Read in the The Wall Street Journal reports that commercial-real-estate may be ready to deliver "a roundhouse punch to the U.S. economy just as it struggles to get up off the mat." Mortgage-backed securities failing due to foreclosures brought us the 2008 financial crisis, and now $700 billion in commercial-mortgage-backed securities appear to be about to fail. The delinquency rate in was July six times the rate at the same time last year, and these loans are hard to refinance. At the close of 2012, $153 billion in loans in commercial mortgage backed securities will be due, and nearly $100 billion worth will have problems getting refinanced. Read it at The Wall Street Journal

So Queen Elizabeth is less influential than Michelle Obama, who is less important than Hillary Clinton . . .

German Chancellor Angela Merkel, for the fourth time, is the world's most powerful woman.

• #2? Sheila Blair, Chairwoman, FDIC
• #35 Nancy Pelosi
• #36 Hillary Clinton
• #40 Michelle Obama
• #41 Oprah - Notice, we don't need her last name to know who she is . . .

According to Forbes, they factor economic impact, media reach, sundry career accomplishments.

 

I was shocked when Lehman Brothers was allowed to fail, and other (in my opinion lesser) Banks were saved.

From Larry McDonald's email to me about his book:

I am exposing the few that HURT so many. Over 2 million jobs lost since Lehman failed. This NEVER should have happened!

The product description on Amazon.Com says:

One of the biggest questions of the financial crisis has not been answered until now. What happened at Lehman Brothers and why was it allowed to fail, with aftershocks that rocked the global economy? In this news-making, often astonishing book, a former Lehman Brothers Vice President gives us the straight answers—right from the belly of the beast.

In A Colossal Failure of Common Sense, Larry McDonald, a Wall Street insider, reveals the culture and unspoken rules of the game like no book has ever done. The book is couched in the very human story of Larry McDonald’s Horatio Alger-like rise from a Massachusetts “gateway to nowhere” housing project to the New York headquarters of Lehman Brothers, home of one of the world’s toughest trading floors.

We get a close-up view of the participants in the Lehman collapse, especially those who saw it coming with a helpless, angry certainty. We meet the Brahmins at the top, whose reckless, pedal-to-the-floor addiction to growth finally demolished the nation’s oldest investment bank. The Wall Street we encounter here is a ruthless place, where brilliance, arrogance, ambition, greed, capacity for relentless toil, and other human traits combine in a potent mix that sometimes fuels prosperity but occasionally destroys it.

The full significance of the dissolution of Lehman Brothers remains to be measured. But this much is certain: it was a devastating blow to America’s—and the world’s—financial system. And it need not have happened. This is the story of why it did.

Can't wait to read this one!

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• The importance of saving Lehman (economist.com)

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Countrywide’s Golden Boy Angelo Mozilo said a year or two ago that within a year the top ten banks would fall to the top 5.  I wonder if he thought his would be one of the first to go, or considered he would be charged with fraud before all the dominos fell.

Since Taylor Bean & Whittaker abruptly shut down last week, I’ve considered Mozilo’s remark and the possibility that there will only be one or two banks left in the mortgage business.  Since that is their money maker, I wonder how many will be left standing at all.

A great many banks are promoting incentives for their banks; Wachovia will give you a gift for referring a new customer, if you are a customer in fact.  Bank of American and Wells Fargo, both of whom are big in online banking have ongoing bank promotions as well.

But would you really choose a bank based on bank promotions?  It is probably a good idea to make sure the bank you choose is one that will be standing after the dust clears, you do want your certificate of deposit to maintain its value, and not have to collect from the FDIC!

The Treasury Department is moving to scale down its troubled-asset program, and the Congressional Oversight Panel says that troubled assets are still parked (hidden?) in banks' balance sheets and need to be removed . . . or the economy may worsen. They want more stress tests (and we know those worked, don't we?) and want the Treasury to consider additional capital for small banks . . .

Whoa! Rep. Jeb Hensarling (R-TX), the only no vote on the Congressional Oversight Panel, doesn't think the Fed should act on this advice.

I don't either, but I don't care for his reasoning.

"It is possible that the toxic asset market is already beginning to heal itself and that the intervention proposed by the Panel could be inappropriate—if not counterproductive," he said.

Possible that it is beginning to heal . . . probable? I don't think so.

He finished with:

". . . the Treasury and the Fed continue to monitor the toxic asset market."

Because watching a house burn down is always better than putting the fire out.

~~ And in notes from all over ~~

The New York Times ponders if China's growth was fueled by aggressive, state-directed lending will it lead to lots of bad loans and mounting government debt?

“They opted for a very quick fix,” said Stephen Roach, an economist and chairman of Morgan Stanley Asia. “Surging investment, fueled by the most rapid bank lending in history, accounted for nearly 90 percent of China’s G.D.P. growth in the first half of this year. And that is worrisome.”

Again from the Times: England Bond purchases may end. When the Bank of England started their program to purchase financial assets to "bail out Britain" five months ago, it was considered highly controversial. (Evidently everyone doesn't think our money should keep bad businesses alive.) But this Thursday, their central bank policy committee votes for it to stay or go away.

Economists and investors are split. Those who favor an expansion say the plan has only marginally improved the supply of credit and more needs to be done. Those who oppose an extension say that Britain’s economy is showing signs of improvement and no further asset purchases are needed.

British Banks are posting more and more losses . . .

Government-controlled Royal Bank of Scotland, announced new losses, and set aside £7.52 billion ($12.6 billion) for potentially bad loans, more than all of 2008. And this is first half of 2009 figures we're seeing.

From the Times:

Bank executives expressed radically divergent views on whether the wave of loan losses was nearing its peak or would continue to erase profits for years to come as clients struggled to repay their debts.

“The picture has been very mixed,” said Paul Wallis, an analyst at Exane BNP Paribas in London. “There are people who want to believe that we will see a recovery and any bad news is being brushed under the carpet.” Other banks, especially R.B.S., still have a “massive leverage burden,” he said.

I grow weary of waiting for the fat lady to sing.

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• Banks miss lending targets as bad debts hit £30bn (telegraph.co.uk)

According to the Wall Street Journal, The FHA suspended Taylor, Bean & Whitaker Mortgage Corp. from making FHA loans, and "raised questions about the company's business practices and financial disclosures."

WSJ continues that TBW didn't submit a required financial report AND failed to disclose "certain irregular transactions that raised concerns of fraud."

Officials demurred from detailing the fraud, however Ocala.com reports:

The FHA said in a written statement Tuesday that Taylor Bean failed to submit its required annual financial report and failed to inform the FHA that TBW's independent auditors ended their examination of the company when they found "certain irregular transactions that raised concerns of fraud."

In addition to the loan suspension, the FHA is also recommending that two top company officials be temporarily banned from doing mortgage business with the federal government.

The FHA alleges that TBW President Ray Bowman and TBW Chief Executive Officer Paul Allen submitted false or misleading documents to the U.S. Department of Housing and Urban Development.

From the WSJ:

It seems Mr. Allen "submitted false or misleading information to Ginnie Mae concerning a delay in submitting financial reports. It said Mr. Bowman submitted two false certifications regarding information lenders are required to verify each year. Neither Mr. Allen nor Mr. Bowman could be reached for comment."

TBW bought almost $30 billion in mortgages last year and that makes it the largest lender ever suspended by the  FHA. It is a private company but Inside Mortgage Finance lists it as the 12-largest lender in the US this year.

HUD Secretary Shaun Donovan announced: "Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world: Operate within our standards or we won't do business with you."

An email sent to employees from Chairman of the Board Lee Farkas around 1:00 pm announced the company was closing, and they were to pack up and leave.  The email included the remark that Farkas had done everything he could to save the company.  Later they issued a news release that all loan origination operations had stopped, but they will continue to service loans.

The Associated Press says: "The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March."

Ironically, Deutsche Bank reports that "prime" loans that meet the guidelines of Fannie Mae and Freddie Mac will be the worst affected: As much as 41 percent will be underwater by the first quarter of 2011, up from 19 percent in 1Q 2009.

Good thing those loans are now available for modification - more and more people are considering the folly of paying a $500K mortgage for a $250K house.

Read the full article at AP

Fannie Mae Home Affordable Modification Program