Small Bank Bailouts
Financial market calamity was narrowly averted today as Farmers National Bank of Emlenton is expected to get a much needed capital injection from the US government. William Marsh, CEO led with this, “they were giving out free stuff”-type quote in the WSJ:
“It seemed like the consensus in the industry was…go out and get this,” said William Marsh, president and chief executive of Farmers National Bank of Emlenton, in Emlenton, Pa. Mr. Marsh said his bank is healthy and viable without government money, but he leans toward taking the money anyway.
Are we efficiently managing the bailout funds? It seems that Douglas McIntyre has the right line of thought–the market can efficient solve the little problems and avoid the free lunch programs.
The Great Recession
Excellent long-form analysis of the Fed and potential “great recession.” Take a look at where the Fed’s “collective head” may be as this financial crisis continues to deepen in complexity. I couple of snapshots at the current lending problem that Congress and the White House are shouting doen lenders over:
The pace of deleveraging is overwhelming policymakers; they can only hope to limit the damages. And as if deleveraging was not enough, declining demand and deteriorating credit quality, both the victim of the deepening downturn, also hamper the growth of lending.
Given the immense headwinds facing financial institutions, the first $250 billion of the bailout will likely be a drop in the bucket compared to what would be necessary to push banks into expanding lending significantly. At best, all of the actions by the Fed and Treasury should be viewed as efforts to keep the banking system from collapsing.
Then there is the question of liquidity for a pending flood of Treasury debt:
The question of whether or not the financial markets can absorb the expected tsunami of Treasury debt coming down the pipeline continues to make the rounds.
JP Morgan Loan Modifications
A big silver lining for 400,000 families:
JPMorgan Chase has moved to ease the burden of struggling US homeowners and avoid taking over thousands of houses, revealing plans on Friday to renegotiate $70bn of mortgages and freeze foreclosures for up to three months.
The measures are expected to stave off the threat of home repossessions for 400,000 families by cutting their mortgage bills through reductions in interest rates or principal repayments and other loan modifications.
Global ZIRP
All (most) countries headed to zero interest rate policy (ZIRP). What does this mean? What does a global recession, economic contraction look like. No one knows it is the “impossible” scenario.
Mike “Mish” Shedlock walks us through just such a scenario.
PMI Posts Losses
Here come the private mortgage insurer losses. Posting $229.4 million in losses their bad news is not likely to end soon as they report net premiums falling 19% on declines in home sales. There is likely to also be an effect from the surge of FHA loans, government mortgage insurance that is taking the lion-share of any new originations or refinances.
GM, No Bailout Money For Your Merger
The US Treasury has turned away GM’s request for $10 billion to merge with Chrysler. Steeped in politics the White House seemed to be cautious to commit the next President to a bailout merger precedent or finance a merger that is expected to cost tens of thousands of autoworkers their jobs. However, they did point to the energy-efficient loan programs for relief opportunity:
Instead of providing new assistance, the Treasury Department told G.M. on Friday, the Bush administration will now shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department.
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I am Bill Rice the Managing Editor of MortgageLoan.com. These are my morning notes. If you have comments, feedback, or pointers to something interesting email me or follow me on Twitter.
(photo credit: TheTruthAbout)
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