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Friday, May 1, 2009

Great Recession Roundup — May 1, 2009

Items of Interest:

Chrysler Lenders Tried Obama's Patience, Lost Game of Chicken — President Barack Obama thanked everyone from unions to executives for working to keep Chrysler LLC alive while blaming “a small group of speculators” for forcing the automaker into bankruptcy...

Steven Pearlstein / Washington Post: A Laughably Late Conversion to the Cause of Fairness
Bruce McQuain / QandO: Reinventing The Flat Tire …
Geoffrey Gwin / Wall Street Journal: Gwin's Letter to the Editor: ‘Why Save Chrysler’
Felix Salmon: Chrysler's future — It's surely a good thing that Chrysler ...

Hedge Fund Cowards -- Let’s be clear: There’s nothing wrong with a group of hedge funds joining forces to push Chrysler into bankrupty because they didn’t like the terms the federal government was trying to get them to agree to. But it is a problem when the hedge funds lack the courage to publicly stand behind their vote...
Zachery Kouwe / New York Times:
The Lenders Obama Decided to Blame
-- Peter A. Weinberg and Joseph R. Perella are part of a band of Wall Street renegades — “a small group of speculators,” President Obama called them Thursday — who helped bankrupt Chrysler.

That, anyway, is the Washington line.

In fact, Mr. Weinberg and Mr. Perella, with sparkling Wall Street pedigrees, are the epitome of white-shoe investment bankers. And their boutique investment bank, a latecomer to Chrysler, played only a small role in the slow-motion wreck of the Detroit carmaker....
Liam Denning / Wall Street Journal: Surveying Chrysler as Wheels Fall Off
Op-Ed: The Great Bank Swindle -- McKinsey has concluded that there are still $2 trillion of toxic assets sitting on the books of US banks. The International Monetary Fund has estimated total credit write-downs of $4.1 trillion, with $2.7 trillion in US institutions alone. And Nouriel Roubini estimates the total losses on loans made by US financial firms will reach $1.6 trillion, with an additional $2 trillion in losses on securities.

The US banks and broker dealers are exposed to half of this figure, or $1.8 trillion; the rest is borne by other financial institutions in the US and abroad. What’s even worse: That $1.8 billion figure doesn’t include commercial real-estate losses, credit-card losses, and losses from the next wave of mortgage resets in 2010.

With $2 trillion of write-offs to go, how could Treasury Secretary Timothy Geithner make the following statement to a Congressional panel last week: “Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators.”?
----The problem with Pay Option Arms is over 80% of POA mortgagees only make the minimum payment.
Mish Shedlock / Minyanville:
The ARMs Reset Crisis Revisited -- The problem with Pay Option Arms is over 80% of POA mortgagees only make the minimum payment. Given that minimum payments typically don't cover interest owed, the loan balance increases every month. This is called negative amortization, and it's been going on for years...

Other than the ticking time bomb of Pay Option Arms (which is still a huge problem, especially for California), the ARM reset problem has vanished for as long as rates stay low, or permanently if ARM holders roll over into affordable fixed-rate mortgages. (For more on this, see ARMs Reset Problem No Problem at All.)

Unfortunately, reset issues aren't the only problem. The economy is still losing 600,000-plus jobs a month, and for every job lost, there's another person who might be shoved into foreclosure as a result.
Help Wanted: Why That Sign's Bad -- The nation has 3 million jobs going begging. And without retraining, U.S. workers may not be able to fill them

Surprising statistic: In the midst of the worst recession in a generation or more, with 13 million people unemployed, there are approximately 3 million jobs that employers are actively recruiting for but so far have been unable to fill. That's more job openings than the entire population of Mississippi.

Sound like good news? It's not. Instead, it's evidence of an emerging structural shift in the U.S. economy that has created serious mismatches between workers and employers...

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia