Now raising intellectual capital

from Rolfe Winkler:

FDIC’s problem bank list grows to 552, DIF now negative

I'm not good at taking vacations....

FDIC published its quarterly banking profile today. Here are the latest banking industry statistics at a glance. A few interesting takeaways I'd like to highlight. First, the problem bank list grew again. And it still understates total problem assets...both Citi and Bank of American should also be on this list.

The number of institutions on the FDIC's "Problem List" rose to its highest level in 16 years. At the end of September, there were 552 insured institutions on the "Problem List," up from 416 on June 30. This is the largest number of "problem" institutions since December 31, 1993, when there were 575 institutions on the list. Total assets of "problem" institutions increased during the quarter from $299.8 billion to $345.9 billion, the highest level since the end of 1993, when they totaled $346.2 billion. Fifty institutions failed during the third quarter, bringing the total number of failures in the first nine months of 2009 to 95.

Also, what will get lots of headlines today is that the Deposit Insurance Fund went negative as of September 30th. We already knew this to be true, and it's not totally fair to report the negative balance without noting that FDIC does have cash. That said, the DIF is still in a very precarious position.

As projected in September, the FDIC's Deposit Insurance Fund (DIF) balance – or the net worth of the fund – fell below zero for the first time since the third quarter of 1992. The fund balance of negative $8.2 billion as of September already reflects a $38.9 billion contingent loss reserve that has been set aside to cover estimated losses over the next year. Just as banks reserve for loan losses, the FDIC has to set aside reserves for anticipated closings over the next year. Combining the fund balance with this contingent loss reserve shows total DIF reserves with a positive balance of $30.7 billion.

Losing the 3 handle on GDP

The downwardly revised 3rd quarter GDP certainly didn’t shock economists who were expecting a softer reading than the initial 3.5 percent, but the 2.8 percent certainly isn’t pretty especially considering the psychological blow of losing of the 3 handle. (Speaking of symbolic numbers, the FDIC also reported that its reserve fund is now in the red.) There’s still one more revision ahead though, so maybe it will inch back to 3 percent.

Weaker consumer spending – up 2.9 percent versus the originally estimated 3.4 percent – isn’t exactly encouraging since the recovery needs the nation’s shoppers to quicken the pace a little if the economy has any hope of picking up steam. And remember, the “cash for clunkers” program was a big contributor to the gain. It’s also no surprise that government expenditures helped at least partially offset the decline. Such spending increased 3.1% from the original estimate of 2.3%.

from Rolfe Winkler:

Grist for Goldman conspiracy theorists

From Yves over at NakedCapitalism:

A former managing director at monolines Ambac and FGIC wonders why AIG was bailed out but the monolines weren't. (He admits to bias, so take this with a grain of salt.)

...the [AIG] bailout was prompted by fear mongering and deliberate strategies and manipulation on the part of Goldman and a few select others, to make sure that AIG would be bailed out to protect their trades in shorting ABS CDOs.

from Rolfe Winkler:

Lunchtime Links 11-23

Reader note: I'm taking the week off for Thanksgiving, so blogging will be light. Back next Monday.

Sewers at capacity, waste poisons waterways (Duhigg, NYT) Fascinating. Yet another example of how society is overgrown. Everywhere you look, there's another piece of antiquated American infrastructure that is completely unable to handle capacity thrown at it by the modern economy. Sewers, the electric grid, air traffic control systems, the list goes on. But it's just too expensive to build any of them out: "As much as $400 billion in extra spending is needed over the next decade to fix the nation’s sewer infrastructure, according to estimates by the E.P.A. and the [GAO]." $400 billion. Just for sewers. We don't, nor will we ever, have the money for that. Not w/o sacrificing all the other stuff we want. Economists are trying to convince you that debt-financed "growth" is the only way to solve our economic problems. They're wrong. Debt-financed consolidation is the best we can hope for.

from Rolfe Winkler:

SNL on the U.S./China economic relationship

"Why are you trying to do sex to me like I was Mrs. Obama!?!"

Small quibble: SNL doesn't note that the Chinese are, uh, "doing sex" to themselves by manipulating the yuan.

from Rolfe Winkler:

Lunchtime Links 11-22

The talented Mr. Pang (Maremont, WSJ) Maremont uncovered the long and sordid history of Mr. Pang. The Journal also broke the Norman Hsu story. Both were high-flying con-artists before the Journal got on their case. Great stories.

The 70% discount on Goldman's $500m gift (Ransom, SmartMoney) Really great work from Diana Ransom. Goldman will get a tax writeoff for much of its "gift." Other parts of it are actually loans the company expects will be repaid with interest. BTW, people know that Warren Buffett isn't actually contributing any money, right? He's just lending his time. Hmmm. What's he going to do? Get on the phone with a Denny's franchisee to talk about the stock market?

from Rolfe Winkler:

Could England be headed for a “sudden stop?”

From Landon Thomas at NYT: In Britain, visions of Japan's decade of stagnation

Britain may finally be emerging from recession, but many analysts warn that it is a false dawn. In fact, they argue, the economy here is so ravaged by growing debts and ruined banks that it could well be following in the steps of Japan’s lost decade of the 1990s.

I still don't understand why we refer to Japan's "lost decade," singular. The country is now moving into its third consecutive lost decade.The Nikkei is still at 1984 levels.

from Rolfe Winkler:

Bank failure Friday

It was a slow night. One small bank failed.


    Failed bank: Commerce Bank of SW FL, Fort Myers FL Acquiring bank: Central Bank, Stillwater MN Vitals: at 8/28, assets of $79.7m, deposits of $76.7m DIF damage: $23.6m

Central has been busy. They also acquired the assets of Riverview Community Bank and Jennings State Bank in October, as well as Mainstreet Bank in August.

from Rolfe Winkler:

Dodd on Bernanke: “not necessarily”

From Shahien Nasiripour at HuffPo.

One wonders where news and approval ratings will be when Bernanke's confirmation comes up for a vote....

I went on record with my Bernanke angst the day said he'd nominate Bernanke for a second term. At that time I qualified my opinion by saying that if Larry Summers was the other option, then I'd settle for BB. But I get the sense that Larry isn't that popular now either, that Washington wants a clean break from Bernanke/Summers/Geithner.

from Rolfe Winkler:

CRE cliff-diving continues

Moody's/REAL released September data for their commercial real estate price index. Month over month drops have been fast and furious this year.


(Click chart to enlarge in new window)

    -8.6% Mar to Apr -7.6% May -1.0% June -5.1% July -3.0% Aug -3.9% Sept

Since the peak in October 2007, CRE prices are down 43%.