by Calculated Risk on 11/07/2009 09:08:00 AM

From The Telegraph: Bank of England says financiers are fuelling an economic 'doom loop'

On the eve of the G20 meeting of finance ministers in Scotland, Andy Haldane, the Bank's executive director for financial stability warned that the relationship between the state and banks represents a "doom loop" which will keep inflicting crises on the public unless arrested.

The warning, which follows Governor Mervyn King's call for investment banks to be split from their high street wings, is the most radical yet from the Bank, and comes amid growing concern that the G20 has abandoned any plans for far-reaching reforms.
...
Mr Haldane, who was a key part of a Bank unit which was among the first to warn, well ahead of the crisis, of a dangerous gap between what banks had in their balance sheets and what they were lending customers ...

Not much has been done to reform the banking system despite warnings from BofE's King, former Fed Chairman Paul Volcker, BofE's Haldane and others. As Haldane says, no reform equals a "doom loop".

by Calculated Risk on 11/06/2009 11:59:00 PM

From David Leonhardt at the NY Times: Broader Measure of Unemployment Stands at 17.5% Excerpts:

Officially, the Labor Department’s broad measure of unemployment goes back only to 1994. But early this year, with the help of economists at the department, The New York Times created a version that estimates it going back to 1970.
...
If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.

In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous high was 17.1 percent, in December 1982.

There is much more in the article, but this suggest that the BLS' "Alternative measure of labor underutilization U-6"¹ is now at the highest level since the Great Depression.

¹ "Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers"

by Calculated Risk on 11/06/2009 09:40:00 PM

Sunrise in the East
United Commercial Bank
Sunsets in the West
by Soylent Green is People
From the FDIC: East West Bank, Pasadena, California Assumes All the Deposits of United Commercial Bank, San Francisco, California

United Commercial Bank, San Francisco, California, was closed today by the California Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of October 23, 2009, United Commercial Bank had total assets of $11.2 billion and total deposits of approximately $7.5 billion. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $1.4 billion. ... United Commercial Bank is the 120th FDIC-insured institution to fail in the nation this year, and the 14th in California. The last FDIC-insured institution closed in the state was Pacific National Bank, San Francisco, which closed on October 30, 2009.

A late night whale makes five ...

by Calculated Risk on 11/06/2009 09:27:00 PM

Note: This was before the FDIC seized four banks today.

This is an unofficial list of Problem Banks.

Changes and comments from surferdude808:

The steady climb in members on the Unofficial Problem Bank list continued this week despite the failure of the multi-bank holding company FBOP Corporation, which took down 9 banks including 5 banks with aggregate assets of $17.5 billion that were on the Unofficial Problem Bank List.

There were 10 additions this week, which pushes the total number of institutions on the list to 505, up from 500 last week. Aggregate assets did drop to $330 billion from $341 billion a week ago.

Notable additions include Hanmi Bank, Los Angeles, CA ($3.9 billion, ticker HAFC); Bank of Blue Valley, Overland Park, KS ($810 million, ticker BVBC.OB); and San Luis Trust Bank, FSB, San Luis Obispo, CA ($369 million, ticker SNLS..OB). In addition, another banker’s bank was added -- Independent Banker's Bank of Florida, Lake Mary, FL. The failure of Silverton Bank, N.A., another banker’s bank based in Georgia, back in May was a costly failure for the FDIC.

By next Friday, the OCC may release its actions for October.

This week we looked over the numbers to determine which states have the most stress in their banking sector. For the ranking, we added together the number of institutions that are on the Unofficial Problem Bank List and failures since 2008 and divided by the number of institutions headquartered in the state and failures since 2008. Interestingly, Georgia is not the top ranked state. Here is the top 10 list; actually top 11 as Maryland and Colorado are in a virtual tie. Please note that we only ranked states with at least 15 institutions headquartered within their borders, as we did not want the ranking influenced by a small banking market.

State	Percent
Washington	26.3%
Utah	25.0%
Arizona	21.3%
Nevada	20.0%
Oregon	19.5%
Georgia	19.2%
California	17.8%
Florida	16.3%
Michigan	13.2%
Maryland	10.8%
Colorado	10.6%

Washington State leads the way with more than 26 percent of its banking industry either under formal enforcement action or having failed. No wonder the esteemed governor wrote a letter to the state’s congressional delegation complaining about bank regulators (see Wall Street Journal article).

Washington Gov. Christine Gregoire sent a letter to her congressional delegation Oct. 9 complaining that "federal regulators have applied inflexible 'one size fits all' regulatory standards on community banks and potential investors that hinder the ability of these community banks to weather the financial storm and actually inhibit opportunities to raise critically needed capital at the local level." Her letter came just days after the Federal Reserve declined to approve the sale of Frontier Financial, the fifth-largest bank in her state, to a New York investment fund for $450 million. Frontier Financial Chief Executive Patrick Fahey declined to comment.

The list is compiled from regulator press releases or from public news sources (see Enforcement Action Type link for source). The FDIC data is released monthly with a delay, and the Fed and OTC data is more timely. The OCC data is a little lagged. Credit: surferdude808.

See description below table for Class and Cert (and a link to FDIC ID system).

For a full screen version of the table click here.

The table is wide - use scroll bars to see all information!

NOTE: Columns are sortable - click on column header (Assets, State, Bank Name, Date, etc.)





Class: from FDIC

The FDIC assigns classification codes indicating an institution's charter type (commercial bank, savings bank, or savings association), its chartering agent (state or federal government), its Federal Reserve membership status (member or nonmember), and its primary federal regulator (state-chartered institutions are subject to both federal and state supervision). These codes are:

N National chartered commercial bank supervised by the Office of the Comptroller of the Currency

SM State charter Fed member commercial bank supervised by the Federal Reserve

NM State charter Fed nonmember commercial bank supervised by the FDIC

SA State or federal charter savings association supervised by the Office of Thrift Supervision

SB State charter savings bank supervised by the FDIC

Cert: This is the certificate number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. Click on the number and the Institution Directory (ID) system "will provide the last demographic and financial data filed by the selected institution".

by Calculated Risk on 11/06/2009 07:13:00 PM

Whats a "Prosperan"?
A breakfast food, car or band?
Answer: money pit

Looming Gateway Arch
Symbol of pioneer spirit
Their bank now a ghost.
by Soylent Green is People
From the FDIC: Alerus Financial, National Association, Grand Forks, North Dakota, Assumes All of the Deposits of Prosperan Bank, Oakdale, Minnesota

Prosperan Bank, Oakdale, Minnesota, was closed today by the Minnesota Department of Commerce, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of August 31, 2009, Prosperan Bank had total assets of $199.5 million and total deposits of approximately $175.6 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $60.1 million. ... Prosperan Bank is the 118th FDIC-insured institution to fail in the nation this year, and the sixth in Minnesota. The last FDIC-insured institution closed in the state was Riverview Community Bank, Ostego, on October 23, 2009

From the FDIC: Central Bank of Kansas City, Kansas City, Missouri, Assumes All of the Deposits of Gateway Bank of St. Louis, St. Louis, Missouri

Gateway Bank of St. Louis, St. Louis, Missouri, was closed today by the Missouri Division of Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 25, 2009, Gateway Bank of St. Louis had total assets of $27.7 million and total deposits of approximately $27.9 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $9.2 million. ... Gateway Bank of St. Louis is the 119th FDIC-insured institution to fail in the nation this year, and the third in Missouri. The last FDIC-insured institution closed in the state was First Bank of Kansas City, Kansas City, on September 4, 2009.

That makes four today ...

by Calculated Risk on 11/06/2009 06:17:00 PM

Motor City crash.
Home Federal has spun out.
Bagholders totaled
by Soylent Green is People
From the FDIC: Liberty Bank and Trust Company, New Orleans, Louisiana, Assumes All of the Deposits of Home Federal Savings Bank, Detroit, Michigan

Home Federal Savings Bank, Detroit, Michigan, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 24, 2009, Home Federal Savings Bank had total assets of $14.9 million and total deposits of approximately $12.8 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $5.4 million. ... Home Federal Savings Bank is the 117th FDIC-insured institution to fail in the nation this year, and the third in Michigan. The last FDIC-insured institution closed in the state was Warren Bank, Warren, on October 2, 2009.

A small one ... but it counts.

by Calculated Risk on 11/06/2009 05:05:00 PM

"Feds!... Come and Take Them"
United Security
Sparta Bank is dead.
by Soylent Green is People
From the FDIC: Ameris Bank, Moultrie, Georgia, Assumes All of the Deposits of United Security Bank, Sparta, Georgia

United Security Bank, Sparta, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of September 14, 2009, United Security Bank had total assets of $157 million and total deposits of approximately $150 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $58 million. ... United Security Bank is the 116th FDIC-insured institution to fail in the nation this year, and the twenty-first in Georgia. The last FDIC-insured institution closed in the state was American United Bank, Lawrenceville, on October 23, 2009.

Off to a quick start ...

by Calculated Risk on 11/06/2009 03:00:00 PM

From MarketWatch: Consumer debt drops for record 8th straight month

Outstanding consumer debt fell at a 7.2% annual rate in September, the eighth consecutive decline, the Federal Reserve reported Friday.

Click on graph for larger image in new window.

This graph shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 4.7% over the last 12 months - and falling fast. The previous record YoY decline was 1.9% in 1991.

Here is the Fed report: Consumer Credit

Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009. Revolving credit decreased at an annual rate of 10 percent, and nonrevolving credit decreased at an annual rate of 3-3/4 percent. In September, consumer credit decreased at an annual rate of 7-1/4 percent.

Note: The Fed reports a simple annual rate (multiplies change in month by 12) as opposed to a compounded annual rate. Consumer credit does not include real estate debt.

by Calculated Risk on 11/06/2009 01:47:00 PM

Update: A couple points: CRE is a lagging sector (see Business Cycle: Temporal Order), and I make some pretty optimistic comments in the middle of this post. I'll try to put some number togther on household formation and excess inventory.

From Carolyn Said at the San Francisco Chronicle: Gloomy times for commercial real estate

Values will plunge, vacancies will rise and rents will decrease across all types of commercial property before the market hits bottom in 2010, according to the "Emerging Trends in Real Estate" forecast from the Urban Land Institute and PricewaterhouseCoopers LLP.
...
No quick recovery is in store, the report said. "2010 looks like an unavoidable bloodbath for a multitude of 'zombie' borrowers, investors and lenders," it said. "The shake-out period may extend several years as even some conservative owners with well-underwritten loans from the early 2000s see their equity destroyed."

The report suggests the first sector to recover will be apartments as "people who were forced to move back in with their parents seek their own places as soon as they find jobs".

This household creation is really the key to entire housing market. During a recession people double up with friends or move into their parent's basements - and this is pent-up demand for housing units (mostly apartments) once these people find jobs and regain confidence about their future earnings.

All will not be grim forever. The number of housing units currently being completed (single family and apartments) is significantly below the level normally required for population growth. This level of completions would usually be reducing the excess inventory, however the improvement is being masked by the loss of households due to the recession. Once the job market starts to improve, I'd expect a surge in household creation (mostly renters).

Unfortunately there is a catch-22. Usually residential investment contributes significantly to job creation at the beginning of a recovery - and the excess housing inventory is holding down residential construction employment this time.

For the other CRE sectors the outlook is very grim. From the Urban Land Institute:

Among property sectors, the survey finds declines or near low record lows in investment sentiment for almost every property type. Only rental apartments register fair prospects and all other categories sink into the fair to poor range. Hotel and retail record the most precipitous falls. Development prospects are “largely dead” and drop to new depths and practically to “abysmal” levels for office, retail and hotels. Warehouse and apartments score only marginally better at “modestly poor.”

by Calculated Risk on 11/06/2009 10:29:00 AM

A few more graphs ...

Stress Test Scenarios

The economy is performing better that the stress test baseline scenario for GDP and house prices, but worse than the "more adverse" stress test scenario for unemployment.

Click on graph for larger image in new window.

This graph shows the unemployment rate compared to the stress test economic scenarios on a quarterly basis as provided by the regulators to the banks (no link).

This is a quarterly forecast: the Unemployment Rate for Q4 is just October at 10.2%. The unemployment rate is higher than the "more adverse" scenario, and much higher than the peak of the baseline scenario.

Unemployed over 26 Weeks

The DOL report yesterday showed seasonally adjusted insured unemployment at 5.75 million, down from a peak of about 6.9 million. This raises the question of how many unemployed workers have exhausted their regular unemployment benefits (Note: most are still receiving extended benefits, and President Obama signed a further extension of benefits this morning).

The monthly BLS report provides data on workers unemployed for 27 or more weeks, and here is a graph ...

The blue line is the number of workers unemployed for 27 weeks or more. The red line is the same data as a percent of the civilian workforce.

According to the BLS, there are a record 5.6 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 3.6% of the civilian workforce. (note: records started in 1948)

Diffusion Index

The third graph shows the BLS diffusion indexes for total private employment and manufacturing employment.

Think of this as a measure of how widespread the job losses are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.

Both the "all industries" and "manufacturing" employment diffusion indices had been trending up - meaning job losses were becoming less widespread. However both turned down in October. This series is noisy month-to-month, but it still appears job losses are widespread across industries.

Earlier employment posts today:

Employment Report: 190K Jobs Lost, 10.2% Unemployment Rate for graphs of unemployment rate and a comparison to previous recessions.

Employment-Population Ratio, Record Part Time Workers, Weak Holiday Hiring