“This simple table below illustrates how so much affordability has been lost in the past year. Without exotic loan programs/guidelines such as interest only, stated income, zero down, 2nd mortgages to replace down payment, higher debt-to-income (DTI) ratios, Pay Option ARMs etc, we have gone back to a 30-yr fixed rate society overnight.”
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”- Deutsche Bank AG, Germany’s biggest bank, reported its first quarterly loss in five years after writing down the value of loans for leveraged buyouts and asset- backed securities by 2.7 billion euros ($4.2 billion).”
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”Subprime loan delinquencies have stabilized after their torrid run-up in late payments according to the latest remittance reports. This is obviously a positive sign for the housing market as fewer 60-day delinquencies mean fewer eventual 90-day delinquencies and NOD’s. While analysts caution against over-reaching in the importance of the improvement they do note that it is significant.”
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”S&P reported this morning that the Case-Shiller home price indices showed declines in all 20 cities. The composite 20 index is off 12.7% over the last year, and 14.8% from the peak.”
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Quite a hit parade: First Horizon is struggling to survive. It is also playing shell games that is going to cost it money. Stock dividends are tantamount to no dividends. The effect is the same as a stock split, and splits are clearly not dividends. It’s even worse than meets the eyes. … Citigroup is another bank playing expensive games to keep its dividend intact. It makes no economic sense to borrow money at 8.4% to pay a dividend yielding 5%. The aroma of that deal stinks as well. … Things are so screwed up at Merrill Lynch, that it cannot even count as tier 1 capital the amount of money it is raising via hybrid preferreds because credit-rating companies typically don’t allow more than 25 percent of a bank’s capital base to be made up of preferred stock, and Merrill is well over that limit. … HBOS, the U.K.’s biggest mortgage lender, may ask shareholders for as much as 4 billion pounds ($7.9 billion) at its annual meeting Tuesday to balance write-downs and strengthen its balance sheet as the economy slows, according to media reports. If it goes ahead with the plans, HBOS would become the second major U.K. bank to require a so-called rights issue this month, on the heels of Royal Bank of Scotland (RBS) saying it would seek another 12 billion pounds last Tuesday.
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”Ailing mortgage lender Residential Capital LLC continued to weigh on GMAC Financial Services during the first three months of 2008, dragging the former General Motors financial division to a $589 million loss for the first quarter. ”
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Articles are flooding out exploring the Fed’s effect on food inflation. Here are a few: The Fed’s Dilemma (Martin Hutchinson), which is very similar to an article I wrote a few days ago: Interest-rate policy normally only affects the world economy at the margin, but it has now been so expansionary for so long that the Fed’s interest-rate strategy has turned into a moral dilemma of sorts. In short, the central bank’s monetary policy will likely determine whether millions of U.S. homeowners lose their homes or millions of the world’s poor starve. A not-so-slight critique of this: Hutchinson states that inflation would actually be good for housing on the premise that wage would rise with inflation. That’s a big “if”, plus the data shows neither wages nor employment have been keeping up with inflation. So in fact this is likely to just exacerbate the misery, as it has been. Further, housing prices are unlikely to “reverse” in real terms (they never have after a bubble has peaked, regardless of inflation) and perhaps not even nominal terms. ARMs would mean that lots of people’s payments would go up. All this means the Fed’s maneuvers have even less to do with helping out homeowners than you might think. In US Fed To Blame for Global Food Crisis, Mike Whitney goes for the jugular: The global food crisis is a monetary phenomenon, an unintended consequence of America’s attempt to inflate its way out of a market failure. There are long-term reasons for food prices to rise, but the unprecedented spike in grain prices during the past year stems from the weakness of the American dollar. Washington’s economic misery now threatens to become a geopolitical catastrophe….The link between the declining parity of the US unit and the rising price of commodities, including oil as well as rice and other wares, is indisputable. Regrettably Whitney gets a bit sidetracked by railing at “speculators” — who according to Whitney’s own main point are simply acting rationally based on the Fed’s rate manipulation. Speculators are simply doing what they’ve always done; the change here comes from the Fed. So who is really at fault?
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”Foreclosure activity increased 23 percent in the first quarter compared to the previous quarter and was up 112 percent from a year ago, RealtyTrac said today.”
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“We are grateful that Justice Freedman sent our case back to Texas where it belongs”
Late Friday, a New York judge dismissed the six banks’ claims against Clear Channel and its potential buyers, sending the lawsuits back to court in Texas. via FMQB
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“It’s up to us with our store experience to capture their (more affluent customers’) imagination and make sure they shop with us when things turn around”
More affluent customers are shopping at Wal-Mart Stores Inc. during the economic slump and a company executive said today that the retailer is in position to keep those shoppers when the economy improves. via Washington Times
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