Entries from July 2008
http://www.thisislondon.co.uk/standard/article-23523323-details/Profit+crash+rocks+banks/article.do
The news hit London on July 30th that one of the most conservative of the British major banking institutions saw its profits plunge by 70%. “The result was far worse than a pessimistic City was expecting and raised fears for high street rivals. HBOS, which owns Halifax, reports tomorrow and Alliance & Leicester the day after. Lloyds TSB blamed the global credit crunch and losses in its insurance business. The figures will heighten government fears that more small banks could collapse such as Northern Rock. Lloyds was regarded as the most conservative of the big banks and had won praise for resisting the temptation to make risky loans during the boom years.”
Categories: Anglo-Saxon free trade · Lloyds · bank assets · bank capitalization · bank earnings · bank failure · bank failures · bank insolvency · bank lending · bank nationalization · bank reserves · bank run · banking crisis · banking system · banks
Big Picture points out that investors have been falling for the “lather, rinse repeat” routine regarding the financial health of investment banks and other financial institutions. Read the post: http://bigpicture.typepad.com/comments/2008/07/how-fucked-are.html
But how long can these people keep any credibility? Here’s the Merrill Lynch illustrations:
Categories: Economy
On Saturday the Senate passed the new “housing rescue” bill with almost no debate. And in case you missed it, it gives Treasury Secretary virtually unfettered power to saddle the taxpayers for generations to come with another roughly trillion dollars of debt. (According to the NY Times, “the only real limit on the Treasury’s authority is the new $10.6 trillion debt ceiling. There is roughly a $1.1 trillion cushion between the new limit and existing federal debt of $9.5 trillion”).
Here it is – read it and weep:
SEC. 3083. INCREASE IN STATUTORY LIMIT ON THE PUBLIC DEBT.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $10,615,000,000,000.
Categories: Hank Paulson · Treasury · debt ceiling · housing rescue bill · mortgage rescue · national debt
Police ordered angry customers lined up outside an IndyMac Bank branch to remain calm or face arrest today as they tried to pull their money on the second day of the failed institution’s federal takeover.
At least three police squad cars showed up early today as tensions rose outside the San Fernando Valley branch of Pasadena-based IndyMac.
Categories: Indymac · bank run · cops
Fears seem to be mounting in the bond market. The possibility of effectively nationalizing Fannie Mae and Freddie Mac may be the catalyst. From acrossthecurve.com: “The decimation of the wealth stored in US Treasury debt, once viewed as the safest of all venues, resulted from the reports that the US government was planning to bail out FNMA and Freddie Mac. This prompted a flight from the US Treasury assets into all sorts of paper. It was a vote of no confidence as Treasury paper underperformed all other asset classes.I am writing this a little early today so these closing levels may not hold as equities have recovered on news that Bernanke has said he will open the Discount window to the GSEs . That should not be a surprise. “
Categories: Economy
You already know about “pay day loans” but here’s a variation on the theme: gas loans. These are essentially pay day loans but are driven by the consumer’s need to put gas in the tank to get to work. Here’s an example from Las Vegas: “The economic downturn grabbing national headlines looks very personal up close, in the midnight lighting of a Rapid Cash store on Nellis Boulevard. Between 9 p.m. and 1 a.m. on a nothing-special Friday, two dozen working Las Vegans find themselves where they never imagined they’d be: in line for a short-term loan just to make ends meet. “I’ve driven past here a million times and I never thought I’d have to use it,” says Marvin Jacobs, a 46-year-old kitchen manager for the Clark County School District. Tonight, Jacobs is one of five customers applying for a new kind of short-term financing agreement: the gasoline loan.” Read article: gasloan
Categories: consumer credit · gas loan · gas prices · gasoline loans · pay day loans · short term financing
The official figures are kept artificially low because of the “birth-death model” and other artifices. The actual unemployment rate on the ground is close to 10%. Mish Shedlock has an absolutely excellent article explaining the numbers, both real and imagined; it makes the situation quite clear. If you’re interested in crunching the numbers, read it by clicking on the link later in this post. Otherwise, here’s the money quote:
“If you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, etc., you get a closer picture of what the unemployment rate is. The official government number remained 5.5% after May’s huge jump, but U-6 (the most inclusive number) rose .2 to 9.9%. To the average Joe on the street unemployment feels more like 10% than 5.5. Both numbers are poised to rise.”
Full article: http://globaleconomicanalysis.blogspot.com/2008/07/jobs-decline-6th-consecutive-months.html
Categories: birth death model · jobs lost · real unemployment · unemployment
One recent phenomenon many are experiencing on an individual and corporate level is creditors capping or cutting off lines of credit (if not previously committed). Turns out this is true and the most recent numbers show that in fact banks are pulling credit at a faster rate than at any time since the number has been monitored, i.e., the early 1970s.
“The latest report from the Fed of assets and liabilities of commercial banks in the U.S. showed the sharpest 13-week contraction in bank credit – loans and investments – in the history of the series, which dates back to January 3, 1973. In the 13 weeks ended June 18, bank credit contracted at an annualized rate of 9.14%.”
Read Russ Winter’s excellent comment on this issue: http://wallstreetexaminer.com/blogs/winter/?p=1759#more-1759
Categories: bank lending · capping credit line · credit contraction · pulling credit line
