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Tuesday, April 7, 2009

Great Recession Roundup — April 7, 2009

Items of Interest:

U.S. Consumer Credit Decreased by $7.48 Billion in February 2009Bloomberg:
U.S. Consumer Credit Decreased by $7.48 Billion -- The pace of borrowing by U.S. consumers fell in February as fewer Americans sought credit to make purchases amid what may become the worst recession in seven decades.

Consumer credit fell by $7.48 billion, or 3.5 percent at an annual rate, to $2.56 trillion, the Federal Reserve said today in Washington. Credit increased by $8.14 billion in January, more than previously estimated. The Fed’s report doesn’t cover borrowing secured by real estate.

Demand for credit in the U.S. probably shrank further in March, the fourth straight month job losses exceeded 650,000, as unemployment climbed and banks remained reluctant to extend affordable loans. The recession that began in December 2007 has cost 5.1 million Americans their jobs, crippling the consumer spending that accounts for almost 70 percent of economic growth...

Jim Jubak / MSN Money: If Americans Won't Spend, Who Will?
Scott Reeves / Minyanville: Consumer Credit Declines -- A decline in consumer borrowing suggests more trouble ahead for the US economy...
Calculated Risk:
Apartment: Vacancy Rate Increases, Rents Fall --
... The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier ...
Manhattan Office Rents Fall Most in Quarter Century -- Manhattan office rents fell the most in at least 25 years in the first quarter as financial companies slashed jobs and relinquished space in the U.S. recession. Rents dropped 6 percent from the fourth quarter to $65.01 a square foot, commercial property broker Cushman & Wakefield Inc. said in a report today.

Manhattan Apartment Prices Get Cut Most in 5 Years
TimesOnLine [UK]:
Toxic debts could reach $4 trillion, IMF to warn -- Toxic debts racked up by banks and insurers could spiral to $4 trillion (£2.7 trillion), new forecasts from the International Monetary Fund (IMF) are set to suggest.

The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.

Banks and insurers, which so far have owned up to $1.29 trillion in toxic assets, are facing increasing losses as the deepening recession takes a toll, adding to the debts racked up from sub-prime mortgages. The IMF's new forecast, which could be revised again before the end of the month, will come as a blow to governments that have already pumped billions into the banking system...
Fed Requests for TALF Loans Drop 64% to $1.7 Billion -- The Federal Reserve’s requests from borrowers for loans to buy asset-backed securities fell 64 percent from last month as investors balked at visa limits and possible political efforts to tax earnings.

Investors sought $1.71 billion from the Term Asset-Backed Securities Loan Facility to purchase securities backed by auto and credit-card loans, the New York Fed bank said today on its Web site. The Fed provided $4.7 billion in loans last month to purchase securities in the TALF’s first monthly round.

The decline hinders Fed Chairman Ben S. Bernanke’s efforts to lower borrowing costs and extends a slow start for a program that the Obama administration is using as a cornerstone of plans to revive credit and end the recession...
LA Street Gang got into Mortgage Business

Two dozen charged in US in alleged gang-led mortgage fraud -- Two dozen people were indicted on racketeering and other charges for allegedly conducting a wide-ranging mortgage fraud based in San Diego and led by a street gang member, according an indictment unsealed on Tuesday.

The lead defendant, Darnell Bell, a documented member of the Lincoln Park street gang in Los Angeles, received at least $9 million in proceeds from the enterprise, prosecutors said.

Bell's status as an active member of the Lincoln Park street gang helped him recruit straw buyers for 220 properties with a total sales price of $100 million, and later maintain discipline among them, according the indictment...
Barry Ritholtz / The Big Picture: Geithner Addresses Mortgage Fraud
Tic-Toc GM Bankruptcy Gets Closer

Court choice for a GM bankruptcy may shape case -- Lawyers for General Motors Corp are likely wrestling with the venue for a possible bankruptcy filing by the automaker, a proceeding that would qualify as one of the biggest-ever corporate reorganizations.

GM Chief Executive Fritz Henderson has said the company prefers to restructure out of court, but would go to court if necessary. A source familiar with the company's plans said on Tuesday that GM was in "intense" and "earnest" preparations for a possible bankruptcy filing...
Weil Gotshal May Get $230 Million If GM Goes Bankrupt -- Weil Gotshal & Manges LLP may earn an estimated $230 million in legal fees should General Motors Corp. file for bankruptcy protection -- more than the record the firm is likely to take in advising Lehman Brothers Holdings Inc. on the largest bankruptcy in U.S. history. GM may pay the lead bankruptcy counsel that much, topping the estimated $209 million Weil will charge Lehman...

Joann Muller / Forbes: Ten Cars That Can Save Detroit