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Thursday, June 18, 2009

Great Recession Roundup — June 18, 2009

Items of Interest:

Son of Subprime - option adjustable-rate mortgages about to implode?'Son of Subprime' Strikes

Kevin G. Hall / McClatchy Washington Bureau:
Worse than subprime? Other mortgages imploding slowly -- Call it son of subprime. Experts warn that a new wave of mortgage foreclosures may be coming soon and could rival the default rates for subprime mortgages and slow efforts to find bottom in a prolonged national housing slump.

The mortgages in question are $230 billion of option adjustable-rate mortgages, creative lending products that flourished at the height of the housing boom. In an option ARM, a borrower can opt to pay less than his or her monthly balance due, and the difference is tacked onto the outstanding loan balance.

Many experts had expected an explosion of defaults in the springtime on these roughly 564,000 outstanding mortgages. However, interest rates dropped to historic lows, and that delayed the detonation of what many housing analysts still see as a ticking time bomb....

Dept. of Labor:
Labor Weekly Claims Report -- In the week ending June 13, the advance figure for seasonally adjusted initial claims was 608,000, an increase of 3,000 from the previous week's revised figure of 605,000. The 4-week moving average was 615,750, a decrease of 7,000 from the previous week's revised average of 622,750.

The advance seasonally adjusted insured unemployment rate was 5.0 percent for the week ending June 6, a decrease of 0.1 percentage point from the prior week's unrevised rate of 5.1 percent.

The advance number for seasonally adjusted insured unemployment during the week ending June 6 was 6,687,000, a decrease of 148,000 from the preceding week's revised level of 6,835,000. The 4-week moving average was 6,757,500, an increase of 2,250 from the preceding week's revised average of 6,755,250...
Mish's Global Economic Analysis: Continuing Claims Drop First Time In 21 Weeks. Is This Worth Getting Excited Over?
Stephanie Rosenbloom / NY Times:
Eddie Bauer Files for Bankruptcy -- Eddie Bauer, the outdoor-clothing chain that sold goose-down coats to Mount Everest mountaineers and college students alike, filed for Chapter 11 bankruptcy protection on Wednesday and said it planned to sell itself for $202 million to CCMP Capital Advisors, a private equity firm.

The company filed for Chapter 11 protection in Delaware, and said that Bank of America, GE Capital and the CIT Group have agreed to provide up to $100 million in financing during the bankruptcy case...
The Big Picture:
June 2009 Consumer Price Index (CPI) -- After a near decade of an aggressive rising inflation level, we are still in a period of Deflation. As someone else (David Rosenberg perhaps?) has said, as of right now, “Deflation is a fact; Inflation is an Opinion.”

June 2009 Consumer Price Index (CPI)
David Goldman / Inner Workings:
The Stealth Deterioration in Asset Quality -- The deadly downdraft of falling demand will continue for years. The government cannot effectively substitute for private expenditures, especially not when government funds are spent to placate high-cost organized labor constituencies.

High savings rates are deflationary...
The lessons of 1937 — In a guest article, Christina Romer says policymakers must learn from the errors that prolonged the Depression — AT A recent congressional hearing I cautiously noted some “glimmers of hope” that the economy could stabilise and perhaps start to rebound later in the year...
Noam Scheiber / The New Republic: Christina Romer Is Making Sense
Brad DeLong / Grasping Reality with Both Hands:
Felix Salmon: Unemployment datapoint of the day
Humble Anaheim home draws 63 offersLasner on Real Estate:
Humble Anaheim home draws 63 offers -- Talk about your Cinderella story. The belle of the ball in the Orange County housing market last month wasn’t a beach-front manor with an eight-figure price tag. Or even a hill-top mansion with killer views.

Instead it was a modest three-bedroom, two-bath bungalow in Anaheim with a brick-lined planter and a dried-up lawn....

But buyers weren’t so much attracted to this home’s features (laminate faux-wood floors, nearly new cherry wood cabinets, granite counter tops). It was the lender’s aggressive asking price of $299,250 and its location in a quiet neighborhood, Johnson said. The home sold for $608,000 at the market peak some 2-plus years ago...
Mortgage Fraud Blog:
Former NFL Player Indicted on Mortgage Fraud Charges -- Arthur James Marshall, Jr. has been charged in a twenty-two-count indictment with fraud and money laundering in his real estate ventures. It was reported in news coverage of the April 3, 2009 execution of a search warrant by the Federal Bureau of Investigation on Marshall's former office building that Marshall was a local high school football star who later played at the University of Georgia and thereafter spent five years in the National Football League [as a wide receiver with the Denver Broncos and New York Giants]...
Financial Times:
Mafia blamed for $134bn fake Treasury bills -- Italian and US secret services concluded that $134bn in US Treasury bills found in a false-bottom suitcase were the handiwork of the Italian Mafia...

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