Week in Review – here’s the headlines….
by Tom on October 19, 2007
in Uncategorized
—–Original Message—–
From: CNNMoney.com Breaking News [mailto:BreakingNews@mail.cnn.com]
Sent: Monday, October 15, 2007 8:52 AM
To: Vanderwell, Thomas
Subject: Citigroup, Bank of America to lead consortium of banks in fund to back certain risky debt investments.
– Citigroup, Bank of America to lead consortium of banks in fund to
back certain risky debt investments.
Log on to http://money.cnn.com/bn for the latest news.
Citi: Profit plummets but tops estimates
Quarterly results for giant bank top forecasts, as subprime losses are offset by strength in other divisions.
October 15 2007: 8:23 AM EDT
NEW YORK (CNNMoney.com) — Citigroup reported sharply lower, but better-than-expected, quarterly results Monday as gains in its international and wealth management divisions helped to temper sizeable subprime mortgage losses.
Citigroup (Charts, Fortune 500) shares gained 1.2 percent in premarket trading Monday.
New York-based Citibank said its net income fell 57 percent to $2.38 billion, or 47 cents a share, in the July through September period, from $5.5 billion, or $1.10 a share, a year earlier
From www.blownmortgage.com
Dead Man Walking – Wholesale Lending is Marching Towards Extinction
Published at October 15, 2007.
There has been a whisper in the mortgage-lending winds, subtle at first, but growing louder everyday: wholesale lending by mortgage brokers is on its death bed. It hasn’t been proclaimed, in fact the big players are adamantly voicing support for their affiliated brokers, but the actions of large banks belie their big talk. For all of the kudos and reassurances as an important business channel lavished on top of brokers by lending institutions, the rug is slowly and silently being pulled out from under the broker population.
Citi Puts Lipstick on Asset-Backed PigBy Liz RappaportMarkets Columnist10/15/2007 5:08 PM EDTURL: http://www.thestreet.com/newsanalysis/banking/10384449.html
Updated from 1:38 p.m. EDT
The big banks might like to bundle all their crummy debt and shoot the whole package into outer space. But fixing this mess won’t be quite that simple, and the markets finally agree.
Three institutions rolled out a plan Monday to ease a credit crunch afflicting the market for asset-backed commercial paper. Citigroup (C) , JPMorgan Chase (JPM) and Bank of America (BAC) are creating an investment fund in a bid to lure money market funds back into the commercial paper market.
Bernanke has warning for Wall Street
In a speech in New York, the Fed chairman said the central bank’s big interest rate cut last month has helped but that the Fed can’t ‘insulate investors from risk.’
October 15 2007: 9:19 PM EDT
NEW YORK (CNNMoney.com) — In a speech to the New York Economic Club Monday night, Federal Reserve Chairman Ben Bernanke said the central bank’s rate cut in September has shown signs of success, but cautioned that lenders and investors must bear responsibility for financial decisions that caused the subprime mortgage meltdown.
“Although the Federal Reserve can seek to provide a more stable economic background that will benefit both investors and non-investors, the truth is that it can hardly insulate investors from risk, even if it wished to do so,” Bernanke said, adding that “over the past few months…those who made bad investment decisions lost money.”
Goodbye subprime, hello FHA
At mortgage conference, lenders push back-to-basics theme for industry in coming years.
By Jeanne Sahadi, CNNMoney.com senior writer
October 15 2007: 5:49 PM EDT
BOSTON (CNNMoney.com) — If your credit is weak or your savings anemic, here are two phrases you’re likely to hear from mortgage loan officers in the next few years: FHA and mortgage insurance.
They’re part of a back-to-basics theme that was emphasized Monday at the annual conference of the Mortgage Bankers Association in Boston.
MBA: Mortgage Lending Going back to the “1950s and 60s”
Quote of the day from the Mortgage Bankers Association’s (MBA) new Chairman Kieran Quinn (no link):
“We’re going back to lending the way it was in the 1950s and 60s. Mortgages will be made mostly by bankers and their employees, and compensation will be based on who’s making good loans and who’s not.”
Securitization is here to stay; Quinn is saying third party origination is mostly going away.
Builders’ confidence at all-time low
Home builders see weakest buyer traffic in 23-year history of trade group survey, outlook for future remains at record low as well.
By Chris Isidore, CNNMoney.com senior writer
October 16 2007: 2:49 PM EDT
NEW YORK (CNNMoney.com) — The nation’s home builders’ confidence in the battered market for new homes fell further in October, and a measure of their outlook remained at a record low level, according to the latest industry survey.
The National Association of Home Builders/Wells Fargo Housing Market Index showed the overall confidence measure sank to 18, the worst reading on record for the 23-year old monthly survey.
Paulson: Housing a ‘Significant Risk’ to Economy
October 16, 2007
Treasury Secretary Henry Paulson weighed in on the role of housing (and mortgages) in the US economy, and his take was somber, to say the least. The Associated Press reports:
“Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy,” Paulson said in a speech delivered at Georgetown University’s law school. “The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.”
… Paulson said that the housing correction is “not ending as quickly” as it had appeared it would and that “it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.”
From www.nytimes.com
Bono Elevates Mortgage Bankers’ Spirits
October 17, 2007, 7:18 am
At the Mortgage Bankers Association’s big annual conference this week in Boston, dour panels on subprime loans gone bad were on offer while talk predictably centered around plunging profits and predictions of massive layoffs in the industry.
But, The Boston Globe says, for the bankers and loan brokers in attendance, the glum mood was broken somewhat by U2 singer Bono, the featured speaker at the association’s gathering at th
e Hynes Convention Center. Bono is on the lecture circuit, using his rock superstar status to advocate for aid for the poor and disease-wracked of Africa.
With thousands of subprime loans falling into foreclosure across the country, the mortgage industry is struggling because investors are refusing to put more capital into a troubled sector. And with thousands of borrowers losing their homes to foreclosure, some in the industry are engaged in some serious soul-searching.
But for an hour or so, the bankers told The Globe, Bono took them out of their day-to-day worries. Though he has urged wealthy nations to forgive the debts of poor countries in Africa, forgiveness of domestic mortgages was not on Bono’s agenda Tuesday.
He instead charmed the bankers and lenders with stories about his “bad boy” days as a rocker. He also appealed to the audience’s collective conscience when he urged them to do humanitarian work or give to charities, even during tough times.
Valerie Harden, who works for JPMorgan Chase in Florida, told The Globe: “The reason people liked him was we’re so wrapped up in ourselves – what’s the interest rate and are we going to hit our quotas. He found the really important thing in life is to help people.”
Housing starts, permits plunge
Builders slam on brakes, taking starts to 14-year low and permits to levels not seen since 1995; both readings fall short of forecasts.
October 17 2007: 8:39 AM EDT
NEW YORK (CNNMoney.com) — Builders continued to slam the brakes on new homes in September, as the government’s latest reading on the battered market out Wednesday showed housing starts and permits were weaker than expected at levels not seen for more than a decade.
The pace of housing starts plunged 10 percent to an annual pace of 1.19 million from a 1.33 million rate in August. That was the weakest level in just over 14 years. Economists surveyed by Briefing.com had forecast that starts would fall to an a rate of 1.29 million.
Real estate: More price drops, more layoffs
No light at the end of the tunnel in latest forecast from the Mortgage Bankers Association.
By Jeanne Sahadi, CNNMoney.com senior writer
October 17 2007: 5:43 AM EDT
BOSTON (CNNMoney.com) — For those in the real estate industry and for those looking to buy or sell a home, it could take until 2009 to catch a break.
That’s the forecast from Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), who will present his outlook to an auditorium full of real estate professionals on Wednesday morning.
Duncan expects national median home prices to fall between 2 percent and 4 percent both this year and next. Prices will be held back by an oversupply of homes for sale, an increase in foreclosures and continued uncertainty among mortgage investors,
Duncan said that some markets will hold their own, but he singled out seven likely to be hit the hardest. They are: California, Texas, Arizona and Nevada, which drew a lot of investor speculation during the housing boom; and Ohio, Michigan and Illinois, where the economies have been hit hard by job loss.
From the Mortgage Market Guide
Inflation watchers breathed a sigh of relief this morning as the core rate of consumer inflation remained stable and matched expectations. The Core Consumer Price Index (CPI) was reported at 0.2% for September. On a year over year basis, the Core rate held steady at 2.1%. Remember, the Fed’s favored measure of inflation is the Personal Consumption Expenditure Index (PCE), last reported at a 1.8% annual rate. Overall, the tame Core reading on CPI is a modest positive for Bonds.
Housing News – The Commerce Department revealed greater than expected weakness in the housing sector. Housing Starts for September was reported at 1.19 million, weaker than the 1.28 million consensus estimate. This is the fewest amount of Starts in 14 years! Meanwhile, Building Permits, a leading indicator of future housing construction, dropped 7.3% also to the worst levels in 14 years. Overall, the weak September housing data wasn’t that much of a surprise to the bond market, which was expecting an unpleasant report.
From www.blownmortgage.com
Bank of America not Immune from Turmoil
Bank of America today reported larger-than-expected losses resulting from credit-related losses and poor investment banking returns. The company, which was one of the few to not report massive write-down charges on their investment portfolios due to subprime mortgage performance prior to releasing earnings, surprised analysts by reporting a 32% drop in profit for the 3rd quarter.
Drivers beware: Oil at all-time high
Crude prices over $90 a barrel for the first time in after-hours electronic trade after settling over $89 on declining dollar and supply fears; gas prices head higher too.
By David Ellis, CNNMoney.com staff writer
October 18 2007: 6:23 PM EDT
NEW YORK (CNNMoney.com) — Oil prices finished at an all-time high above $89 a barrel Thursday, while the cost of a gallon of gasoline jerked higher.
Jobless claims soar
Last week’s increase is four times greater than economists’ expectations.
October 18 2007: 8:51 AM EDT
WASHINGTON (AP) — The number of newly laid off workers filing claims for unemployment benefits shot up by the largest amount since early February, a far bigger increase than had been expected.
The Labor Department reported Thursday that applications for jobless benefits hit 337,000 last week, an increase of 28,000 from the previous week. That was the biggest one-week surge since jobless claims jumped 42,000 the week of Feb. 10.
WaMu: “Most challenging cycle for housing”
Quotes of the day from WaMu (via Seattle Times):
“This is perhaps the most challenging cycle for housing that we’ve seen in many decades,” WaMu Chief Executive Kerry Killinger said in an interview. He and other WaMu executives said they don’t see any improvement in the near term.
And from the WaMu CFO:
“I have never seen housing credit conditions change so significantly over such a short period of time, nor can I remember a period when there was less clarity about near-term housing and credit trends,” [Chief Financial Officer Tom] Casey said
Fed Funds: Market Expects 25bps Cut Source: Cleveland Fed, Fed Funds Rate PredictionsThe market now expects a 25bps rate cut to 4.5% at the upcoming meeting.
Fifth Third Bancorp today reported third quarter 2007 earnings of $376 million, or $0.71 per diluted share, compared with $376 million, or $0.69 per diluted share, in the second quarter of 2007 and $377 million, or $0.68 per diluted share, for the same period in 2006.
“Third quarter results were solid in a quarter that saw significant market disruption. While we weren’t completely immune from that disruption, we were spared most of its effects,” said Kevin T. Kabat, President and CEO of Fifth Third Bancorp. “Revenue growth of two percent sequentially and seven percent from a year ago was impressive, given the market, with strength in both net interest income and fee income. Expenses were also well controlled during the quarter. Credit continues to be a challenge and we are actively managing our risks as the cycle progresses. We continue to expect further deterioration in credit trends for the near future
but the deterioration to remain manageable. Overall, we were pleased with our results given the macro environment in this kind of quarter and continue to execute our strategic plans.”
