U.S. problem bank list climbs to 829
It really puts it into perspective that last year this time, this troubled bank list was only at half the size it is today. This happened in the backdrop of a supposed recovery. We are at 118 bank closures for 2010 on track to hit 150 by years end. We are going to have a bumpy fall. Good luck!
CNN - The government’s list of troubled banks hit its highest level since 1993 during the second quarter, although the pace of growth continued to slow, according to a government report released Tuesday.
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Hedge Fund Manager Dan Loeb: “The Whole System Is Rigged”
Dan Loeb makes a good point that I hope more people are already feeling or starting to realize. He is correct that we are heading into a period of more government control and regulation because of the past excesses. We had rules on the books to deal with these problems but we did not choose to enforce them. If we did we would find that crimes were committed and people that are getting a slap on the risk should be going to jail and pay major fines.
We should hope that he is correct that we come back to basis of free market capitalism to allocate capital and decide winners and losers. Lets quit interfering and picking winners and not letting the market do what it does best, even if a major corporation or two has to go bust in the process.
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Fed officials saw risk Aug decision would send wrong signals
The recovery is finally running out of steam and we are having to face some tough decisions that we have been putting off since we collectively (sort of) chose to bailout the largest banks and backstop real estate. Now that the Federal Stimulus is running out we are seeing all the indicators declining that would point to a recovery. The Fed is going to resume asset purchases including MBS and U.S. Treasuries.
The FOMC mentioned that further shocks will slow growth, any slower than the 1.6% GDP growth will start to go back into recession. The Fed is getting ready to ramp up more credit creation to try and get some positive inflation. This will only work until they stop doing it. We lack income to support the debt in the system so we need to see many more defaults of this bad debt or higher paying jobs need to come back to the U.S. so people can afford their debt load. Until our officials figure out that outsourcing higher paying jobs, dumping cheap goods on the U.S. and running a debt/growth based money system do not work.
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Watch out for “Professional Credit Cards” in the mail
The WSJ did a nice expose’ on the rise of “Professional Cards”. These cards are targeted towards small business owners and the self employed. It is quite interesting that these credit cards are not covered the the credit card reform act that just went into effect.
The article mention that there has been a whopping 256% increase in these offers compared to last year. The industry says there has been no increase in these offers above real demand from business operators. They still have all of the old profit centers of the credit cards of late.
It is not all clouds, come of the credit card companies like Capital One have voluntarily implemented many of the provisions from the reform act. I think there will be an outcry and we should see the banks do the same. End of the day, the banks need to get back to normal operations and make money the good old way, lending.
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Bernanke signals Fed is ready to prop up U.S. economy
Following up on my comments yesterday, it looks like inflation is going to be the route to try and bring a recovery. The Federal Reserve and Ben Bernanke will fail in this attempt because at the end of the day, income (wages) will not keep prices and real growth where it is needed to stop deflation.
The recovery is basically over when we are getting statements like this from our central bank chairman. It can become really dangerous when the Fed create uncertainty by talking about purchasing long term treasuries. The gold market has sniffed this out and the price is almost nears its nominal high of $1,253.00 per ounce.
The more these type of discussions keep coming up, the more it shows that the Fed and Treasury so not have a handle on the macro-economic situation and the market is what is really dictating our conditions. Bernanke said that deflation is not a risk to the economy but he is wrong, to him this is the biggest risk and that is why he is continuing the program of Quantitative Easing (QE aka: money printing).
Ask yourself this question, do you fight inflation with inflation or do you fight deflation with inflation?
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U.S. home foreclosures fall but new delinquencies up to 3.5%
Hope you are all having a good summer. I have been enjoying the good weather and relaxing time outdoors.
Things are not looking good while going into fall. Unemployment numbers are at November 2009 levels, people falling behind on their mortgages is rising and the Fed is talking about buying more treasuries in another effort to try and fight the gravitational forces of deflation.
This is impossible, if the buying power and income is not in the system to support the current price levels then they have to fall. If you keep trying to fight gravity then it will only serve to debauch the currency and create real chaos until we get our heads right and get back to fiscal responsibility.
The trend is up for foreclosures in the long run, that is for sure. Too many jobs are going over seas and the ones that are left over will not support buying a home in most major areas. Until we start creating real jobs that create real middle class incomes, this cycle will continue until it corrects itself the hard way.
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Thousands of NYC residents may lose rent subsidies
This is going to make living in one the nations most expensive cities even harder. According to the NY Times, the housing department is facing a large $45 million short-fall in their budget. This is more evidence of the hardships that have come on us since the housing crash. It sent the economy into a tailspin and that has reduced tax receipts to the point where many of these entitlement benefits needs to be trimmed back to bring back balance to the city and state spending.
It is hard and certain hardship circumstances need to be addressed but over all, spending will need to be reduced across the board because they are based on tax dollars that were in a bubble environment. The other option is higher taxes that will fall mostly on the wealthier class and that might need to be done, being that they got much benefit on the bubble and crash. Either way, a policy needs to be made so we know what we are dealing with. More to come.
NY Times - Linda Couch, the vice president for policy at the National Low Income Housing Coalition, said that given the recession, the drop in attrition rates should not have come as a surprise. In recent years, she added, the act of continuing to issue vouchers to the point at which authorities exceeded their federal cap for Section 8 units has become “a big no-no at HUD.”
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