"The Iranian government must understand that the world is watching. We mourn each and every innocent life that is lost. We call on the Iranian government to stop all violent and unjust actions against its own people. The universal rights to assembly and free speech must be respected, and the United States stands with all who seek to exercise those rights.Sphere: Related Content
As I said in Cairo, suppressing ideas never succeeds in making them go away. The Iranian people will ultimately judge the actions of their own government. If the Iranian government seeks the respect of the international community, it must respect the dignity of its own people and govern through consent, not coercion.
Martin Luther King once said - “The arc of the moral universe is long, but it bends toward justice.” I believe that. The international community believes that. And right now, we are bearing witness to the Iranian peoples’ belief in that truth, and we will continue to bear witness."
Southern Community Bank, Fayetteville, Georgia was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with United Community Bank, Blairsville, Georgia, to assume all of the deposits of Southern Community Bank.Second failure:
As of May 29, 2009, Southern Community Bank had total assets of $377 million and total deposits of approximately $307 million. United Community Bank paid a premium of 1 percent to acquire all of the deposits of the failed bank. In addition to assuming all of the deposits of the failed bank, United Community Bank agreed to purchase approximately $364 million of assets. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $114 million. United Community Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives
Cooperative Bank, Wilmington, North Carolina was closed today by the North Carolina Office of Commissioner of Banks, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Bank, Troy, North Carolina, to assume all of the deposits of Cooperative Bank, except those from brokers.
As of May 31, 2009, Cooperative Bank had total assets of $970 million and total deposits of approximately $774 million. In addition to assuming all of the deposits of the failed bank, First Bank agreed to purchase approximately $942 million of assets. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $217 million.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $114 million.The third:
First National Bank of Anthony, Anthony, Kansas was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Bank of Kansas, South Hutchinson, Kansas, to assume all of the deposits of First National Bank of Anthony.There go another $300 million from the DIF. But at least the FDIC can celebrate 75 years of promptly shutting down banks when needed (these days, that's pretty much everyday). Sphere: Related Content
As of March 31, 2009, First National Bank of Anthony had total assets of $156.9 million and total deposits of approximately $142.5 million.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $32.2 million.
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Negotiations on joining PorscheComing soon to a Park Avenue showroom near you - Porsche C63 AMG GT3. Also, might be a good time to check out those DAIGR CDS. Sphere: Related Content
The carmaker Daimler negotiates informed manager magazin with Porsche on a career in the sports car manufacturer posted. The talks are at an advanced stage. Daimler would thus indirectly also to participate in Volkswagen.
Hamburg - The automotive group Daimler is considering a stake in the competitor Porsche. The talks would be at an advanced stage, such as manager-magazin.de has experienced. Daimler CEO Dieter Zetsche and Porsche Chief Executive Wendelin Wiedeking had the potential options of a career already discussed at the end of May, it was in financial circles. The discussion is therefore that Daimler has a capital increase shares of Porsche SE will.
Daimler would thus indirectly also to Europe's biggest carmaker Volkswagen join. Porsche holds 50.8 percent of the voting rights in VW. The group had with the acquisition, however verhoben and is looking urgently for investors. Parallel negotiations Porsche boss Wiedeking also with the Emirate of Qatar on various possibilities of a career.
It is also possible that a package Daimler Porsche VW options decline, experienced manager-magazin.de from financial circles. About the options Porsche has secured the opportunity to make further approximately 25 percent of Volkswagen's shares at a fixed price to buy. Porsche but lacks the money, the options and make up the shares to pay.
In the past week were leading members of the families Porsche and Piëch taken in Salzburg. The clan includes 100 percent of Porsche shares. Wiedeking asked the families to agree, a portion of the shares to outside investors must. He is not appealed to a particular investor notes. The participants initially refused their consent. The families will be available early next week to a further meeting to come together.
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[California's] A2 rating is just five notches above speculative status and Moody's raised the potential for the rating to tumble toward "junk" status if lawmakers fail to quickly produce a budget for Governor Arnold Schwarzenegger to sign.All in all, a complete disaster, and as Obama made clear recently, the Governator can not rely on bailout funding. Do you see what happens Arnie, when you don't have one million UAW pensioners living in your state, ordering Viagra, and never issuing recall notices on gas guzzling (stainless?) steel tinderboxes."If the legislature does not take action quickly, the state's cash situation will deteriorate to the point where the controller will have to delay most non-priority payments in July," Moody's said in a statement.
"Lack of action could result in a multi-notch downgrade," Moody's added.
A downgrade could push California's borrowing costs up at time when state officials expect to issue up to $9 billion in revenue anticipation notes as soon as possible after a budget agreement is notched -- a deal whose timing is in doubt.Moody's said California's leasing debt and other state-related debt are also on review, affecting a total of $72 billion of debt.
Moody's cited California's expected massive budget gap for fiscal 2010 of more than 20 percent of its general fund budget; warnings by the state controller that without budget solutions the state will not be able to meet all its financial obligations in July; continued political stalemate, and the limited options.
The pounding the dollar has taken as a result is indicative of the investing community's skepticism of CNBC's ability to spin all out nuclear war as a green shoot. Sphere: Related ContentThe U.S. military is planning to intercept a flagged North Korean ship suspected of proliferating weapons material in violation of a U.N. Security Council resolution passed last Friday, FOX News has learned.
The USS John McCain, a navy destroyer, will intercept the ship Kang Nam as soon as it leaves the vicinity off the coast of China, according to a senior U.S. defense official. The order to inderdict has not been given yet, but the ship is getting into position.
The ship left a port in North Korea Wednesday and appears to be heading toward Singapore, according to a senior U.S. military source. The vessel, which the military has been tracking since its departure, could be carrying weaponry, missile parts or nuclear materials, a violation of U.N. Resolution 1874, which put sanctions in place against Pyongyang.
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The Chinese sub was shadowing the destroyer when it hit the underwater sonar array that the USS McCain was towing behind it.
That same navy destroyer that was being shadowed by the Chinese is now positioning itself for a possible interdiction of the North Korean vessel.
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A maximum loan-to-value ratio would create a cushion of borrower equity—the excess of collateral value above loan amount—available to lenders in the event of default. In addition, borrowers would face the prospect of losing their equity, making them more likely to apply only for loans they were reasonably sure to repay. By promoting such conservatism, loan-to-value regulation would guard against the speculative borrowing that leads to credit booms.While this proposal has about a snowball's chance in hell of ever being effectuated under Bernanke, and about a million times less under successor Summers, the take home message is the ever increasing "vigilantism" by regional Feds in their attempts to bring rationality to the system hell bent on repeating the excesses of the past credit bubble. At what point will the Bernanke vs Everyone dynamic become unsustainable? Will another major market crash be sufficient to shift the balance of power away from Bernanke to the likes of Yellen, Lockhart et al?
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To CMSA’s Members and Friends:hat tip Alex and Clay Sphere: Related Content
Commercial Mortgage Securities Association is actively engaged in discussions surrounding yesterday’s Obama Administration regulatory reform proposal, reviewing every facet of the plan and forming its initial reactions. Having said this, CMSA believes it important to be judicious but also forthright in some of its immediate concerns.
The regulatory changes proposed by the Administration include, most significantly, risk retention requirements; measures to align compensation with long-term performance of securitized assets; accounting rule changes to eliminate the immediate recognition of “gain on sale” requirements relative to consolidation on originators’ balance sheets; changes in regulation of credit rating agencies, including ratings differentiation; and disclosure and reporting requirements, including document standardization requirements. It should be noted that many of the Administration’s references cite the residential market, so, as the legislative process takes its course, it is important for CMSA to regularly differentiate and communicate the cited references from its own market.
While CMSA is encouraged by the Obama Administration’s steps to address the ongoing capital markets and liquidity crisis that continues to affect our greater economy, we must begin by strongly re-stating our long-standing opposition to any plan that includes credit rating differentiation for structured products.
The association always has advocated some checks-and-balances for rating agencies to avoid conflicts of interest, and has strongly supported the need for additional transparency in ratings and the methodologies used by the rating agencies, but we strongly oppose differentiation of ratings described in the White House provisions which, we feel, causes both confusion and implementation issues. Indeed, the issue of ratings differentiation reopens a previously settled debate, a debate that will greatly delay and exacerbate market recovery. Investors have been very clear that imposing differentiation across structured finance does not enhance the understanding of certain ratings – it only creates more confusion and more uncertainty.[in other words, can Steve Rattner please make sure S&P doesnt downgrade any CMBS class... ever...]
The Administration yesterday proffered a plan that would require loan originators (or sponsors) to retain five percent of the credit risk of the securitized exposures, noting that proposed regulations would prohibit the originator of the loan from otherwise hedging or transferring the risk it is required to retain. While we agree conceptually with the issue of “skin in the game,” CMSA believes that – with CMBS – the structure already includes a third party credit-check with the B-piece (first loss) buyers who have skin in the game; B-piece buyers conduct extensive credit analysis of each loan before buying the highest risk piece in a CMBS securitization and most always are buy-and-holders, the long-term investor who underwrites the risk and holds it. [Just as we suspected, A piece buyers do not and have never done any analysis...Thanks for confirming.]
Also, it should be noted that, when viewing construction lending where financial institutions had 100% of their “skin in the game,” many of these loans failed. This, we feel, puts in question the relationship of the current credit crisis to this five percent risk retention requirement.
We do recognize that the long-term return-based concept of the holding of risk may be valid, but, for CMBS, this concept does in fact apply to the holders of the non-investment grade bonds. We support the need for sufficient disclosure and sufficient representations and warranties to properly transfer the risk, but a true sale should be permitted where risk is properly being transferred to a third party, such as these B-piece bond holders.
We need to let originators have gain on sale treatment to let the market work, and have the long-term-return-based concept apply to the holders of the non-investment grade bonds. While aligning compensation with long-term performance of securitized assets would appear to be appropriate, it’s very difficult for regulators and accountants to determine if a loan default is due to poor underwriting, due to changes in market condition, or due to poor business practices by borrower and tenants.
The Administration’s provisions for issuers of asset-backed securities are to include new reporting requirements which would include loan-level data. CMSA notes that the CMSA Investor Reporting Package (CMSA IRP®), in effect since 1994 for the CMBS industry, and currently being used by the industry in its Fifth Version, continues to be reviewed and updated on an ongoing basis. Monthly, the CMSA IRP provides not only bond level information such as updated bond balances, amount of interest and principal received on the bonds and bond ratings, but also loan level as well as property-level information.
The residential securitized marketplace is currently developing a residential reporting package modeled on CMSA’s successful IRP. The success of the CMSA IRP in the U.S. has also led to the adoption of similar standards for CMBS in Europe and in Japan.
In sum, CMSA believes it must continue to distinguish the commercial market from residential, and to continue to educate policymakers on the safeguards that the commercial market already has in place – safeguards that should obviate the need for some of the high level of regulation the Administration proposed June 17.
CMSA remains actively committed to communicating all its views to policymakers, to lawmakers and the press and will keep its members apprised on a regular basis as we move forward toward market recovery.
Thank you.
Patrick C. Sargent
President, Commercial Mortgage Securities Association
June 18, 2009
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(1) while home sales activity has picked up in some regions, much of it reflects clearing of distressed inventory and is accompanied by falling prices. Over the last several months, many MSAs reached their all time highs in affordability, helped by low mortgage rates. Unfortunately, affordability is no longer the driving issue in the housing market and we believe prices still have a ways to fall in many areas before home prices reach their trough. The bottom is closer but we are not there yet.Sphere: Related Content
(2) For the US we are now projection a further 14% decline from 1Q09 this compares to the 16.5% current to trough decline we published our last outlook in March '09.
(3) Affordability no longer an issue in most of the Top 10 MSAs in the US but factors such as unemployment, distressed inventory and home price momentum are combining to still result in quite negative current to trough outlooks in some large MSAs.
(4) In NY prices still have to drop an additional 32% from 1Q09 levels just to restore affordability to its historic high (1998) but including model risk factors beyond just affordability we are projecting a 40.6% decline from 1Q09 (vs 47.4% in March ).
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Citi is uniquely qualified to arrange TALF loans due to its relationships with the Fed, the rating agencies, and TALF investors
– Pricing and proceeds will be driven by underwriting, rating agency process and investors
– Proper underwriting is essential to execution since Fed has discretion to refuse securities [We can't wait to see the Fed refusing some pristine AAA-rated POS]
– Longstanding relationships at rating agencies and intimate knowledge of their models [just in case anyone thought there were no models at all]
– Access to broad array of 100+ TALF investors, critical to driving tightest terms and resulting in best TALF execution track record to date [Alas Citi's rolodex excludes CMBS investors, resulting in exactly 0 interest in yesterday's CMBS TALF auction]
Regulation FD provides that when an issuer discloses material nonpublic information to certain individuals or entities generally, securities market professionals, such as stock analysts, or holders of the issuer's securities who may well trade on the basis of the information the issuer must make public disclosure of that information. In this way, the new rule aims to promote the full and fair disclosure.So assuming that Reg FD is still valid and actual, Zero Hedge has some questions of both the management team of Bank Of Hawaii Corp, and Morgan Stanley analyst Ken Zerbe, CFA.
What’s new: We hosted a dinner meeting with the management of Bank of Hawaii at our offices in NYC. We continue to view BOH as a well-run, conservative bank that has been largely isolated from many of the mainland credit problems, at least up until recently. Following our meeting with management, we expect the pace of credit deterioration to increase, including a potentially large increase in charge-offs during 2Q09.What is particularly troublesome is this very selective disclosure from page 3 of the report, italics mine:
The key takeaways from our meeting include: 1) the Hawaiian economy could see further weakness in the coming quarters, due to lower tourism, home price depreciation, rising unemployment, and less government spending; 2) higher credit losses in 2Q09 as BOH resolves certain loan exposures; and 3) overall fundamental weakness including ongoing NIM pressure and declining loan balances partially offset by solid fee income due to strong mortgage banking earnings.
Expect Higher Credit Losses in 2Q09Can some professional working for any of the various US regulators (even input from Larry Summers in his role as Systemic Risk Regulatory Czar-in-waiting) please advise how Bank Of Hawaii is exempt from issuing an 8-K disclosing if nothing else, at least the highlighted pieces of information that it provided to MS' dinner participants? As the company has a $1 billion HELOC book (not to mention a $7 billion total loan book) on an $800 million tangible equity base, all of this information is in fact material, and, previously, non-public.
Investors should expect both higher net charge-offs and provision expense in 2Q09. Management expects to resolve two larger credit issues in the quarter, which we suspect are its $17 million net mall exposure and a leasing exposure. While resolving these issues should be a positive, the likely higher resulting charge-offs could be viewed as a short term negative. We are also likely to see further increases in home equity losses, but lower charge-offs in its indirect auto portfolio. Management noted it would likely provision above charge-offs, implying a larger hit to operating income and EPS than we previously expected. Our revised provision estimate of $31 million (up from $23 million) is the main driver of our lower EPS estimates for the quarter.
In terms of overall credit quality and trends, we summarize management’s comments on each of its major loan categories below.
Areas of More Concern
Within its loan portfolio, management highlighted home equity as being the area where they could see the greatest deterioration in credit near term. The company has roughly $1 billion of home equity loans, of which a meaningful (but undisclosed) amount have LTVs in excess of 80%. With rising unemployment and further declines in home prices, home equity credit losses could start to rise noticeably. Land loans, within its residential mortgage segment, could also be at risk, although the company has just over $50 million of total exposure. Overall, residential mortgage loans are still performing well, with just 90 bps of early stage delinquencies as of 1Q09. Management also highlighted potential losses in its aircraft leasing portfolio, although it has already built considerable reserves against this portfolio (reserves of roughly $31 million against $76 million of loans). The risk of loss rises in aircraft leasing as the price of oil increases.
Era of the Green Shoots is OverSource: David Rosenberg, Gluskin Sheff Sphere: Related Content
It was fun while it lasted but if the latest set of data couldn't kybosh the 'green shoot' theory, then FedEx sure did when it posted earnings results that fell well short of target and the CEO announcing that the economic backdrop was "extremely difficult". On top of that, UAL stated that its 2Q traffic is expected to drop as much as 10.5% YoY on a 9.0% decline in available seats. Not only have the transports rolled over but so have the banks — the group that led the rally since early March — with a huge 3.3% loss yesterday (and now the group is down 20% for the year). Due to mounting concerns over commercial real estate exposure, S&P cut the ratings and/or outlooks on 22 banks yesterday (the regional banks of course — the ones that the Fed, Treasury and White House don't believe are too big to fail. As an aside, to see how the U.S. government's behaviour is dramatically altering private sector incentives, see Too Big to Fail, or Succeed in today's op-ed section of the WSJ.) We also see in today's FT (page 28) that Moody's is considering a wave of bank downgrades of its own premised on its concerns surrounding the quality of subordinated debt on bank balance sheets.
Screening for the CPI
The consumer price index rose by a much lower than expected 0.1% in May and this, like the PPI, took the YoY trend to a five-decade low, of -1.0%. We are going to see some larger monthly prints due to higher gasoline prices but because of the huge base effects of a year ago, when oil hit $150/bbl, we could still very likely see the YoY headline inflation rate sink to as low as -2.0% by the end of the summer. It is very clear that we are either in an extremely benign inflation environment or on the precipice of a deflationary environment. Either way, pricing power is confined to relatively few sectors.
Who has Good Pricing Trends at a time of -5.0% PPI?
We also ran sector screens on actual pricing power using the PPI, which is deflating at a 5.0% YoY pace, the most pronounced deflation rate in 50 years. The key is to identify the sectors whose pricing is not deflating, let along making new 50-year lows. So what is hanging in well? Soft drinks, alcoholic beverages, chicken producers, confectionary products, pet food/pet products and toys/games all look good.
February 28, 2007 - Dow Jones @ 12,268Austrian Filter conlcudes correctly: "If Bernanke and Paulson were doctors, and our economy was the patient, they would be in jail for malpractice." Sphere: Related Content
March 13th, 2007 – Henry Paulson: “the fallout in subprime mortgages is "going to be painful to some lenders, but it is largely contained."
March 28th, 2007 – Ben Bernanke: "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,"
March 30, 2007 - Dow Jones @ 12,354
April 20th, 2007 – Paulson: "I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained." , "All the signs I look at" show "the housing market is at or near the bottom,"
April 30, 2007 - Dow Jones @ 13,063
May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”
May 31, 2007 - Dow Jones @ 13,627
June 20th, 2007 – Bernanke: (the subprime fallout) ``will not affect the economy overall.''
July 12th, 2007 – Paulson: "This is far and away the strongest global economy I've seen in my business lifetime."
August 1st, 2007 – Paulson: "I see the underlying economy as being very healthy,"
October 15th, 2007 – Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions."
December 31, 2007 - Dow Jones @ 13,265
January 31, 2008 - Dow Jones @ 12,650
February 14th, 2008 – Paulson: (the economy) "is fundamentally strong, diverse and resilient."
February 28th, 2008 – Paulson: "I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street."
February 29th, 2008 – Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."
March 16th, 2008 – Paulson: "We've got strong financial institutions . . . Our markets are the envy of the world. They're resilient, they're...innovative, they're flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong."
March 18th, 2008 - Bear Stearns Bailout Announced
May 7, 2008 – Paulson: 'The worst is likely to be behind us,”
May 16th, 2008 – Paulson: "In my judgment, we are closer to the end of the market turmoil than the beginning," he said.
May 30, 2008 - Dow Jones @ 12,638
June 9th, 2008 – Bernanke: Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a "substantial downturn" appears to have waned,
July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, "… in no danger of failing.","…adequately capitalized"
July 20th, 2008 – Paulson: "it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation."
July 31, 2008 - Dow Jones @ 11,378
August 10th, 2008 – Paulson: ``We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)
September 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 - 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet.
September 16th, 2008 - $85 Billion AIG Bailout “Loan”
September 19th, 2008 - $700 Billion Bailout Plan Announced
September 19th, 2008 – Paulson: "We're talking hundreds of billions of dollars - this needs to be big enough to make a real difference and get at the heart of the problem," he said. "This is the way we stabilize the system."
September 19th, 2008 - Bernanke: "most severe financial crisis" in the post-World War II era. Investment banks are seeing "tremendous runs on their cash," Bernanke said. "Without action, they will fail soon."
September 21st, 2008 – Paulson: "The credit markets are still very fragile right now and frozen", "We need to deal with this and deal with it quickly.", "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."
September 23rd, 2008 – Paulson: "We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses, both small and large, and the very health of our economy,"
September 23rd, 2008 – Bernanke: "My interest is solely for the strength and recovery of the U.S. economy,"
October 31, 2008 - Dow Jones @ 9,337
March 31, 2009 - Dow Jones @ 7,609
