bank run blog

The other shoe has dropped.

Bloomberg reports that mortgage delinquincies of commercial properties are beginning to been seen across the US. Bloomberg writes;

“Loans secured by properties that were writtenassuming rental growth have been unable to meet targets, leading to increased defaults. The delinquency rate for North American commercial real estate loans in mortgage backed securities may triple in 2009 as loans default.”

Some regions have been hit hard and hit early, Bloomberg reports;

“Office, retail, apartment and industrial properties with mortgage payments 60 days late or more rose to 3.93 percent as of March in Cleveland area and 3.75 percent in the Detroit area…The North American commercial property delinquency rate is 1.1 percent according to Standard and Poor’s.”

Cleveland had a commercial real estate vacancy rate of 14.8 in 2008 which is forcast to rise to more than 20 percent by 2010. Ohio has unemployment levels that outpace the national average. In December, the unemployment rate in Ohio was 8.8 percent and the state lost a further 214,000 jobs in January. Detroit’s unemployment rate is even greater, with 10.6 percent of its workers receiving unemployment insurance.

The service also said that that Phoenix area had the “second highest percentage of 30-day late commercial real estate loan payments” and that other regions, such as the Las Vegas area, could see commercial defaults increasing over the course of 2009.

“Cleveland and Detroit are just the first to see the stress. They’re the canaries in the coal mine”, Bloomberg qoutes chief economist for Grubb Ellis, “There is really no part of the country being spared.”

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Bloomberg : Cleveland Commercial Loan Delinquencies Signal More Declines

Since early November, the Justice Department has announced that it has agreed to settlements in more than twenty business-related cases, many of which have been pending for years. The Washington Post recently reported details of several high-profile corporate settlements finalized over the Christmas holidays. Public interest groups have charged that the spate of settlement activity is being driven by a perception that the outgoing Bush administration is likely to offer more favorable deals than the Obama team led by Attorney General designee Eric Holder.

Among the influential corporations agreeing to settlements since the presidential election are AT&T, Siemens, Exxon Mobil, the Aibel Group, and Spartan Motors. The Justice Department announced three separate settlements totaling more than $15 million on December 23. Taxpayers Against Fraud spokesman Patrick Burns told the Post, “This is traditionally the time to ram a settlement through because no one notices. Putting it out between Christmas and New Year’s is brilliant.”

Law professor Ellen S. Podgor, who blogs on corporate fraud and white-collar crime, cited the Siemens settlement with the outgoing administration by giving it a “best timing in 2008&” award. The DoJ has continued to announce new settlements this month, as a number of senior government attorneys prepare to leave their posts.

cross posted at

redstateupdate.net

The foreign secretary of the UK, David Miliband, recently said that he has long considered that the concept of a “war on terror” is flawed and using the term over the past years has perhaps caused “more harm than good.”

Miliband called into question the construct advanced by the Bush administration as a rational for tactics such as extraordinary rendition, warrantless wire-tapping and torture in a speech in Mumbai India, the site of a recent terror attack where more than 170 people were killed.

Miliband said the more western powers “draw the battle lines as a simple binary struggle between moderates and extremists or good and evil, the more we play into the hands of those seeking to unify groups with little in common.” Miliband defined terrorism as a “deadly tactic, not an institution or an ideology.” Democracies, Miliband told his audience, must respondto terrorism by “championing” instead of subordinating the rule of law.”

cross posted at

redstateupdate.net

British Prime Minister Gordon Brown today announced a new initiative to rescue his country’s insolvent banks, an ambitious plan that would require the institutions to mark their collapsed assets to market and compel them to resume consumer lending.

It is now apparent to all of the central bankers in the industrialized world that the first round of financial bailouts has failed to address the underlying fundamentals of the worldwide depression, and that further systemic remedies will be necessary. According to the Associated Press :

“Britain announced a new bank bailout Monday to boost lending into a struggling economy and protect banks from the bad assets sinking their balance sheets — an admission that an earlier sweeping rescue plan didn’t do the job.

The plan outlined Monday would require banks who want to participate to identify their riskiest assets and allow them to pay a fee to insure them with the government. By offering to insure bank loans, the government is exposing taxpayers to billions of pounds of potential losses, though an exact amount can’t be pinpointed until banks start participating.

But banks would have to enter legally binding agreements to lend more money to borrowers, Prime Minister Gordon Brown said.

‘The impact of today’s announcements on public finances will be temporary, investments will be held for no longer than is necessary to ensure stability,’ Brown said. ‘We will protect taxpayers’ interests, liabilities will be backed by assets and fees will be charged for the schemes that we are introducing.’”

After an initial market bounce, European financial shares fell again as British investors considered the implications of the new bailout for taxpayers and the government. The Daily Telegraph reports Bonds tumble as Government admits no cap on taxpayer risk :

“The Prime Minister announced a scheme to allow banks to exchange cash or shares for a Government guarantee on their “toxic” debts, transferring any losses they suffer from the banks to the taxpayer.

But the Government has conceded that it can’t estimate how much taxpayers’ money will be on the line in the latest bank assistance package.

UK bond prices fell sharply as the financial markets digested the prospect of further Government borrowing. Bank stocks also tumbled with shares of Royal Bank of Scotland losing more than half their value. Lloyds, Barclays and HSBC also fell.

Ministers say the new package, which comes only three months after another £500 billion bailout, is vital to restore bank lending and help companies get credit and stay in business.”

Associated Press : Britain launches new bank bailout to boost lending

Daily Telegraph : Banks bailout: Bonds tumble as Government admits no cap on taxpayer risk

Despite an almost continuous flow of negative economic news and data, stocks have staged a half hearted rally since November, with many Wall Streeters calling a bottom. In a piece appearing today on Minyanville headlined Don’t Believe the Hype, the estimable Minyan Peter discusses the increasing pressure to jump back into the stock market for retail investors who have sustained heavy losses :

“After 15 months of often steep declines, everything feels like a bargain. And, honestly, from the perspective of every US recession in our lifetime, these truly are bargain prices.

Unfortunately, unless you’re in your eighties, what we’re living through today doesn’t in any way resemble an event from your past. This one is global – and it is secular, not cyclical. And, while they can put a higher floor on the bottom than would otherwise be the case, history suggests that central banks and governments are limited in their ability to counteract this unwinding deflationary cycle.”

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