Mr. Contained
At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained
Testimony Chairman Ben S. Bernanke , March 28, 2007
Shares of Bank of America, which recently completed its acquisition of mortgage lender Countrywide Financial, lost 8.1 percent in trading yesterday. National City, an Ohio-based bank whose shares have taken a recent beating, was down 4.5 percent. U.S. Bancorp, Minnesota's biggest bank, said that its second-quarter earnings fell 18 percent and that its level of bad loans would continue to rise as more customers fell behind on payments. Its shares dropped as much as 12 percent before recovering to end the day slightly in the red.
The S&P banking index was down 5.4 percent yesterday and 14 percent since Friday.
Wachovia Faces Shallow Reserves but Says It Is Raising More Capital, July 16, 2008
It is encouraging that inflation expectations appear to be contained.
Testimony Chairman Ben S. Bernanke , March 28, 2007
The unexpectedly large increase in CPI was led by a 6.6% jump in energy prices and a 0.8% increase in food prices.
...
With prices rising so fast, inflation-adjusted or real weekly earnings fell 0.9% last month. Real earnings are down 2.4% in the past year, a vivid illustration of how the average worker is falling behind as prices rise and the weekly workweek contracts.
Consumer prices jump 1.1% in June, July 16, 2008
Posted by b on July 16, 2008 at 14:45 UTC | Permalink
Here in the Happy Little Kingdom of Denmark, there seems to be a rolling bust starting.
Roskilde Bank had to have an infusion of nearly a billion kroner and even them will have to sell itself to "somebody". Its shares fell 62%. But other of the smaller banks who have been aggressive in the housing and building markets are hurting also. Bonusbanken -40%; Di Ba -34%; Norresundby -32% and so on.
The director of the, in effect, bankrupt Roskilde Bank, left a couple of months ago with a 30 million kroner golden handshake -- talk about a rat leaving a sinking ship!!!
Even the tabloid rag, BT, which I culled this info from states the obvious: "The crisis, which started in the USA last summer has spread to the rest of the world and sucked buying power out of wven the world's largest and most powerful banks..."
They have a saying in Danish that "when it rains on the priest, it drips on the deacon" -- hmmn, seems to work both ways...
(the kroner is around 5kr to the US$)
Posted by: Chuck Cliff | Jul 16 2008 17:03 utc | 4
Well, I guess, right now they are trying to keep everything as stable as possible, because of the election. (Not that they succeed that well, but still...)
Wait what happens when then election is past...
Like, what B said a few times in the past: The US may choose to reduce the value of the USD to stem the trade imbalance.
Like, severe hiking up taxes and cutting social spending (if there is still some to be cut)
Like, pressure anyone and his dog, both domestically and abroad, to pay for the upkeep of the US military. (That is, even more than already happening)
Wait... just wait
Posted by: No So Ana | Jul 16 2008 17:47 utc | 5
BTW: It has a kind of morbid fun to read quotes from the bridge of the titani ... ahhhhmmm ... from the top levels of US government, civil service and financial institutions, while ramming the iceberg happens in slow motion ...
But I do not expect these people to have any long term influence on events any longer - its even doubtful for middle term...
Posted by: No So Ana | Jul 16 2008 17:51 utc | 6
Wall Street could not get enough of banks or anything that touched a mortgage today. The failure of IndyMac and the troubles at Phony and Fraudy were forgotten in the stampede. Wells Fargo decided to extend the number of days they don't get paid on a loan before classifying it as delinquent. Voila! They hit the analysts earnings expectations. And once again the sky is blue in financial land.
But Comrade Cox was more worried about short sellers and not that Wells Fargo can change the accounting rules as they please. Of course Comrade Cox was missing in action while Comrade Greenscam was blowing bubbles and now that we know there was rampant fraud. But neither has that stopped Comrade Helicopter Ben from his generosity to the Wall Street CEO proletariat.
Posted by: ab initio | Jul 16 2008 22:51 utc | 8
b, thanks for the #7 link. from the comments..
Wonder how many traders watched the Bernanke-Paulson-Cox testimony yesterday and had the same hallucinogenic experience I did. I mean, it was like far out.The psychedelic part when Paulson was explaining his idea for saving Fannie Mae and Freddie Mac. He wants a blank check, to spend an undetermined amount, at an undetermined time, under an undetermined set of circumstances. If he gets it, he's pretty sure he'll never need to use it.
But he needs it to save an institution that's doing just fine and doesn't need any help at all. And if he does need to use it, he would consult with the people he's trying to save, or maybe not. He was clear that they might not even recognize that they need to be saved.
Paulson would also consult with the movers and shakers in congress, if he has time, and it's convenient.
And there can't be any limitations on the action taken, or the evil speculators would know the limits and have no fear about destroying those same institutions that are fine and don't really need any help. The idea there seems to be that if the evil speculators know you only have a squirt gun in you pants, they would not be afraid, and would wreak havoc and otherwise victimize poor Fannie and Freddie. But if they believed he had a bazooka in his pants, then they would cower in fear. That's a whole phallic image I myself fear to even contemplate.And by the way, let's ban shorting those institutions that are explicitly not backed by the government, just in case the government would have to back their share price and debt.
Cox announced the plan to keep the evil shorts at bay. I think he wants to make it illegal to naked short those two stocks. My impression has been that's it's always been against the rule to short if you didn't have the ability to deliver the stock. So apparently what the real plan is... wait for it, to enforce the existing rules on naked shorts, but only for prime brokers and the GSEs. I mean, that's far out man!
All this talk about naked shorts, and bazookas in your pants, a human unit just has to wonder what these guys are feeding their heads.
When the men on the chessboard
Get up and tell you where to go
And you've just had some kind of mushroom
And your mind is moving low.
Go ask Hank
I think he'll know.
When logic and proportion
Have fallen softly dead,
And the White Knight is talking backwards
And the Red Queen's "off with her head!"
Remember what the dormouse said:
"Feed your head."Posted by: MeanGene | Jul 16, 2008 9:03:06 AM
Posted by: annie | Jul 16 2008 23:15 utc | 9
And Treasury credit default swaps reached 22 basis points. How does the writer hedge those, I wonder?
Posted by: Jacob Richter | Jul 16 2008 23:35 utc | 10
Banks pretty fooked in Ireland too. Stocks dropping like stones
Posted by: drunk as a rule | Jul 17 2008 1:59 utc | 11
i just got back from a three day training session for my 12 month stint in AMERICORPS. the specific program i'm participating in, VISTA, deals specifically with poverty. i am happy to report there was less blame-the-victim personal responsibility spewing and more institutional injustice and lack of education talk than i expected. needless to say when the one guy over 60 started in on America is the greatest nation on earth he got a serious ear-full from me and others who are no longer tolerant of uncritical national pride and jingoistic platitudes from an old ex-pastor who's mentality is a generational detriment to what's needed: humble, open minds capable of seeing why there are so many poor in a 1st world nation, and why it's going to get A LOT worse.
unfortunately i believe strengthening community resources is the only kind of "change" that will ever produce results. there will not, in the near future, be grand institutional changes at the national level, or regulations with teeth put in place in the financial sector, or any deviation from exerting desperate imperial control abroad, or legislative changes to restore the constitution and our right to privacy.
one change we can count on is the changing of seasons, and the tripling of heating oil will make this winter especially brutal not just for "the poor" but for millions of americans on the edge and unprepared for a tripling of their energy bills.
Posted by: Lizard | Jul 17 2008 21:37 utc | 12
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The real evil, the real destruction is still slithering out of it's lair. Bush's legacy will be as toxic as his presidency.
Posted by: waldo | Jul 16 2008 14:58 utc | 1