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Thursday, May 28, 2009

Great Recession Roundup — May 28, 2009

Items of Interest:

New York Times:
New G.M. Plan Gets Support From Key Bondholders — As General Motors moved closer to a bankruptcy filing, possibly early next week, attention on Thursday turned again to the bondholders, the most important group that the company has yet to win over for its efforts to start fresh...

Micki Maynard / DealBook: U.A.W. Defends Itself and Takes On G.M. Bondholders
Ryan Avent / The Washington Independent: Some Good News for ‘Government Motors’

GM Said to Plan June 1 Bankruptcy as Debt Plan Gains -- General Motors Corp., the world’s largest automaker until its 77-year reign ended in 2008, plans to file for bankruptcy protection on June 1 and sell most of its assets to a new company, people familiar with the matter said...

Joann Muller & Brian Wingfield / Forbes: GM Skids Toward Bankruptcy
Ted Reed / TheStreet.com: What Will Cure Automakers Is Selling Cars
1 in 8 US Homeowners Are Late Paying or In ForeclosureCNBC:
1 in 8 Homeowners Late Paying or In Foreclosure -- One of eight U.S. households with a mortgage ended the first quarter late on loan payments or in the foreclosure process in a crisis that will persist for at least another year until unemployment peaks, the Mortgage Bankers Association said on Thursday...
Diana Oleck / CNBC Realty Check:
It's Prime Time In Foreclosures -- It’s not like we didn’t know it was coming, but apparently it’s coming with a vengeance.

Prime fixed-rate loans have finally leapfrogged those nasty subprimes to take the lead in the race to foreclosure. The foreclosure rate on primes has in fact doubled in the last year, and almost half of the overall increase in foreclosure starts in the first quarter of this year was due to the increase in primes.

I got a call yesterday from Scott Scredon at the Consumer Credit Counseling Services in Atlanta. He says they’ve seen a distinct change in callers. “We’re getting calls from engineers and attorneys and post graduate students,” he says. “Many of these people run through their 401Ks and their savings and start living off credit cards and then they call a counseling agency for help. So it’s a new kind of person we’re seeing today, but it’s a sign of the times.” ...

Calculated Risk: New Home Sales: The Distressing Gap
Mortgage Market Locks Up

Mr. Mortgage Live:
Potential Consequences of 5.5% Mortgage Rates -- Yesterday, the mortgage market was so volatile that banks and mortgage bankers across the nation issued multiple midday price changes for the worse, leading many to ultimately shut down the ability to lock loans around 1pm PST. This is not uncommon over the past five months, but not that common either. Lenders that maintained the ability to lock loans had rates UP as much as 75bps in a single day. Jumbo GSE money — $417k - $729,750 — has been blown out completely with some lender’s at 8%. I have seen it all in the mortgage world — well, I thought I had.

A good friend in the center of all of the mortgage capital markets turmoil said to me yesterday “feels like they [the Fed] have lost the battle…pretty obvious from the start but kind of scary to live through it … today felt like LTCM with respect to liquidity.”
Mish's Global Economic Analysis: Mortgage Market Locks Up
Derek Thompson / The Atlantic - Business:
The Graph That Will Solve the Financial Crisis -- Here's a pie chart that puts into perspective the size of the Fed's involvement in the financial crisis. The entire circle represents approximately 8 trillion dollars. Yes, $8,000,000,000,000. The blue quadrant represents federal lending including expansion of swap lines to the tune of about $2 trillion. The purple quadrant comprises housing related purchases ($1.45 trillion) and buying $1.8 trillion of commercial paper. You can see a more itemized breakdown here.

Federal government spending $8 trillion dollars on financial crisis
Timothy Lavin / The Atlantic:
The Fed's Cash Machine -- As the housing collapse has turned into a financial crisis, and the financial crisis into an economic calamity, the government has tried furiously to keep the country free of breadlines and trash-can fires. Two of its interventions—the $700 billion bank bailout known as TARP and the $787 billion stimulus package—have inspired levels of partisan acrimony and journalistic scrutiny befitting a war vote. But neither of those initiatives, expensive as they are, approach the civic munificence displayed by the Federal Reserve...
FDIC's bad loan sale program stalling: sources -- A program to cleanse U.S. banks of bad loans has been stalled by recovering markets and fears among investors and banks of being hit by new government rules mid-game, sources familiar with the program said.

A pilot sale of $1 billion worth of whole loans by the Federal Deposit Insurance Corp, a U.S. bank regulator, may not take place next month as planned, the sources said.

However, the Treasury Department is pressing ahead with a parallel program to create public-private investment funds that would buy failed mortgage securities from banks.

A Treasury official said the launch of the Public Private Investment Program (PPIP) was on still track for a launch in late June or early July, but declined to comment on whether the whole loans portion of the effort would be delayed...
E. Klein / Washington Post:
Is the Geithner Plan DOA? -- The Wall Street Journal reports that the Public-Private Investment Program -- better known as Geithner's Plan -- might never live at all...

WSJ: Plan to Buy Banks' Bad Loans Founders
Steve Benen / Washington Monthly:
THERE IS NO CAR-DEALER CONSPIRACY -- A whole lot of right-wing blogs are worked up today over a report about the political affiliations of Chrysler dealers who've been shut down. … Rep. Vern Buchanan (R-Fla.), who has a dealership that will close, called this “an outrage.”
Jonah Goldberg / The Corner: Targeting GOP Car Dealers?
Ryan Powers / Think Progress:
Fox News Embraces Right-Wing Theory That Obama Is Forcing GOP-Owned Car Dealerships To Close — Citing a handful of right-wing bloggers yesterday afternoon, the Washington Examiner reported ominously, “Evidence appears to be mounting that the Obama administration has systematically targeted Chrysler dealers …
Mark Tapscott / Washington Examiner:
Furor grows over partisan car dealer closings
Tom Maguire / JustOneMinute: Dealergate — It's going to take a lot of digging to see if there is gold in Dealergate.
Rabble Rouser Reverend Amy / NO QUARTER: Payback's A Bitch
Steve M. / No More Mister Nice Blog: REPUBLICAN CRACK-UP WATCH
Kenneth R. Timmerman / NewsMax.com: Republican Donors Hit by Chrysler Closings
Joey Smith / Chrysler Dealership Campaign …: Robert Gibbs Press Conference (Chrysler Closings)
Eric Dondero / Libertarian Republican: STUNNING REVELATION!! …
Mish's Global Economic Trend Analysis:
Initial Unemployment Claims Dip Slightly; Continuing Claims Approach 6.8 Million, 17th Consecutive New Record -- The peak in initial claims might be in but the peak in unemployment is nowhere close. Continuing claims hit 6.788 million, setting a record for the 17th straight week.

The peak in initial claims might be in but the peak in unemployment is nowhere close. Continuing claims hit 6.788 million, setting a record for the 17th straight week...

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