UPDATE 1-Horizon Bank first U.S. bank failure of 2010
kicking off what has been forecast as a peak year for small bank failures.
The Federal Deposit Insurance Corp said Horizon Bank had approximately $1.3 billion in total assets and $1.1 billion in total deposits as Sept. 30.
Friday's bank failure is expected to cost the FDIC's insurance fund a total of $539.1 million.
The 18 branches of Horizon Bank will reopen during their normal business hours beginning on Saturday as branches of Washington Federal Savings and Loan Association and deposits will continued to be insured by the FDIC.
Community banks are facing persistent pressure from deteriorating loans, many tied to commercial real estate projects that have collapsed or are in decline.
Regulators closed 140 banks last year, the highest level since 1992 when officials were still cleaning up from the savings and loan crisis. That compares with 25 in 2008 and only three in 2007.
FDIC Chairman Sheila Bair has said in the current banking crisis, failures will peak in 2010 and then start to subside.
The price tag for the bank closings is expected to total $100 billion from 2009 through 2013, according to the FDIC.
The failures have drained the agency's deposit insurance fund, but the agency recently collected about $45 billion by having banks prepay three years of industry assessments.
The FDIC expects the insurance fund's balance will remain negative until 2013 but says it has plenty of access to cash, including the ability to tap a $500 billion line of credit with Treasury.
In a new twist in the way the FDIC collects fees, the agency may propose next week that banks with risky employee compensations practices be ordered to pay more for deposit insurance.
The proposal is preliminary and it is unclear if it will gain favor with other regulators or the industry. (Reporting by Doug Palmer and Karey Wutkowski; Editing by Gary Hill)
Employment Condition Continues To Degrade
This data series shows the genuine employment condition continuing to degrade. From two months ago, the Full Time Employment Population Ratio = (Num Employed / Non-Institutional Adult Population) * (Avg Private Hours Worked Per Week / 40 Hours Full Time Work Week) has fallen half a percent (see below). Compared to a year ago it has fallen 2.4%.
15:05 Nov Consumer Credit ($17.5B) vs. consensus ($5.0B)
Oct figure revised to ($4.2B) from ($3.5B)
* * * * *
end.
John Hussman of the Hussman funds came out yesterday with this commentary. This man is much admired and followed :
"As I wrote several weeks ago, the Federal Reserve has expanded the U.S. monetary base by more than 150% since the beginning of the recession. That is not a typo. The monetary base has soared from $800 billion to over $2 trillion. Much of this has been accomplished through outright purchases of mortgage-backed securities (not repurchases) and an equivalent creation of base money. Unless these securities can be sold back out into private hands for the same value that was paid to acquire them, the Fed will have effectively forced the U.S. government to make its implicit guarantee of these agency securities explicit, without the authorization of Congress. To the extent that the underlying mortgages default, the U.S. government will be forced to issue additional Treasuries to retire the mortgage backed securities now held by the Fed. Alternatively, if the U.S. does not explicitly bail out Fannie Mae and Freddie Mac to the full extent, the Fed will have created money, with no recourse, and without the equivalent backing of assets or securities on its books. In short, the Fed is now engaging in unlegislated, back-door fiscal policy."
"What is likely, in my view, is that we will observe far greater issuance of government liabilities, which will predictably create a near doubling of the consumer price index in the coming decade (though probably not for a few years due to credit concerns, which dampen monetary velocity). It is notable that the massive expansion of government liabilities beginning in the late-1960's eventually exploded into uncontrollable inflation by the late 1970's. There are lags between the creation of government liabilities and their inflationary effects. But to expand these liabilities as recklessly as the Fed and Treasury are now doing is to undermine the long-term foundations of the economy."
end.
Note that as I have indicated to you on many occasions, the monetary base has risen from 800 billion to 2 trillion dollars. His take which is similar to my own, is that the Fed cannot withdraw from all the liquidity it created.
It will be impossible to return the mortgaged back securities to private hands/bankers at full price or for that matter at any price. Hyperinflation is the only avenue that will result.
end
In international affairs, this next story is a dilly: (from Jim Sinclair and Tyler Durden of Zero Hedge)
Jim Sinclair’s Commentary
If the US Federal Reserve does not stop talking trash about draining, the US legislative via a Fed audit will do the same.
Argentina Central Bank Mutiny Costs Local Bernanke Equivalent His Job, Criminal Charges
by Tyler Durden on 01/07/2010 17:36 -0500
A surreal harbinger of what may well transpire in the US some day was today’s firing of the president of Argentina’s Central Bank Martin Redrado by president Cristina Fernandez de Kirchner. The action followed his refusal to release reserves to the government to be used for debt service payments, as well as his refusal to resign. At least in Argentina the Central Bank is answerable to the president, instead of the other way around. The odd development follows Kirchner’s enactment of a "Bicentennial Fund" which was to be funded with $6.6 billion of the $17 billion reserves, in order to make debt payments this year: the Argentine government has $13 billion in debt service payments due in 2010. One can imagine their jealously of the US, where such a situation would be met with merely a little more cash printing and a few more $40 billion 3 year auctions.
Market News also reports:
Fernandez de Kirchner called on Redrado to resign, but when he refused she called an emergency cabinet meeting to sign a decree removing him from his post "for misconduct and failure to execute the responsibilities of a public functionary, according to press reports.
And the La Nacion daily reported that the president also ordered Attorney General Esteban Righi to file criminal charges against the Harvard-educated economist.
Ah, to see the day when various other Central Bankers see criminal charges filed against them for insubordination.
I would like to bring to your attention to the headlines from last night. It is very telling:
Tishman Real Estate to miss payment on a commercial loan of over $5 billion on a massive New York apartment complex, the 2nd largest default in commercial real estate loans in history.
-California declares an economic emergency.
-Employment figures stink.
-Apartment vacancies hit record highs.
-Foreclosures are setting new records.
-Consumer credit in the US drops a record $17.5 billion.
end.
I highlighted to you already items 4 and 5 on Thursday night, (apartment vacancies, foreclosures)
and in my commentary this morning, the employment data and consumer credit. (items 3 and 5)
For those that missed the apartment vacancy report, I will again send it down to you:
U.S. apartment vacancy rate hits 30-year high
Thu Jan 7, 2010 1:01am EST
By Ilaina Jonas
NEW YORK, Jan 7 (Reuters) – The U.S. apartment vacancy rate rose to an almost 30-year high of 8 percent in the fourth quarter, and rents dropped in the biggest one-year slump in 2009, according to real estate research company Reis Inc.
The report reflects the job market, which so far has stubbornly refused to follow positive economic indicators such as the stock market rebound and improved manufacturing demand.
Even large apartment landlords such as Equity Residential (EQR.N), AvalonBay Communities Inc (AVB.N), Essex Property Trust Inc (ESS.N), UDR Inc (UDR.N) and Post Properties Inc (PPS.N) have reduced rents and offered perks to retain and attract tenants.
Yet, the apartment market may still turn around this year if those out of work become confident enough about a job market recovery to move into a rental, Victor Calanog, Reis’ director of research, said on Thursday.
In addition, the supply of newly built apartments is winding down as the last projects funded before credit dried up start to open for business.
Here is Jim Sinclair and Vincent Del Giudice (Bloomberg) on the big consumer credit contraction:
Jim Sinclair’s Commentary
Trillions spent, and the best we can do is bottom bounce. We are in real trouble.
To hear every day how the Fed is going to drain is total nonsense and an insult to everyone’s intelligence.
Consumer Credit in U.S. Declined in November by Most on Record
By Vincent Del Giudice
Jan. 8 (Bloomberg) — Consumer credit in the U.S. dropped a record $17.5 billion in November as unemployment close to a 26- year high discouraged borrowing and banks limited access to loans.
The slump in credit to $2.46 trillion was more than anticipated and followed a revised $4.2 billion drop in October, Federal Reserve figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease of $5 billion. The series of 10 straight declines was the longest since record-keeping began in 1943.
A labor market that’s shed 7.2 million jobs since the recession started in December 2007 is restraining consumer spending that accounts for about 70 percent of the economy. Fed policy makers have said tighter bank lending standards and reductions in credit lines are hampering the recovery.
“The consumer is battling some pretty fierce headwinds right now with double-digit unemployment rates, an inability to obtain credit, and looming tax hikes for wealthier Americans,” Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, said before the report. “Consumers are trying to wean themselves off of credit cards, and if they don’t, banks will help them.”
Consumer credit in October was revised from a previously reported $3.5 billion decline, and the forecast for November was based on the median of 32 estimates in a Bloomberg News survey. Projections ranged from decreases of $2 billion to $10 billion. Credit dropped at an 8.5 percent annual rate in November.
The two new items that hit the news wires was the following: (both stories are huge)
1.Tishman Real Estate to miss payment on commercial loans of over 5 billion dollars
2. California declares an economic emergency.
Here is the big story on the Tishman default. Tishman is a huge real estate owner and developer:
TISHMAN,BLACKROCK DEFAULT ON STUYVESTANT TOWN
By DAWN WOTAPKA
Tishman Speyer and BlackRock Inc. said Friday that they wouldn't make a full scheduled debt payment to senior lenders on Stuyvesant Town and Peter Cooper Village, triggering default and leaving one of New York's largest apartment complexes in limbo.
The joint venture "has been engaged in discussions with CWCapital, the special servicer acting on behalf of the lenders, and hopes to continue good-faith negotiations toward a potential restructuring of the debt," the venture said in a statement.
CWCapital, which couldn't be reached for comment, is expected to issue a notice of default over the payment, scheduled to be $16 million. The statement didn't say how much, if any, of the payment was made.
The announcement shouldn't affect the complex's day-to-day operations, which have become a major concern for current tenants.
A venture led by Tishman Speyer Properties and a unit of BlackRock bought the 11,000-unit complex in 2006 in a top-of-the-market deal valued at $5.4 billion, hoping to push out longtime tenants and replace them with tenants paying higher rents.
But the highly leveraged deal has suffered amid New York's weak economy. Also, in October, New York's highest court ruled that owners improperly raised rents on thousands of units removed from the city's rent-regulation program, a ruling that sent shock waves through New York's real-estate community.
Monthly rents have been rolled back on roughly 4,000 units as the saga awaits conclusion.
Already, the court ruling is having an impact elsewhere. It played a role in last month's preliminary injunction by the State Supreme Court halting eviction of 12 Bronx, N.Y., tenants whose rent was raised beyond stabilized levels by landlord Riverview Redevelopment Co., said Garrett Wright, a staff attorney in the Community Development Project at the Urban Justice Center, who filed the Supreme Court suit. The rent spikes were hundreds of dollars; for example, the rents for two bedroom apartments rose from under $800 to almost $1,300.
"It was a tremendous help," Mr. Wright said of the Stuyvesant Town ruling. "You're going to see more and more cases like our case that are going to be sprouting up throughout the city, and I think the circles ... are going to continue to expand."
end.
Here is the second story on the new emergency in California:
Governor warns of deep fiscal crisis as he unveils California budget plan
Schwarzenegger's bid to address a $19.9-billion gap seeks steep cuts in education, healthcare, social services and transit. Republicans applaud the lack of tax cuts; Democrats see a fiscal retread.
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His proposal, aimed at closing a $19.9-billion gap, and the response to it foreshadow another year of paralysis in Sacramento as the governor and lawmakers struggle with the latest crippling shortfall.
The new budget blueprint -- the governor's last before term limits force him from office -- comes after the state's epic financial problems have already become a target of ridicule around the world. Even after $60 billion in program cuts, tax increases and federal stimulus money over the last year, California's books are so far out of balance that the state is once again in danger of having to issue IOUs.
The governor announced that he would declare a fiscal emergency and immediately call the Legislature into a special session to make budget cuts. His plan includes no new broad-based tax increases. It relies instead on seeking billions of dollars in new federal money and on steep reductions in education, healthcare and social services, as well as cuts in mass transit, state worker pay and environmental programs.
"California is not Washington. We don't have the luxury of printing money or running trillion-dollar deficits," Schwarzenegger said at a news conference Friday morning. "I refuse to raise taxes, because there are so many areas where California can be smarter, more efficient and save precious taxpayer dollars."
Republicans and business groups were supportive of the framework. "Tough choices are going to have to be made in this budget, but they are no different from the tough choices that every California family has had to make in these tough times," said Senate Republican Leader Dennis Hollingsworth of Murrieta.
But Democrats who dominate the Legislature, labor unions and advocates for the poor were dismissive.
"With regard to the bulk of the budget proposal, I have one reaction: You've got to be kidding," said Senate leader Darrell Steinberg (D-Sacramento). Assembly Speaker Karen Bass (D-Los Angeles) called the proposal a "big pile of denial."
They and other Democrats derided Schwarzenegger's plan as a retread of ideas they dismissed last year. "This is a recycled budget," said Senate Budget Committee Chairwoman Denise Ducheny (D-San Diego). "These are exactly the same proposals he made last year. We talked about them, we rejected them, we did as much as we thought we could do, and he's come back with the same ones that he had before."
more.....http://www.latimes.com/news/local/la-me-state-budget9-2010jan09,0,6186917.story?track=rss
As promised: the gold comex results:
| Trade Date |
| Daily Settlements for Gold Futures (FINAL)Trade Date: 01/08/2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Month | Open | High | Low | Last | Change | Settle | Estimated Volume | Prior Day Open Interest | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| JAN 10 | 1124.9 | 1136.9 | 1122.7 | 1136.1 | +5.1 | 1138.2 | 54 | 117 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FEB 10 | 1131.5 | 1140.0 | 1119.5 | 1139.2 | +5.2 | 1138.9 | 213,424 | 316,766 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MAR 10 | 1129.5 | 1140.4 | 1121.0 | 1138.1 | +5.2 | 1139.6 | 149 | 134 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| APR 10 | 1131.8 | 1141.3 | 1121.2 | 1140.5 | +5.2 | 1140.3 | 21,581 | 67,041 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JUN 10 | 1131.5 | 1142.0 | 1123.7 | 1139.8 | +5.3 | 1141.4 | 2,890 | 38,946 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AUG 10 | 1129.5 | 1141.7 | 1125.0 | 1141.6 | +5.3 | 1142.5 | 1,706 | 17,185 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OCT 10 | - | - | - | - | +5.2 | 1143.9 | 664 | 5,004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEC 10 | 1137.2 | 1146.0 | 1127.5 | 1141.0 | +5.0 | 1145.6 | 2,389 | 24,078 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FEB 11 | 1136.5 | 1145.5 | 1136.5 | 1145.5 | +4.9 | 1148.0 | 16 | 6,248 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| APR 11 | 1134.0 | 1139.2 | 1134.0 | 1139.0 | +4.8 | 1150.7 | 18 | 3,733 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JUN 11 | 1142.3 | 1142.3 | 1142.1 | 1142.1 | +4.7 | 1154.0 | 22 | 7,411 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AUG 11 | 1144.4 | 1144.4 | 1144.3 | 1144.3 | +4.6 | 1157.8 | 17 | 1,369 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OCT 11 | 1149.3 | 1149.3 | 1149.2 | 1149.2 | +4.5 | 1162.1 | 18 | 1,142 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEC 11 | 1156.8 | 1164.3 | 1152.1 | 1156.5 | +4.3 | 1166.6 | 180 | 10,669 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JUN 12 | - | - | - | - | +4.1 | 1182.9 | - | 5,973 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEC 12 | 1198.0 | 1198.0 | 1197.9A | 1198.0 | +3.8 | 1202.5 | 63 | 8,676 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JUN 13 | - | - | - | - | +3.8 | 1224.9 | - | 927 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEC 13 | - | - | - | - | +3.8 | 1249.8 | - | 3,124 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JUN 14 | - | - | - | - | +3.8 | 1276.1 | 50 | 976 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEC 14 | - | 1300.1B | - | 1300.1B | +5.4 | 1304.6 | 50 | 51 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 243,291 | 519,570 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Last Updated 01/08/2010 06:00 PM
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