManhattanWest Las Vegas” src=”http://4.bp.blogspot.com/_pMscxxELHEg/Sf9PRZw9JlI/AAAAAAAAFMQ/ynayg7al4GY/s320/Vegas2.jpg” //a This photo (credit: Anthony May 4, 2009) shows the only activity at ManhattanWest condo project in Vegas - a security guard relaxing in the sun.br /br /And ManhattanWest isn’t the only halted project in Las Vegas (From the Las Vegas Review-Journalin March: a href=”http://www.lvrj.com/business/41012277.html”ManhattanWest latest casualty of crisis/a): blockquoteLast year, Mira Villa condos and Vantage Lofts stopped construction and went into bankruptcy. Sullivan Square had barely begun excavation before the project was canceled. Spanish View Towers was the first high-rise project to stop construction after partially building an underground parking garage./blockquotediv class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-5485768768362071605?l=www.calculatedriskblog.com’//div
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centeremFiasco bankersbr /Addicted to public cashbr /Only flushed away/embr /by Soylent Green is People/centerbr /a href=”http://www.fdic.gov/news/news/press/2009/pr09075.html”From the FDIC/a: Midland States Bank, Effingham, Illinois, Assumes All of the Deposits of Strategic Capital Bank, Champaign , Illinois blockquoteStrategic Capital Bank, Champaign, Illinois, was closed today by the Illinois Department of Financial and Professional Regulation, Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Midland States Bank, Effingham, Illinois, to assume all of the deposits of Strategic Capital Bank.br /…br /As of May 13, 2009, Strategic Capital Bank had total assets of $537 million and total deposits of approximately $471 million. …br /br /The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $173 million. Midland States Bank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to alternatives. Strategic Capital Bank is the 35th FDIC-insured institution to fail in the nation this year, and the fourth in Illinois. The last FDIC-insured institution to be closed in the state was Heritage Community Bank, Glenwood, on February 27, 2009./blockquotediv class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-7751838460472509858?l=www.calculatedriskblog.com’//div
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centeremFederal ninjasbr /Swarm the shoguns failed bankbr /Almost seppuku/embr /by Soylent Green is People/centerbr /From the FDIC: a href=”http://www.fdic.gov/news/news/press/2009/pr09072.html”BankUnited Acquires the Banking Operations of BankUnited, FSB, Coral Gables, Florida /a blockquoteBankUnited, a newly chartered federal savings bank, acquired the banking operations, including all of the nonbrokered deposits, of BankUnited, FSB, Coral Gables, Florida, in a transaction facilitated by the Federal Deposit Insurance Corporation (FDIC). As a result of this transaction, BankUnited, FSB, offices and branches will be operated as BankUnited offices and branches.br /…br /Bank United, FSB had assets of $12.80 billion and deposits of $8.6 billion as of May 2, 2009. The new BankUnited will assume $12.7 billion in assets and $8.3 billion in nonbrokered deposits. … br /br /The FDIC facilitated the transaction with John Kanas and a consortium of investors after BankUnited, FSB, was closed today by the Office of Thrift Supervision, which appointed the FDIC as receiver. The FDIC estimates that the cost to its Deposit Insurance Fund will be $4.9 billion. BankUnited’s acquisition of all the deposits and assets of BankUnited, FSB was the “least costly” resolution for the DIF compared to alternatives.br /…br /BankUnited, FSB is the 34th FDIC-insured institution to fail in the nation this year, and the third in Florida. The last bank to be closed in the state was Riverside Bank of the Gulf Coast, Cape Coral on February 13, 2009./blockquotediv class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-794443717276620560?l=www.calculatedriskblog.com’//div
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From the Financial Times: a href=”http://www.ft.com/cms/s/0/74f80dca-4568-11de-b6c8-00144feabdc0.html”BofA seeks to repay $45bn by end of year/a blockquoteBank of America wants to pay back $45bn in bail-out funds by the end of the year, in a faster-than-expected move made possible by an accelerated programme to raise capital. br /br /BofA is on track to raise more than $35bn in capital by the end of September…br /br /People familiar with the bank’s plans say negotiations to sell some of BofA’s non-core assets are under way and, if the asset sales occur in the next few months, the bank will be able to fulfil its stress-test obligations and pay back Tarp funds from its $173bn cash reserves./blockquoteStop laughing!br /br /Plenty of info today:br /br /li a href=”http://www.calculatedriskblog.com/2009/05/new-mortgage-loan-reset-recast-chart.html”New Mortgage Loan Reset / Recast Chart/a br /br /li a href=”http://www.calculatedriskblog.com/2009/05/architecture-billings-index-steady-in.html”Architecture Billings Index Steady in April/a br /br /li a href=”http://www.calculatedriskblog.com/2009/05/dot-us-vehicle-miles-off-12-yoy-in.html”U.S. Vehicle Miles off 1.2% YoY in March/a br /br /li a href=”http://www.calculatedriskblog.com/2009/05/pension-benefit-guaranty-corporation.html”Pension Benefit Guaranty Corporation Deficit Increases/a - and more problems coming from the automakers.br /br /li a href=”http://www.calculatedriskblog.com/2009/05/residential-rental-market-and-inflation.html”Residential Rental Market and Inflation/a br /br /best to all.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-3313999222661735172?l=www.calculatedriskblog.com’//div
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From the Fed: a href=”http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20090429.pdf”Minutes of the Federal Open Market Committee April 28-29, 2009/abr /br /Some FOMC members suggested buying more Treasury securities: blockquoteMembers also agreed that it would be appropriate to continue making purchases in accordance with the amounts that had previously been announced—that is, up to $1.25 trillion of agency MBS and up to $200 billion of agency debt by the end of this year, and up to $300 billion of Treasury securities by autumn. strongSome members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery/strong; all members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases. The Committee reaffirmed the need to monitor carefully the size and composition of the Federal Reserve’s balance sheet in light of economic and financial developments.br /span style=”font-size:78%;”emphasis added/span/blockquoteThe economic projections are near the end. Although the Fed lowered their economic outlook (compared to January), they are still fairly optimistic. As an example, the central tendency for GDP growth in 2010 is 2% to 3%, not far below trend growth, and above trend growth in 2011 (3.5% to 4.8% central tendency of projections). The Fed is also optimistic about the unemployment rate peaking below 10% later this year or in early 2010. In January, the members saw unemployment peaking in 2009, and the central tendency for unemployment was 8.5% to 8.8% in 2009 - we are already at 8.9% in April!div class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-458635120524325298?l=www.calculatedriskblog.com’//div
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From the Detroit News: a href=”http://detnews.com/article/20090520/AUTO01/905200376/1148/auto01/Feds+to+inject+$7.5B+more+into+GMAC”Feds to inject $7.5B more into GMAC/a (ht jb)blockquoteThe Treasury Department is preparing to announce as early as today that it will invest an additional $7.5 billion in GMAC LLC in a deal that could allow the U.S. government to hold a majority stake in the Detroit-based auto finance company./blockquote The a href=”http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090507a1.pdf”Stress Test results/a showed GMAC needs another $11.5 billion in capital, so there is probably more coming.div class=”blogger-post-footer”img width=’1′ height=’1′ src=’//blogger.googleusercontent.com/tracker/10004977-757124020694582475?l=www.calculatedriskblog.com’//div
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