bank run blog

The Federal Reserve reports that the nation’s banks have tightened lending standards across the board for all types of loans responding to both delinquencies and a slowing economy. The Fed said that a survey of federal banks revealed, “domestic institutions reported having tightened their lending standards and terms on all major loan categories over the previous three months.” About 75 percent of institutions polled said that they had tightened lending practices on all types of loans, including home mortgages. Bloomberg reported;

“Funds were scarcer for homebuyers and small businesses, credit card loans became tougher to get, and even banks’ best customers were subject to greater scrutiny. Tighter credit may delay any recovery in economic growth, which economists forecast will slow well into next year.”

Bloomberg reports that since the Fed began lowering interest rates last year, rates that banks charge for home loans have actually increased. The Fed has cut its main lending rate by 3.25 percentage points over the past year to 2 percent while banks are charging homeowners 6.52 percent on a 30-year mortgage as of this month. Bloomberg writes;

“Banks may be reluctant to lend against housing collateral that is falling in value. Home prices in 20 U.S. metropolitan areas dropped 15.8 percent in May, the biggest decline since record keeping began in 2001, according to the S&P Case-Shiller Home-Price Index.”

Banks also tightened their lending standards on non-mortgage loans with 60 percent of the polled institutions reporting that they have increased interest rates on credit card loans, up from 30 percent earlier this year.

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Bloomberg : Fed Says Banks Toughen Lending Standards Amid Slump

The Commerce Department reports that retail sales fell in July, the decline in sales was the first drop seen in five months. Reuters writes the government stimulus package of so-called “tax rebate” checks may have helped to boost consumer spending during the month of June, “but their influence appears to have petered out by July.” Consumer spending makes up more than two-thirds of the US economy.

The White House says high fuel prices are among the factors creating “substantial headwinds faced by households” that bought fewer automobiles last month, causing the drop in consumer spending. Commerce reported that sales at auto dealers and parts stores dropped 2.4 percent.

Bloomberg said that consumer spending “is likely to keep fading as a boost from tax rebates wanes and households try to cope with job losses and house-price declines.” Bloomberg quoted an executive of the Manufacturer’s Alliance who believes;

“A whole host of factors - unemployment growing, wages flat to stagnating, the wealth effect of lower house prices and stock prices - all are conspiring to forecast, I think, weaker sales ahead.”

One bright spot in the retail sales numbers was in the sale of gasoline since last year at this time. Although the American Petroleum Institute reported that gasoline use has declined by more than 2 percent since last year at this time and the Federal Highway Administration said that Americans drove 12.2 billion fewer miles this June compared to last year, the rise in gas prices pushed sales up by 0.8 percent over last years figures.

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Bloomberg : U.S. Economy: Retail Sales Fell in July, Led by Autos
Associated Press : Retail sales drop for first time in 5 months
Reuters : Check Out Line: The short-lived tax rebate boost

With the price of commodities continuing to rise, incidents of copper theft are being reported with more frequency. An earlier bank run blog post noted an incident where authorities in Chicago had difficulty identifying a thief who perished as he tried to steal copper wire from an active electrical transformer. Many municipalities have been hit by similar thefts leaving them forced to make costly repairs.

The Newark Advocate reports that municipal buildings have been hit by copper thieves;

“The most costly was the cutting of copper coils from air condensing units on the roof of the Midland Theatre…The estimated cost to fix the problem, which includes removal and placement by crane, was $50,000.”

Thieves in Jackson, MS targeted the Cedar Grove Missionary Baptist Church twice in a single week, WLBT News reported;

“We came out for service yesterday afternoon and we noticed the church was a little warm, so we went outside and checked and sure enough two of the air conditioning units had been torn apart.”

According to the Waterloo Record, copper thieves in Waterloo, Canada were captured “tending to injuries that police called significant but non-life-threatening” after cutting through wire carrying more than 13,000 volts of electricity.

This report from a Sarasota Florida ABC affiliate focuses on the cost borne by municipalities that are victims of copper theft;

“In just Sarasota county alone copper crooks have cost tax payers more than $40,000, that’s how much money has gone into replacing copper and aluminium from county owned buildings”-Monica Buchanan, ABC news

see stories-
bank run blog : independent commodities speculators can get burned
Newark Advocate : Copper thieves target business, landmarks
WLBT News : Copper Thieves Hit House of Worship
The Waterloo Record : Alleged copper thieves get burned

The US Department of Labor reported today that 62,000 jobs were cut from the US economy last month. The government’s officially reported unemployment rate remained at 5.5 percent-the highest unemployment rate since 2004.

MarketWatch reported, “Payrolls have now fallen in all six months this year for a total job loss of 438,000, the strongest evidence that the economy fell into a recession.” The number of jobs lost in America was 22,000 greater than had been predicted by MarketWatch based upon it’s survey of economists.

MarketWatch also reported that the job loss numbers for both April and May were revised downward by the Labor Department, with an additional 52,000 jobs reported as having been eliminated by US companies.

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MarketWatch : U.S. June nonfarm payrolls fall 62,000
Reuters : Economy extends job loss streak
Charlotte Business Journal : U.S. jobs fell by 62,000 in June

More media have begun to report on a growing phenomenon caused by the surge of foreclosures in the US; middleclass families becoming homeless and seeking shelter in their automobiles. Earlier this spring, bank run blog reported on victims of foreclosure who are employed, but live in their automobiles and SUVs.

Today, the Associated Press did a piece on how Los Angeles citiy authorities are responding to the increased numbers of homeless Americans, including members of the professional classes, who are camping on city streets;

“Tourist states with temperate climates, such as California and Florida, have long been magnets for the homeless. Los Angeles is the nation’s homelessness capital, with an estimated 73,000 people on the streets. A survey of 3,230 homeless people last year in Los Angeles County found nearly 7 percent living in vehicles, according to the Los Angeles Homeless Services Authority.”

The Los Angeles City Council passed a provision that prohibits overnight parking in residential neighborhoods earlier this year because residents had complained, as the AP writes, that “rusty, dilapidated campers can be seen lined up outside neat single-family homes.” Police authorities often warn homeless car-campers to move along, but fines can be levied on offenders. Police also have the authority to impound vehicles.

The Guardian reported today, “As mortgage foreclosures continue to rise, growing numbers of middle-class professionals are losing their homes and downsizing from four bedrooms to four wheels.” In California, some have moved into one of the 12 parking lot homeless shelters in the city of Santa Barbara run by a homeless support organization called New Beginnings. A spokesperson for the organization told CNN recently, “The way the economy is going, it’s amazing the people who are becoming homeless. It’s hit the middle class.” The Guardian quoted one resident of a Santa Barbara parking lot shelter who cautioned;

“The people sleeping at the [car parks] are … just like me. They come from normal, everyday homes. I think a lot of people in this country don’t realize that they, too, are a couple of pay cheques away from destitution.”

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bank run blog video : economic indicators : parking lot living
Associated Press : L.A. seeing more people living out of their cars
Guardian UK : Credit crunch forcing US middle classes to live in their cars

A report on global wealth accumulation released by Merrill Lynch shows that assets held by wealthy individuals rose to $4.7 trillion in 2007, a rise of 9.4 percent. The study defined High Net Worth Individuals, or, HNWIs as the report refers to them, as those persons who have “investable assets of more than $1 million.”

Reuters said, “soaring oil and commodity prices helped lift growth in assets of wealthy individuals in Latin America, which saw a 20.4 percent rise in assets, the Middle East with 17.5 percent growth and Africa with 14.9 percent increase.” The growth of assets of HNWIs in Europe and North America slowed over the last year. The report said that the collapse of property values and the overall economic decline was the cause of slower growth of the wealth of HNWIs in Europe nd North America. In England, for example, the number of HNWIs grew by 8.1 percent in 2006, but last years, rose by only 2.1 percent. A spokes person for Merrill Lynch who was apparently worried of the prospect, told Reuters;

“You need to be aware that China is coming up fast behind. I wouldn’t be surprised if we saw China ahead of the UK next year.”

The report also reflected that HNWIs have fled from real estate as an investment, with their allocation of wealth in real estate declining from 24 percent in 2006 to 14 percent 2007. Agency Press France reported that in India and China, the countries that have the fastest-growing population of HNWIs, tend to invest their new millions in ”luxury travel (and) gems.” The Merrill Lynch report said that the worlds new millionaires have “an unquenchable appetite” for luxury goods, “Globally, these high priced toys tend to be art collections, yachts, personal jets…’experiential travel’, visits to high end spas and luxury cloths.”

The report showed that the number of Chinese and Indian millionaires rose by more than 20 percent in both countries. At the same time, GDP in China grew 11.4 percent and in India, GDP rose by 7.9 percent. The report said;

“Once recognized as a manufacturing superpower, characteristic of a more nascent market, much of India’s recent growth has been driven by the technology, financial services, property, construction and infrastructure sectors.”

Experts foresee that India’s middleclass will grow to 550 million people in the next ten years, nearly double the entire population of the US.

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Reuters : Global wealth hits $40.7 trillion but growth slows
FinanceAsia.com : Assets of world’s richest up 9.4% to $40.7 trillion

As the economy sputters, inflation increases, wages stagnate, jobs vanish and more and more family homes fall into foreclosure, Americans are also pressured by the mental and physical consequences of the current economic crisis. This ABC News segment reports on the links between economic stress and bodily health.

“People struggling to pay for the basic necessities- food, gas, housing, seeing savings depleted, plans for kids and future threatened…that’s a heavy burden, and over time, that pressure can cause your body to start breaking down.”

The Labor Department reported that California and Florida had the largest rises in unemployed workers in May. California shed 10, 900 jobs last month and Florida saw 6000 jobs disappear. There were large losses of jobs in the construction, retail and transportation sectors, with 9600 of the jobs cut in California coming in the construction trades.

The jobless rate climbed by half a point to 5.5 percent, the largest rise in twenty years, according to the Labor Department. There was a rise in unemployment in 49 of the fifty states in May. Bloomberg reported that the Labor department statistics showed;

“Michigan’s jobless rate surged to 8.5 percent in May from 6.9 percent the prior month, the biggest jump of any state. Rhode Island, Illinois, Mississippi and Tennessee also suffered increases of at least one percentage point.”

The numbers reported by the Labor Department come from state and local sources, independent of the numbers gathered to provide the national statistics. Last month, national figures showed a decline of about 20,000 jobs, while state date revealed significantly different numbers of jobs lost. The state’s reported the loss of over 151,000 jobs nationwide in April.

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Bloomberg : California, Florida Had Biggest Job Losses in May, Labor Says

This segment from Al Jazeera TV focuses on how the rising costs of food in the US has forced working Americans to seek handouts from community organizations. The rise in working poor clients has challenged local food pantries and soup kitchens that are already having difficulty meeting the needs of their communities due to rising costs of food products and decreased dontaions.

“A basket that we are able to give out in 2008- that has gone down approximately one half from 2007 based upon decreasing donations. But we still are feeding the community…this is better than starving at night.”
-Frank Carey, Bethel’s Heavenly Hands Food Bank

“Hunger becomes just a horrible choice that they have to make, because they can’t meet all of their expenses…Almost half of the households we serve are working households, but the amount that they pull in doesn’t cover basic expenses.”
-Brian Greene, Houston Food Bank

The Associated Press reported that government official will advise thousands of American companies and organizations next week that they are considered to be high-risk terror targets. Some 7000 companies that manufacture, stockpile and utilize dangerous chemicals are considered to be potential targets for terrorist attacks here in the US.

Intelligence officials said that the sites “range from major chemical plants to universities, food processing centers (to) hospitals,” according to the AP. Government officials will require companies and organizations that have been deemed to be at an elevated risk for terrorist attack to complete a “vulnerability assessment” so that intelligence officers can revaluate security measures required to protect the locations. The AP said;

“US intelligence officials say terrorist organizations, including al-Qaida, favor chemical attack methods because of the severe consequences they can inflict.”

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Associated Press : Businesses advised to secure chemicals