Wednesday, July 1, 2009

Required Reading: Wednesday, July 1st 2009

Cramer: The Housing Market Bottoms TODAY – Clusterstock (Time to BUY! BUY! BUY!)

S.F. Fed chief Yellen tells inflationistas to pipe down – Naked Capitalism

Bank Woes Deepening in Europe – The New York Times

Few people outside Belgium have ever heard of KBC Bank. But the travails of this lender, based in Brussels, highlight the broader challenges Europe is facing by not having more fully confronted the deteriorating health of its financial institutions.

Since October, KBC Bank has had to seek government relief three times. In all, it has received $41.5 billion in financing and guarantees to recover from disastrous mortgage bets that its financial engineers and traders made when times were good. For a bank with a balance sheet of just $425 billion, it is an astounding sum, exceeding the bailout of the Royal Bank of Scotland.

Sterling Crisis Looms as U.K. Unraveling Points to Budget Cuts – Bloomberg

June 30 (Bloomberg) -- The state of the U.K. economy fills British financial historian Niall Ferguson with foreboding.

“The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one,” the Harvard University professor says.

Ferguson’s concern stems from the deterioration in the U.K.’s public finances, which prompted Standard & Poor’s to warn on May 21 that the country could lose its AAA debt rating. The firm estimated the cost of propping up Britain’s banks at 100 billion pounds ($166 billion) to 145 billion pounds and said government debts could double to almost 100 percent of gross domestic product by 2013.

"Suck on Our Yachts": Goldman Sachs Issues Non-Apology for Destroying the World Economy – Matt Taibbi

Goldman Sachs chief Lloyd Blankfein says he's sorry, then proceeds to brag about screwing us all.

Anyone else out there find himself doubled over laughing after reading Goldman, Sachs chief Lloyd Blankfein's "apology" for his bank's behavior leading up to the financial crisis? Has an act of contrition ever in history been more worthless and insincere? Even Gary Ridgway did a better job of sounding genuinely sorry at his sentencing hearing -- and he was a guy who had sex with dead prostitutes because it was cheaper than paying live ones.

Looking at Blankfein's one-sentence apology, I'm struck in particular by a couple of phrases:

While we regret that we participated in the market euphoria...

Really, Lloyd? You "participated" in the market euphoria? You didn't, I don't know, cause the market euphoria?

Home Loan Delinquencies Double on Prime Loans; Foreclosure Filings Top 300,000 3rd Straight Month – Mish

This is a damning report on the success (or lack thereof) of the mortgage foreclosure workout programs to date. Redefault rates are near 50% after Fannie/Freddie loan modifications. Of course Fannie and Freddie can grant bigger loan mods (and probably will), but taxpayers will have to eat the cost.

Private loan mods are redefaulting at a stunning 58.1% rate 12 months after modification. Can those people redeafulting can afford ANY payment? Even if they can, the incentives to walk away are enormous.

Certainly those out of a job are unlikely to be able to afford any payment, and the unemployment rate is soaring.

Moreover note that 67% of loans are "Prime Loans". Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008 according to the report.

Total Servicing is $6 Trillion. $4 Trillion of that is "prime". 2.9% of that is 60 days late or worse. 2.9% of $4 Trillion is $116 billion. And that ignores the problem in Alt-A and Pay Option ARMs.

Government Excited That People Are Willing To Get Paid To Buy A New Car – Clusterstock

Dennis Kneale Flips Out, Calls Bloggers "Dickweeds" – Clusterstock

Unemployment Forecast: Too Much "Hope" – Calculated Risk


June Economic Summary in Graphs – Calculated Risk

Five Things: Five Themes for 2009 Midyear Scorecard – Minyanville, Kevin Depew

Is it time for underwater homeowners to be given a get-out-of-debt-free card? – The Los Angeles Times

Government and private-lender attempts to stem the home foreclosure crisis so far have mostly focused on loan modifications or refinancing -- giving borrowers a temporary or permanent reduction in their monthly payments.

But some housing experts say the next wave of help will have to address the core problem for many homeowners: negative equity.

One graph to rule them all … – Brad Setser

More landlords take renters with bad credit – On The Block, The San Francisco Chronicle

Just for kicks, we looked on Craigslist, where there were a surprising number of bad credit apartments listed (somewhere between 50 and 70). One property manager in San Jose, for example, not only advertises "BAD CREDIT OK," but he/she also promises a "MOVE-IN BONUS." Similarly, the landlord of a three-bedroom house in Pittsburg says "Bad credit OK with good references."