Paige Rausch

False Representations of FDIC-Owned Real Estate Properties for Sale

Paige Rausch (PAR) — Sun, 08 Nov 2009 12:24:42 -0600

I thought it was worth sharing the warning from the FDIC.....pass the message on to clients and please take a minute to scroll though the properties listed for sale at the below FDIC provided sites, you could find "the one" you or a client has been searching for!

The Federal Deposit Insurance Corporation (FDIC) is warning the general public and interested investors of false claims from various entities (individuals and companies) claiming to represent the FDIC in the sales of FDIC-owned properties.

FDIC-owned properties currently being marketed for sale are available for FREE public viewing and access on the FDIC Web site at http://www2.fdic.gov/drrore/.

The listing for each asset includes the assigned asset management company, local brokers, and contact information. There are all types of properties; residential/commercial, vacant/ improved.

Find additional FDIC Real Estate for Sale at:

http://orelistings.cbre.com/

http://www.fdiclistings.com/

Groupon

Paige Rausch (PAR) — Sun, 08 Nov 2009 11:49:55 -0600

Spread the word: Groupon.com offers offers bargains on meals, services and activities in more than 30 major cities!

Groupon was started to make it easier for people to enjoy the great things in their community.

How It Works:

Each day the site features something cool to do or a place to dine at an unbeatable price.

You only get it if enough people join that day… so invite your friends!

Check back the next day for another awesome Groupon!

Learn How Groupon Works! from The Point on Vimeo.

Beyond the Numbers... Appraisers Using REO/Foreclosure and Short Sale Comps

Paige Rausch (PAR) — Thu, 30 Jul 2009 20:45:35 -0500

Watch the video, and then please voice your thoughts on Appraisers using REO's and Short Sales, is it right or wrong? Be honest. Everyone is encouraged to comment, Real Estate Professionals, Appraisers, Lenders....below are link's to the latest S/P and Beige Book from the Federal Reserve.

S&P/Case-Shiller Home Price Indices

July 29, 2009

Summary of Commentary on
Current Economic Conditions
by Federal Reserve District

Update on Chinese Drywall Issue, IRS may offer tax deducation

Paige Rausch (PAR) — Fri, 10 Jul 2009 15:30:37 -0500

Residents whose homes have been damaged by tainted Chinese drywall may be eligible for a tax deduction similar to the one taxpayers can claim for damages caused by hurricanes, floods or fires, according to the Internal Revenue Service.

The final determination will be based on the results of investigations being conducted on the drywall by two federal agencies.

According to the information contained in the IRS link(below), a casualty loss "can result from the damage, destruction or loss of your property from any sudden, unexpected, and unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption."

IRS Topic 515 - Casualty, Disaster, and Theft Losses

Bank of America Gives Cities and States First Shot at REOs

Paige Rausch (PAR) — Tue, 23 Jun 2009 09:36:30 -0500

The program is a result of the U.S. Department of Housing and Urban Development's Neighborhood Stabilization Program, which aims to encourage redevelopment of neighborhoods hit hardest by foreclosure and the resale of properties to home owners.

Bank of America will notify participating cities that properties are available before they are listed on multiple listing services. The company will set the prices with no haggling allowed. If it all works according to plan, the result may be that cities have an easier time buying foreclosures, redeveloping them and then reselling them to homeowners in neighborhoods hardest hit by the housing crisis. Also, communities will be able to buy multiple properties in a single transaction and Bank of America will designate one employee as the "point person" for a community, in an effort to streamline the process.

"We're balancing our desire to work with communities that are struggling to stabilize with our fiduciary duty to the investors that hold the paper on all these properties," says Rob Grossman, senior vice president of community affairs for Bank of America. "We will offer them the best price."

How do you view the actions of Bank of America giving cities, not private buyers, the inside skinny on new foreclosures. Is it a positive, or negative? Fair, unfair?

The Way Forward from Harvard University's Joint Center for Housing Studies

Paige Rausch (PAR) — Tue, 23 Jun 2009 08:34:17 -0500

The State of the Nation's Housing: 2009

The bad news has been the worst economic recession since the 1930s. The good news is the housing market has been showing some signs of leading the nation out of that recession. A new report from Harvard University's Joint Center for Housing Studies is banking on demographics to bring back the battered housing market.

The uncertainty, though, lies in predicting the timing, speed and depth of a housing recovery that hinges on the reversal of so many variables-including rising unemployment, sinking home values, and tightening mortgage credit-and their impact on immigration trends and demand among younger home buyers.

The Echo Boomers are entering their peak household formation years of 25-44 with more than five million more members than the baby boomers had in the 1970s. The Echo Boom generation-which is five million people larger than the Baby Boomers-is believed to be high enough to drive the housing industry's growth "for the next 10 years." However, echo boomers "will likely enter the housing market with lower real incomes than people the same age did a decade ago," and therefore might be more open initially to rental housing and starter homes.

Meanwhile, as the leading edge of the baby-boom generation reaches age 65, demand for retirement housing will rise. Increased longevity among those born before World War II will also lift demand for assisted living facilities. How this demand is expressed will depend importantly on how much, and how quickly, these households can rebuild their recently decimated wealth.

The Harvard report has numerous charts and other data that hopefully will assist you and your clients find your Way Forward!

Only great minds can read this

Paige Rausch (PAR) — Mon, 15 Jun 2009 08:55:32 -0500

This is weird, but interesting!

fi yuo cna raed tihs, yuo hvae a sgtrane mnid too

Cna yuo raed tihs?

Olny 55 plepoe out of 100 can.


i cdnuolt blveiee taht I cluod aulaclty uesdnatnrd waht I was rdanieg.

The phaonmneal pweor of th e hmuan mnid, aoccdrnig to a rscheearch at Cmabrigde Uinervtisy,

it dseno't mtaetr in waht oerdr the ltteres in a wrod are, the olny iproamtnt tihng is taht the frsit

and lsat ltteer be in the rghit pclae. The rset can be a taotl mses and you can sitll raed it whotuit a pboerlm.

Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef,but the wrod as a wlohe.

Azanmig huh?

yaeh and I awlyas tghuot slpeling was ipmorantt!

Cape Coral's Riverside Bank made "agreement" with Federal Reserve of Atlanta and Florida Office of Financial Regualtion

Paige Rausch (PAR) — Mon, 03 Nov 2008 17:14:51 -0600

Press Release

Release Date: November 3, 2008

For immediate release

The Federal Reserve Board on Monday announced the execution of a Written Agreement by and among Riverside Gulf Coast Banking Company, Riverside Bank of the Gulf Coast, both of Cape Coral, Florida, the Federal Reserve Bank of Atlanta, and the State of Florida Office of Financial Regulation.

A copy of the Agreement is attached.

Attachment (666 KB PDF)

2008 Enforcement Actions

Under the agreement, Riverside Bank is required to take specific steps to implement certain policies and procedures. It requires the bank to retain an independent consultant, acceptable to the Federal Reserve and the Division of Financial Institutions, to conduct a review of staffing needs and the qualifications and performance of all senior managers. A compliance committee, composed mostly of people who are not executive officers or principal shareholders, will monitor the bank’s compliance with the agreement.

The bank has not violated any regulations or laws, and there are no penalties involved.

Last week, Brazilian businessman Marcelo Lima of Sao Paulo, Brazil, applied to buy Riverside Bank of the Gulf Coast with the state Office of Financial Regulation. If the deal goes through, Elmer Tabor bank chairman said, "There's not going to be any name change, management change, all that will be the same and Riverside will move forward." Both OFR and the Federal Reserve would have to approve any purchase, he said.

"Where the Hell is Matt?"

Paige Rausch (PAR) — Wed, 29 Oct 2008 00:22:29 -0500

Where The Hell Is Matt?

If you need an attitude adjustment take four minutes and watch the video. While the rest of sit around working it appears that Matt Harding has done a jig all over the globe. Matt spent 14 months visiting 42 countries in order to produce "Where the Hell is Matt?", a video featuring Harding (and anyone else he could rope into it) doing an incredibly silly, high-energy dance in some of the most breathtaking scenery around the world.

I ask: Who accomplished more or "something important" between him and "us"?

The scenery alone and imagining the people he met along the way gave me quite a bit to think about.

If you enjoyed the video...."Matt's outtakes" are hilarious copy and paste the link below into your browser:

http://www.youtube.com/watch?v=tT8jA_pps3o

The songs are "Praam" and the "Dance Outtakes Song."

*To silence the music and watch the video, go to the top left corner of the Jukebox and click on the stop button. Enjoy!

Did the Ratings agency's create a "Triple A Failure"?

Paige Rausch (PAR) — Sun, 26 Oct 2008 10:48:17 -0500

Lawmakers criticised the three largest credit rating agencies for their role in the worst financial crisis in decades, and the agencies admitted they didn't see it coming.

Representative Henry Waxman (D-CA), chairman of the House Oversight and Government Reform Committee said, "The story of the credit rating agencies is a story of colossal failure". Rep. Waxman blamed the rating agencies and federal regulators for putting the entire financial system at risk and betraying the public trust.

Rep. Waxman's committee is investigating the credit crisis and put much of the blame on those agencies. According to documents(Below)Waxman distributed at the hearing, Moody's Chief Executive Raymond McDaniel told directors that Moody's was facing a dilemma in trying to maintain both market share and ratings quality. McDaniel told directors that industry competition forces rating agencies to provide the lowest credit enhancement needed for the highest rating, which "can place the entire financial system at risk."

The three biggest ratings agencies, S&P, Moody's and Fitch, Inc.; made huge profits for giving top ratings to the securities. The agencies apparently relied on ever increasing home prices for the confidence they placed in the mortgages. Two of the agencies, S&P and Moody's, have now downgraded thousands of their previous top ratings.

Documents also revealed that a portfolio manager with big mutual fund company Vanguard Group Inc told Moody's over a year ago that the rating agencies "allow issuers to get away with murder." Though some say that the economic crisis could not have been foreseen (Moody's CEO McDaniel calls the last several weeks "unimaginable"), the committee cited E-mails and internal presentations revealing that at least some executives, employees, and investors voiced misgivings about the debts being evaluated. One S&P employee joked in an instant message exchange, "It could be structured by cows and we would rate it."

Below is a list of the documents that the House Oversight Committee reviewed, trust me when I say its some eye opening information. Click here for a preliminary hearing transcript.

Documents and Links

Opening Statement of Chairman Waxman (81 KB)
Testimony of Jerome Fons (91 KB)
Testimony of Frank Raiter (161 KB)
Testimony of Sean Egan (70 KB)
Confidential Presentation to Moody's Board of Directors, October 2007 (268 KB)
Revenue of Big Three Credit Rating Agencies: 2002-2007 (14 KB)
E-mail from Belinda Ghetti to Nicole Billick, et al., December 16, 2006 (298 KB)
E-mail from Frank Raiter to Richard Gugliada et al., March 20, 2001 (377 KB)
E-mail from Mary Elizabeth Brennan to Moody's Subprime Working Group, July 11, 2007 (253 KB)
E-mail from Raymond McDaniel to Mark Almeida, July 13, 2007 (83 KB)
Instant Message Conversation between Shannon Mooney and Ralul Dilip Shah, April 5, 2007 (105 KB)
Moody's Town Hall Transcript, September 2007 (4 MB)
E-mail from Yo-Tsung Chang to Joanne Rose, et al., May 25, 2004 (129 KB)
Testimony of Stephen Joynt (51 KB)
Testimony of Raymond McDaniel (119 KB)
Testimony of Deven Sharma (71 KB)
E-mail from Brian Clarkson to Raymond McDaniel, et al., March 21, 2007 (735 KB)
Preliminary Hearing Transcript (18 MB)

For those who like to know.......How did we get here?

Between 1909, when John Moody set up shop, and the 1980s, most of the analysis that Moody's and S&P did was of securities issued by either corporations or governments. Unlike asset-backed securities, corporate bonds are dynamic -- there is an active management (usually with a visible track record of past behaviour) making decisions that can make it more or less likely that bondholders will be repaid.

If poor decisions are made early in the life of the bond, there is time and scope for different decisions to offset these.

Conversely, the amount of risk in a corporate or government bond remains fairly constant through its life -- a disastrous move that destroys the firm and makes repayment impossible is theoretically just as possible in the last year of its term as in the first.

Mortgage-backed securities, on the other hand, represent a vastly more complex valuation and risk-assessment challenge. While many mortgages are pooled together, there is very little information about the past behaviour of the borrowers -- the track record that an investor can infer from the resumes of a corporate issuer's CFO and CEO is absent.

Some of this data becomes available as the pool of mortgages gradually becomes "seasoned" and defaults take place. But then an additional problem arises -- the pool of mortgages underlying a security is static, and once money is lost from a default, it cannot be recovered from outperformance elsewhere. Most securitised mortgages or debt assets build in a buffer to cover defaults. But whether this is too little (or too much -- insurance is "wasted" because there are fewer defaults than expected) only becomes known over time, as variability lessens and value converges on a particular combination of defaults by some underlying borrowers, early repayment by others, and "normal" repayment by the rest.

The complex mathematics in any thorough attempt to model a mortgage-backed security becomes exponentially more daunting for CDOs, where returns are tiered, many different securities or elements of securities are combined and the equation is further complicated by an "active" manager with some scope to shuffle differently performing underlying assets between various tranches and issues.

It now seems fairly clear that the models the ratings agencies used to justify the lofty investment-grade credit ratings they gave to many mortgage-backed securities and CDOs were woefully inadequate, based as they were on the very different world of corporate and government bonds. This is why the rating agency models failed to detect any reason for the credit ratings for most mortgage-backed and debt-backed securities to be lowered until months after the sub-prime crisis had erupted. Traditional credit analysis will become more significant again.

The fact is that S&P and Moody's became more experienced and adept at rating complex securities, largely by learning from the way older issues evolved, they refused to revisit ratings for older issues with this knowledge, leaving existing ratings in place.

By the time the music stopped last year, the ratings agencies were therefore major contributors to the opacity, confusion and lack of trust among participants in markets for debt-backed securities, rather than the providers of impartial fact-based opinion they aspire to be. That is why it is going to take years for Moody's and S&P to fully regain the confidence of the market.

Of course, none of this would have mattered had not a great many US investors, including some of the most illustrious names in finance, all been willing to believe that they really could get something for nothing, and not be left with any exposure to unpleasant underlying risks.

Roger Lowenstein, author of When Genius Failed, wrote a terrific article in this past weekend’s New York Times Magazine if you'd care to read more, but from my persepective I don't think people are going to blindly take the advice of the rating agencies anymore, how about you?

"Foreclosure Vouchers?" aka The Trickle Up Bailout Plan for Joe the Plumber and Bob the Builder

Paige Rausch (PAR) — Fri, 24 Oct 2008 10:38:08 -0500

"The Trickle-Up Plan"

"Foreclosure Vouchers?"

by Mark Thoma of the RGE Monitor

The Plan works as follows:

Give people a tax cut or rebate as in a standard fiscal stimulus package, the government would distribute to taxpayers mortgage foreclosure vouchers. These vouchers can be used either by homeowners to pay mortgages on homes in severe danger of foreclosure, or to help homebuyers to purchase foreclosed homes.

As with other stimulus packages, these vouchers would be distributed to taxpayers based on their incomes with those with the lowest incomes receiving the largest vouchers and those with incomes of, say, over $200,000 receiving nothing at all. ... The vouchers, however, could only be fully used by homeowners facing foreclosure or interested in buying a house in foreclosure.

For the majority of taxpayers who cannot use them, the vouchers could be sold on a secondary market... These vouchers would likely sell at a discount, perhaps of about 25%. Since the plan will increase demand for foreclosed housing, it will stop the fall of housing prices, thereby helping to end the housing crises and starting the economy on the road to recovery. ...Instead of a rescue scheme that relies on the benefits trickling down from Wall Street to Main Street, the benefits of this plan will trickle up from Main Street to Wall Street.

The Trickle-Up Plan would ... help keep people in their homes and create demand for housing currently in foreclosure. By doing so, it will help stop the fall in housing prices, and also increase the value of the lowest elements of the mortgage backed securities - precisely what governments wants to do.

PNC reaches agreement to purchase National City

Paige Rausch (PAR) — Fri, 24 Oct 2008 10:19:59 -0500

The PNC Financial Services Group, Inc. (NYSE: PNC) and National City Corporation (NYSE: NCC) today announced that they have signed a definitive agreement for PNC to acquire National City for $2.23 per share, or an aggregate fixed amount of approximately $5.2 billion in PNC stock. Additionally $384 million of cash is payable to certain warrant holders. Total consideration approximates National City's market capitalization as of the close of business on October 23, 2008. National City shareholders will be entitled to 0.0392 share of PNC common stock for each share of National City.

Branch Locations Map of both PNC and National:

National City Corporation acquired by PNC

Paige Rausch (PAR) — Fri, 24 Oct 2008 09:02:59 -0500

PNC plans to issue to the U.S. Treasury $7.7 billion of preferred stock and related warrants under the TARP Capital Purchase Program subject to standard closing requirements. The U.S. Treasury Department approval of PNC's participation enables PNC to further strengthen its capital position, resulting in an estimated pro forma Tier 1 capital ratio for the combined company of approximately 10 percent.

"The acquisition of National City will increase our core deposit base to $180 billion, making PNC the fifth largest U.S. bank by deposits. At a time when core funding is key, we see our deposit strength as an important success factor. Upon closing the transaction, we will implement our successful business model and execute our strategies for managing risk, achieving cost efficiencies and growing high-quality revenue streams," said James E. Rohr, chairman and chief executive officer of PNC. "We believe this strategic combination will continue PNC's efforts to build capital strength and shareholder value. We are also gratified that we have been selected to participate in Treasury's Capital Purchase Program, which has helped to put this transaction on a very solid footing."

The transaction has an estimated internal rate of return to PNC of more than 15 percent and is expected to be accretive to PNC's earnings in the second year. PNC's fair value adjustments and provisions for future losses of National City's current loan portfolio will bring the cumulative impairment of these loans to approximately 17.5 percent. PNC will continue to liquidate non- core and impaired loans.

"The combined company will have greater scale and scope, enhancing service to our customers and communities and providing greater opportunities for our employees. This transaction is about two companies that fit well together in terms of geography, products and services," said Peter E. Raskind, chairman, president and chief executive officer of National City.

Upon closing the transaction, Raskind will be appointed a PNC vice chairman, and one National City director will join the board of the combined company.

In addition to ranking fifth nationally in deposits, the combination with National City is expected to place PNC fourth among U.S. banks in number of branches. It will give PNC the No. 1 deposit share position in Pennsylvania, Ohio and Kentucky and will rank the company No. 2 in Indiana and Maryland.

PNC expects to incur merger and integration costs of approximately $2.3 billion. The transaction is expected to result in the reduction of approximately $1.2 billion of noninterest expense through the elimination of operational and administrative redundancies.

Under terms of the agreement, PNC will acquire all outstanding shares of common stock of National City in a stock-for-stock transaction, which has been approved by the Boards of Directors of both companies. In connection with the transaction, National City has issued to PNC an option to acquire 19.9 percent of National City's common stock that becomes exercisable under certain specified circumstances. Corsair Capital, LLC, which owns approximately 7.8 percent of outstanding National City common shares, has agreed to vote all National City common shares it owns in favor of the deal and otherwise support the transaction. After closing, PNC intends to merge National City's banking affiliates into PNC Bank and they will assume the PNC Bank name. The merged entity will have its headquarters in Pittsburgh.

Based on PNC's closing NYSE stock price of $56.88 on October 23, 2008, the transaction values each share of National City's common stock at $2.23. The aggregate consideration is composed of a fixed number of approximately 92 million shares of PNC common stock. Additionally $384 million of cash is payable to certain warrant holders.

The transaction is currently anticipated to close by Dec. 31, 2008. The merger is subject to customary closing conditions, including both PNC and National City shareholders and regulatory approvals. Citigroup Global Markets Inc., JPMorgan Securities, Inc. and Sandler O'Neill + Partners, L.P. acted as financial advisers to PNC, and Wachtell, Lipton, Rosen & Katz acted as its legal adviser. Goldman Sachs acted as financial adviser to National City and Sullivan & Cromwell LLP acted as its legal adviser, and Cravath, Swaine & Moore LLP acted as legal adviser to the Board of Directors of National City.

CONFERENCE CALL AND SUPPLEMENTARY INFORMATION

Rohr and Chief Financial Officer Richard J. Johnson will hold a conference call for investors at 10:00 a.m. Eastern Time today regarding the announcement of the acquisition. Investors should call 5 to 10 minutes before the start of the conference call at 800-990-2718 or 706-643-0187 (international). The related presentation slides to accompany the conference call remarks may be found at http://www.pnc.com/investorevents. A taped replay of the call will be available for one week at 800-642-1687 and 706-645-9291 (international), conference ID 70844287. In addition, Internet access to the call (listen only) and to the presentation slides will be available at http://www.pnc.com/investorevents. A replay of the webcast will be available on PNC's Web site for 30 days.

The conference call may include a discussion of non-GAAP financial measures, which, to the extent not so qualified during the conference call, is qualified by GAAP reconciliation information that will be made available on PNC's Web site under "About PNC - Investor Relations." The conference call may include forward-looking information, which along with the presentation slides and this news release, is subject to the cautionary statements that follow.

National City Corporation, headquartered in Cleveland, Ohio, is one of the nation's largest financial holding companies. The company operates through an extensive banking network primarily in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania, and Wisconsin and also serves customers in selected markets nationally. Its core businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. For more information about National City, visit the company's Web site at nationalcity.com.

The PNC Financial Services Group, Inc. (http://www.pnc.com/) is one of the nation's largest diversified financial services organizations providing retail and business banking; specialized services for corporations and government, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.

The Trickle Up Plan...a new take on how to get the bailout working for Plumber Joe's and Builder Bob's

Paige Rausch (PAR) — Fri, 24 Oct 2008 04:38:05 -0500

As the financial crisis hits Main Street America, nearly one in six US homeowners are finding themselves in the same position, threatening the US economy with a new wave of foreclosures and bankruptcies.

About 12-million US homeowners owe more than their homes are worth, compared with 6,6-million at the end of last year and slightly more than three million at the close of 2006, said Mark Zandi, chief economist at Moody's Economy.com.

"At the root it's 'the' problem," said Zandi. "If you're going to put your finger on the one thing that's gotten us into this fiasco, it's the fact that millions of homeowners are under water on their homes." Already, US consumer spending is slumping as homeowners find they can no longer take equity out of their homes to fund their lifestyles.

In a slowing economy, it doesn't take much to push an underwater mortgage into default.

"When you're under water and you have some kind of hit to your income or some kind of unintended expense, that's when you default. And so now we've got this noxious mix of millions of people under water and quickly rising unemployment," Zandi said.

Wasteland

Cape Coral, built over swampland near Fort Myers on Florida's palm-fringed Gulf Coast, was fertile ground for the real estate boom, which peaked across much of the United States three years ago.

It is now a wasteland, with barren strip malls, a bloated inventory of unsold or abandoned homes and ubiquitous for-sale signs that speak volumes about the plunge in housing prices and surge in mortgage defaults that triggered the US credit crunch last year.

With current home prices likely to decline on average by another 10%, Zandi said there will be 14,6-million homeowners underwater by September next year.

"House prices have collapsed and you've got many homeowners who bought homes in the last three years who put very little down or have been borrowing against their homes," said Zandi. "That's causing this to rise very rapidly."

Economists like Zandi worry that the underlying housing crisis could eventually prove much more costly to the US taxpayer than the $700-billion the US government has pledged to recapitalise banks and buy up distressed debt from financial institutions.

"The government is going to have to start filling this negative equity hole and that's just going to be a direct cost to taxpayers," Zandi said. "This is going to be the really costly part, I think, for taxpayers."

While the US government has focused its rescue on banks, it has done little to help individuals who are struggling to pay their mortgages, apart from the Hope Now programme, which has facilitated a few hundred thousand mortgage restructurings.

The government may have no option but to step in, especially if a rising tide of foreclosures and fall-off in property and other tax revenues endanger municipalities and local governments and force some into bankruptcy.

Both presidential candidates have outlined plans for relief for distressed homeowners but critics say they have been short on details and there appears to be little consensus about how best to help homeowners who are underwater.

*The Above is only a portion of the Article by Tom Brown from Reuters, Click here for a Link to Complete Rueters Article

Below is a solution that makes more sense then anything I've seen....it's called the "The Trickle-Up Plan"

which advocates "Foreclosure Vouchers?"

by Mark Thoma of the RGE

The Plan works as follows:

Treasury, Regulators Issue Additional Guidance on Capital Purchase Program

Paige Rausch (PAR) — Tue, 21 Oct 2008 07:58:25 -0500

October 20, 2008
hp-1222

Treasury, Regulators Issue Additional Guidance on Capital Purchase Program

Washington, DC-- Treasury, the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation today issued application guidelines and other documents for the Capital Purchase Program announced last week.

REPORTS:

Application Guidelines for Capital Purchase Program

FAQs for Capital Purchase Program

Headlines on the Bailout Taking Place all over the World you should read.....Double or Nothing...We're Down $700 Billion!

Paige Rausch (PAR) — Sun, 12 Oct 2008 14:16:44 -0500

1. World readies rescue

U.K., Germany, France, others reported preparing emergency moves
Nations across the globe reported beginning to roll out new emergency measures to recapitalize banks, guarantee deposits and stabilize the world financial system amid fear of global meltdown.

Germany & Britain

The U.K. government is finalizing plans to invest billions of pounds in four of its largest banks as part of its efforts to stabilize the country's financial system, a move that could lead to the suspension of London stock trading Monday, according to media reports.

Australia & New Zealand

Australian Prime Minister Kevin Rudd said Sunday that his government will:

1. guarantee all deposits with institutions for the next three years to bolster confidence in the banking system.

2. guarantee all "term wholesale funding" by Australian banks operating in international credit markets to ensure they can compete against global rivals getting similar backing.

3. Austraila will double its pledge to purchase residential mortgage-backed securities to A$8 billion.

For its part, New Zealand said it would guarantee all retail bank deposits for the next two years to free up liquidity flows, the Associated Press quoted Finance Minister Michael Cullen as saying Sunday.

UAE, others

Even oil-rich Gulf nations were not immune from the need to protect their banks.

The United Arab Emirates said Sunday it will guarantee all credit risks and deposits at national banks and interbank lending among all banks operating in the UAE, the Financial Times reported.

The Abu Dhabi-based central bank also promised to inject extra liquidity if needed, as local banks are being frozen out of international debt markets and liquidity in local money markets is becoming increasingly scarce, the report said.

Poland's Finance Ministry, the central bank and the country's financial watchdog are set to meet the chief executives of Poland's top 10 banks Monday to discuss the current situation on the financial markets, a banking source said Sunday.

2. Germany said ready to give banks up to $135 billion in equity capital IMF: World on brink of meltdown, prepared to act

It is reported that Saturday that Germany was preparing a plan to bail out its financial sector -- not long after saying its banks didn't need such support. Handelsblatt, citing sources close to the talks on the matter, said that the $137 billion fund was part of a bigger package, valued at as much as 400 billion euros. That package also will include interbank guarantees or direct loans, the German paper said.

3. U.S. accounting board says firms can use 'significant judgment' in marking to market

The FASB ruling amplifies a statement it released with the Securities and Exchange Commission on Sept. 30, with examples of how companies should use their best judgment to value assets that have no active market.

"Determining fair value in a dislocated market depends on the facts and circumstances and may require the use of significant judgment about whether individual transactions are forced liquidations or distressed sales," Friday's FASB statement said.

"In determining fair value for a financial asset, the use of a reporting entity's own assumptions about future cash flows and appropriately risk-adjusted discount rates is acceptable when relevant observable inputs are not available," it said. Read full FASB position statement.

Countrywide ponys up 1 Billion in Florida as part of a settlement deal over "predatory lending", pass this on!

Paige Rausch (PAR) — Thu, 09 Oct 2008 07:25:41 -0500

The nation's largest mortgage lender, recently bought by Bank of America, settled "predatory lending" lawsuits with 11 states and will give back nearly $9-billion to Countrywide customers. Florida's lawsuit alleged Countrywide put people in mortgages they couldn't afford and misled them about rates and penalties.

In a deal meant to stave off home foreclosures, as many as 57,000 Florida homeowners could get $1-billion in relief from Countrywide Financial. The Countrywide effort is the most comprehensive, mandatory loan workout program since the mortgage crisis began last year.

The settlement came as Bank of America reported its third-quarter results Monday, earlier than planned, revealing a 68 percent drop in profit. It plans to boost capital by selling stock and halving its dividend.

How's this for justice?

Attorney General Bill McCollum News Release

October 6, 2008
Media Contact: Sandi Copes
Phone: (850) 245-0150

McCollum: Florida, States Settle Countrywide Lawsuits with Bank of America

TALLAHASSEE, FL – Attorney General Bill McCollum today announced that Florida and several other states have reached a multimillion dollar agreement in principle with Countrywide, a newly-acquired subsidiary of Bank of America. The agreement includes a $150 million foreclosure relief payment program and loan modifications for thousands of homeowners, including more than 57,000 Florida homeowners with qualifying Countrywide mortgages.

“This agreement will bring much-needed relief to countless homeowners, including thousands in Florida,” said Attorney General McCollum. “I appreciate Bank of America’s commitment to rectify the situations created by Countrywide’s loan practices.”

The agreement, which is still being finalized by the participating states, could provide nearly $1 billion in total relief to Florida homeowners alone and up to $8 billion nationwide, including the realized relief from modified loans. Under the terms of the agreement, the following relief initiatives will be offered:

Home Retention Efforts

Countrywide will launch a new Loan Modification Program for qualifying owner-occupied subprime home loans and pay option adjustable rate mortgages (ARMs) to move borrowers into fixed-rate, fully amortizing loans that they can afford. Additionally, Countrywide will suspend foreclosures on all loans that meet the eligibility criteria while determining whether or not the borrower qualifies for a loan modification, and will waive all loan modification fees associated with a modification under the new program. Approximately 52,000 Florida borrowers are anticipated to receive a loan modification under this plan.

Foreclosure Relief

Countrywide will make cash payments to eligible individual borrowers who have lost their homes to foreclosure after experiencing an early payment default or after an interest rate reset. Early payment default is an indicator that the loan was not underwritten properly and the homeowner could not afford the loan from the beginning, and default after reset is an indicator that a loan was not written to the fully-indexed, fully amortizing rate. Approximately $150 million will be available nationwide with more than $20 million earmarked for Florida borrowers.

Countrywide will also make approximately $60 million in cash payments nationwide to any borrowers in foreclosure who agree to voluntarily leave their home at the time of foreclosure sale. Florida borrowers in foreclosure could receive up to $4 million under the relocation assistance program.

Other Relief

Countrywide will waive late fees for the delinquency that led to borrowers receiving loan modifications under the new program. Approximately $79 million in late fees will be waived nationwide, and $9.7 million will be waived in Florida. Countrywide will also waive prepayment penalties on subprime and pay option ARM loans owned by Countrywide. Approximately $56 million in prepayment penalties will be waived nationwide, and $8 million will be waived in Florida.

Once finalized, the agreement will resolve the allegations against the Bank of America-owned subsidiary in a lawsuit filed by Attorney General McCollum prior to Countrywide’s acquisition. The lawsuit asserted Countrywide put borrowers into mortgages they couldn't afford or loans with rates and penalties that were misleading. The company’s deceptive marketing practices were purportedly designed to sell costly loans while hiding or misrepresenting the terms and dangers. Bank of America acquired the company the day after the lawsuit was filed and has worked with the Attorneys General to resolve the allegations against its subsidiary.

In addition to Florida, participating states currently include Arizona, California, Connecticut, Illinois, Iowa, Michigan, Ohio, Texas, and Washington. Additional states may join the agreement in the coming days. Consumers can call Countrywide toll-free at 1-800-669-6607 for additional information.

Bernanke's next move is to consider Rate Cut to head off further Credit Deterioration

Paige Rausch (PAR) — Tue, 07 Oct 2008 12:41:52 -0500

In light of developments - where the outlook for growth has worsened while the outlook for inflation has improved, "the Fed will need to consider whether the current stance of policy remains appropriate," Bernanke said in a speech prepared for delivery to a meeting of the National Association of Business Economics.

The Fed has maintained a balanced, or neutral, stance towards future rate moves since April - by signaling to the market that the risk of a downturn and the risk of higher prices were roughly even.

Bernanke's speech suggests that he believes the financial turmoil has tipped the scale towards the threat of a serious slowdown, which isn't exactly news for most of us but its good the Fed is acknoledging is FINALLY!

From a layperson perspective the only thing this might do is decrease default risk, which in turn takes pressure off the people and entities that are borrowing or borrowed in the past. BUT.....

Will it trickle down into an increase in consumer confidence?

Speech from Chairman Ben S. Bernanke

At the National Association for Business Economics 50th Annual Meeting, Washington, D.C.

October 7, 2008

Good afternoon. I am pleased to have once again the opportunity to address the National Association for Business Economics. My remarks today will focus on recent developments in the financial sector and the economy and on the challenges we face.

As you know, financial systems in the United States and in much of the rest of the world are under extraordinary stress, particularly the credit and money markets. The losses suffered by many banks and nonbank financial firms have both constrained their ability to lend and reduced the willingness of other market participants to deal with them. Great uncertainty about the values of financial assets, particularly more complex and opaque assets, has made investors extremely reluctant to bear credit risk, resulting in further declines in asset prices and a drying up of liquidity in a number of funding markets. Even secured funding has become expensive and difficult to obtain, as lenders worry about their ability to sell collateral in illiquid markets in the event of default. In addition, many securitization markets, such as the secondary market for private-label mortgage-backed securities, remain closed or impaired.

Considerable experience in both industrialized and emerging economies has shown that severe financial instability, together with the associated declines in asset prices and disruptions in credit markets, can take a heavy toll on the broader economy if left unchecked. For this reason, the Federal Reserve, the Treasury, and other agencies are committed to restoring market stability and are working assiduously to ensure that the financial system is able to perform its critical economic functions. Recent actions by the Congress have given the Treasury new tools and resources to address the stressed conditions of our financial markets and institutions. The Federal Reserve has also been granted a new authority, the ability to pay interest on bank reserves, which will allow us to expand our lending as needed to support the system while better managing the federal funds rate. These tools will provide important additional support for the government's efforts to strengthen financial markets and the economy.

Let me briefly review recent financial developments. On the heels of nearly a year of stress in credit markets, investors' and creditors' concerns about funding and credit risks at financial firms intensified over the summer as mortgage-related assets deteriorated further, economic growth slowed, and uncertainty about the economic outlook increased. As investors and creditors lost confidence in the ability of certain firms to meet their obligations, their access to capital markets as well as to short-term funding markets became increasingly impaired and their stock prices fell sharply. Among the companies that experienced this dynamic most forcefully were the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac; the investment bank Lehman Brothers; and the insurance company American International Group (AIG).

The Federal Reserve believes that, whenever possible, such difficulties should be addressed through private-sector arrangements--for example, by raising new equity capital, as many firms have done, by negotiations leading to a merger or acquisition, or by an orderly wind-down. Government assistance should be provided with the greatest reluctance and only when the stability of the financial system, and thus the health of the broader economy, is at risk. In those cases when financial stability is threatened, however, intervention to protect the public interest may well be justified.

Fannie Mae and Freddie Mac present cases in point. The Federal Reserve had long warned about the systemic risks posed by these companies' large portfolios of mortgages and mortgage-backed securities, as well as the problems arising from the conflict between shareholders' objectives and the government's goals for the two firms. Given the scale of losses in their portfolios, raising enough new capital from private investors was infeasible. The firms' size and their government-sponsored status precluded a merger with, or acquisition by, another company. To avoid unacceptably large dislocations in the mortgage markets, the financial sector, and the economy as a whole, the Federal Housing Finance Agency (FHFA) put Fannie and Freddie into conservatorship and the Treasury, drawing on authorities recently granted by the Congress, made financial support available. The Federal Reserve, acting in a consultative role, worked closely with FHFA in evaluating the GSE portfolios and capital positions. Based on the joint findings of the agencies, we supported FHFA's decision to place the companies into conservatorship as necessary and appropriate, given their conditions and systemic importance. The government's actions appear to have stabilized the GSEs, although like virtually all other firms they are experiencing effects of the current crisis. Nonetheless, we already have seen benefits of their stabilization in the form of lower mortgage rates, which should help the housing market.

The difficulties at Lehman and AIG raised somewhat different issues. Like the GSEs, both companies were large and complex and deeply embedded in our financial system. In both cases, as the firms approached default, the Treasury and the Federal Reserve sought private-sector solutions, but none was forthcoming. Attempts to organize a consortium of private firms to purchase or recapitalize Lehman were unsuccessful. With respect to public-sector solutions, we determined that either facilitating a sale of Lehman or maintaining the company as a free-standing entity would have required a very sizable injection of public funds--much larger than in the case of Bear Stearns--and would have involved the assumption by taxpayers of billions of dollars of expected losses. Even if assuming these costs could be justified on public policy grounds, neither the Treasury nor the Federal Reserve had the authority to commit public money in that way; in particular, the Federal Reserve's loans must be sufficiently secured to provide reasonable assurance that the loan will be fully repaid. Such collateral was not available in this case. Recognizing that Lehman's potential failure posed risks to market functioning, the Federal Reserve sought to cushion the effects by implementing a number of measures, including substantially broadening the collateral accepted by the Fed's Primary Dealer Credit Facility (PDCF) and Term Securities Lending Facility (TSLF) to ensure that the remaining primary dealers would have uninterrupted access to funding.

In the case of AIG, the Federal Reserve and the Treasury judged that a disorderly failure of AIG would have severely threatened global financial stability and the performance of the U.S. economy. That judgment reflected our assessment of prevailing market conditions, AIG's central role in a number of markets other firms use to manage risks, and the size and composition of AIG's balance sheet. To avoid the default of AIG, the Federal Reserve was able to provide emergency credit that was judged to be adequately secured by the assets of the company. To protect U.S. taxpayers and to mitigate the possibility that lending to AIG would encourage inappropriate risk-taking by financial firms in the future, the Federal Reserve further ensured that the terms of the credit extended to AIG imposed significant costs and constraints on the firm's owners, managers, and creditors.

AIG's difficulties and Lehman's failure, along with growing concerns about the U.S. housing sector and economy, contributed to extraordinarily turbulent conditions in global financial markets in recent weeks. Equity prices have fallen sharply, the cost of short-term credit, where such credit has been available, has spiked, and liquidity has dried up in many markets. One money market fund's losses forced it to "break the buck"--that is, the value of its assets fell below par--an event that triggered extensive withdrawals from a number of money market funds. Those funds responded to the surge in redemptions by attempting to reduce their holdings of commercial paper and large certificates of deposit issued by banks. Some firms that could not roll over maturing commercial paper drew on back-up lines of credit with banks just as the banks were finding it even more difficult to raise cash in the money markets. At the same time, a marked increase in the demand for safe assets--a flight to quality and liquidity--resulted in a further drop in the value of mortgage-related assets and sent the yield on Treasury bills down to a few hundredths of a percent.

Developments during the summer pressured not only nonbank financial firms, but also a number of depository institutions, including Washington Mutual (WaMu) and Wachovia. In recent weeks, these two institutions suffered deposit outflows and reduced access to wholesale funding. The Office of Thrift Supervision, WaMu's regulator, closed that company and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver; the FDIC immediately sold the institution to JPMorgan Chase. In the case of Wachovia, to avoid serious adverse effects on economic conditions and financial stability, the Secretary of the Treasury, in consultation with the President and on the recommendation of the Federal Reserve and FDIC, authorized the FDIC to use its funds to facilitate the sale of that company's banking operations without loss to creditors. Both Citicorp and Wells Fargo have offered to buy the company and negotiations are continuing. Most importantly, however, in either case all depositors and creditors of Wachovia are fully protected, and depositors and other customers will experience no interruption in banking services.

By potentially restricting future flows of credit to households and businesses, the developments in financial markets pose a significant threat to economic growth. The Treasury and the Fed have taken a range of actions to address the very tight funding conditions that now prevail. For example, the Treasury implemented a temporary guarantee program for balances held in money market mutual funds, helping to stem the outflows from these funds and thus reducing their need to sell assets into already distressed markets. The Federal Reserve has taken a number of steps, including putting in place a temporary lending facility that provides financing for banks to purchase high-quality asset-backed commercial paper from money market funds. The Fed has also significantly increased the quantity of funds it auctions to banks and has accommodated heightened demands for funding from banks and primary dealers; as of last Wednesday, our various lending facilities, including our securities lending program, were providing more than $800 billion of liquidity to the financial system. To address dollar funding pressures worldwide, we have significantly expanded reciprocal currency arrangements (so-called swap agreements) with foreign central banks. These agreements enable the foreign central banks to provide dollar funding to financial institutions in their jurisdictions, which helps to improve the functioning of dollar funding markets globally. In addition, this morning the Federal Reserve announced a new facility that will help provide liquidity to term funding markets by purchasing three-month commercial paper and asset-backed commercial paper directly from eligible issuers.

The expansion of Federal Reserve lending is helping financial firms cope with reduced access to their usual sources of funding. Recently, however, our liquidity provision had begun to run ahead of our ability to absorb excess reserves held by the banking system, leading the effective funds rate, on many days, to fall below the target set by the Federal Open Market Committee. This problem has largely been addressed by a provision of the legislation the Congress passed last week, which gives the Federal Reserve the authority to pay interest on balances that depository institutions hold in their accounts at the Federal Reserve Banks. The Federal Reserve announced yesterday that it will pay interest on required reserve balances at 10 basis points below the target federal funds rate, and pay interest on excess reserves, initially at 75 basis points below the target. Paying interest on reserves should allow us to better control the federal funds rate, as banks are unlikely to lend overnight balances at a rate lower than they can receive from the Fed; thus, the payment of interest on reserves should set a floor for the funds rate over the day. With this step, our lending facilities may be more easily expanded as necessary. So long as financial conditions warrant, we will continue to look for ways to reduce funding pressures in key markets.

Economic activity had shown signs of decelerating even before the recent upsurge in financial-market tensions. As has been the case for some time, the housing market continues to be a primary source of weakness in the real economy as well as in the financial markets. However, the slowdown in economic activity has spread outside the housing sector. Private payrolls have continued to contract, and the declines in employment, together with earlier increases in food and energy prices, have eroded the purchasing power of households. This sluggishness of real incomes, together with tighter credit and declining household wealth, is now showing through more clearly to consumer spending. Indeed, since May, real consumer outlays have contracted significantly. Meanwhile, in the business sector, worsening sales prospects and a heightened sense of uncertainty have begun to weigh more heavily on investment spending as well.

The intensification of financial turmoil and the further impairment of the functioning of credit markets seem likely to increase the restraint on economic activity in the period ahead. Even households with good credit histories are now facing difficulties obtaining mortgage loans or home equity lines of credit. Banks are also reducing credit card limits, and denial rates on automobile loan applications reportedly are rising. Businesses, too, are confronting diminished access to credit. For example, disruptions in the commercial paper market and tightening of bank lending standards have made it more difficult for businesses to obtain the working capital they need to meet everyday operating expenses such as payrolls and inventories.

All told, economic activity is likely to be subdued during the remainder of this year and into next year. The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance and further increase the risks to growth. To support growth and reduce the downside risks, continued efforts to stabilize the financial markets are essential. The Federal Reserve will continue to use the tools at its disposal to improve market functioning and liquidity.

Inflation has been elevated, reflecting the steep increases in the prices of oil, other commodities, and imports that occurred earlier this year, as well as some pass-through by firms to consumers of their higher costs of production. However, more recently, the prices of oil and other commodities, while remaining quite volatile, have fallen from their peaks, and prices of imports show signs of decelerating. In addition, expected inflation, as measured by consumer surveys and inflation-indexed Treasury securities, has held steady or eased. These recent developments, together with economic activity that is likely to fall short of potential for a time, should lead to rates of inflation more consistent with price stability. Still, the inflation outlook remains highly uncertain, in part because of the extraordinary volatility of commodity prices. We will need to continue to monitor price developments closely.

Overall, the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased. At the same time, the outlook for inflation has improved somewhat, though it remains uncertain. In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate.

The intensification of the financial crisis in recent weeks made clear that a more powerful and comprehensive approach involving the fiscal authorities was needed to solve these problems. On that basis, the Secretary of the Treasury, with the support of the Federal Reserve, went to the Congress to ask for a substantial program aimed at stabilizing our financial markets. As you know, last week the Congress passed and the President signed the Emergency Economic Stabilization Act. This legislation provides important new tools for addressing the distress in financial markets and thus mitigating the risks to the economy. The act adds broad, flexible authorities to buy troubled assets, to provide guarantees, and to directly strengthen the balance sheets of individual institutions. Notably, the legislation establishes a new Troubled Asset Relief Program, or TARP, under which the Treasury is authorized to purchase as much as $700billion of troubled mortgages, mortgage-related securities, and other financial instruments from financial firms that are regulated under U.S. law and have significant operations in the United States. The act also raises the limit on deposit insurance at banks and credit unions from $100,000 to $250,000 per account, a step that should reinforce depositors' confidence in the security of their funds and thus help to stabilize depository institutions. And, as I mentioned, the act provides the Federal Reserve the authority to pay interest on reserves, which will allow us to better manage the federal funds rate as we provide liquidity to the markets. We will begin exercising that authority this week.

The TARP's purchases of illiquid assets from banks and other financial institutions will create liquidity and promote price discovery in the markets for these assets. This in turn will reduce investor uncertainty about the current value and prospects of financial institutions, enabling banks and other institutions to raise capital and increasing the willingness of counterparties to engage. More generally, increased liquidity and transparency in pricing will help to restore confidence in our financial markets and promote more normal functioning. With time, strengthening our financial institutions and markets will allow credit to begin flowing again, supporting economic growth.

The interests of taxpayers are carefully protected under this program. First, the Congress has required extensive controls and oversight to ensure that the allotted funds are used appropriately and effectively. Second, the $700 billion allocated by the legislation is not an authorization to spend but rather an authorization to purchase financial assets. The Treasury will be a patient investor and will likely hold these assets for an appreciable period of time. Eventually, however, some assets will mature, and the Treasury will choose to sell others to private investors. Financially, in the long run, the taxpayer may come out either ahead or behind in this process; in light of the many uncertainties, no assurances can be given. But the ultimate cost of the program to the taxpayer will certainly be far less than $700 billion. Third, and most important, restoring the normal flow of credit is essential for economic recovery. If the TARP promotes financial stability, leading ultimately to stronger economic growth and job creation, it will have proved a very good investment indeed, to everyone's benefit.

To be sure, there are many challenges associated with the design and implementation of the TARP, including determining which assets will be purchased and how prices will be determined. The Treasury, with the advice and cooperation of the Federal Reserve, is working to address these challenges as quickly as possible. It is unlikely that a single method will be used for acquiring assets; inevitably, some experimentation will be necessary to determine which approaches are most effective. Importantly, the legislation that created the TARP does provide sufficient flexibility to allow for different approaches to solving the problem--subject, of course, to the close oversight that will ensure that the program's funds are used in ways that are in the interest of taxpayers.

These are momentous steps, but they are being taken to address a problem of historic dimensions. In one respect, however, we are fortunate. We have learned from historical experience with severe financial crises that if government intervention comes only at a point at which many or most financial institutions are insolvent or nearly so, the costs of restoring the system are greatly increased. This is not the situation we face today. The Congress and the Administration chose to act at a moment of great stress, but one at which the great majority of financial institutions have sufficient capital and liquidity to return to their critical function of providing new credit for our economy. The steps being taken now to restore confidence in our institutions and markets will go far to resolving the current dislocations in the markets. I believe that the bold actions taken by the Congress, the Treasury, the Federal Reserve, and other agencies, together with the natural recuperative powers of the financial markets, will lay the groundwork for financial and economic recovery.

Current Economic and Financial Conditions

Banks Don't want anything to do with each other, now what?

Paige Rausch (PAR) — Tue, 07 Oct 2008 08:11:54 -0500

Unfortunately, the worst is still yet to come if you consider the Libor an inidcator.

Here's why:

1. The spread between Overnight Indexed Swaps (OIS) and the three-month LIBOR rose to an all time high of 2.94%.

The LIBOR/OIS spread measures the amount of cash available for interbank lending and is used by banks to determine interest rates. The wider the spread, the less cash there is to go around. This is telling us that banks, despite billions of central-bank support in recent months, are still cash-strapped and are disinclined to lend money either to each other or to consumers.

2. LIBOR, which equates to the rate that banks charge each other for overnight dollar loans rose to 2.37% yesterday, the British Bankers’ Association said.

For those of you who don't follow what the LIBOR is.....it's a set of rates, and is calculated for several currencies based on periods ranging from overnight to 12 months.

3. Last week as U.S. lawmakers tussled over a bailout plan and governments in Europe were forced to intercede to rescue five banks, the cost of one-month bank loans in euros and overnight dollar loans soared to records, which simply put means banks are hoarding cash!

4. Yesterday’s three-month LIBOR for loans in dollars jumped to 4.33%.

5. The TED spread, which is the difference between three-month LIBOR and what the U.S. Treasury pays for a three-month loan hit an all-time high of 3.93%, before pulling back slightly. The TED spread provides a gauge of how likely banks are to lend to each other, rather than to the Federal Government.

Under normal conditions, the banks charge each other premiums that are historically not much higher than government Treasuries.

Conclusion:

The fact that the spread is at all-time highs seemingly confirms that banks don’t want anything to do with one another, and would rather deal with the government.

To get interbank lending going again, banks must have confidence in each other’s solvency and liquidity.

How can we restore trust in these interbank relationships?

There are a number of options 3 of which are below, explained by one of the authors of the FT(Financial Times), Mr. Willem Buiter:

Nationalise the banks. When they have a common majority owner (the state), the state can simply instruct the banks to lend to each other. Problem solved. It may come to that in any case, but for those who are not ready for such measures, here are a couple more.
Guarantee interbank lending. Here the Treasury guarantees interbank transactions, both secured and unsecured. This should be done against fees that ensure the Treasury an acceptable risk-adjusted rate of return on this activity.
Have the central bank interpose itself as the universal counterparty for interbank transactions. This is effectively already the case in the overnight market in the UK and the euro area. When the Fed starts paying interest on reserves (commercial bank deposits with the Federal Reserve System), we will see the same phenomenon there. In the UK, for instance, banks hold large deposits overnight with the Bank of England at the standing deposit facility (which pays 100 basis points below Bank Rate (the official policy rate) )and borrow either by running down these overnight deposits or by borrowing overnight at the standing lending facility (at a rate 100 basis points above Bank Rate). The same phenomenon can be observed with banks in the euro area. That 200 basis points spread (between the standing deposit and standing lending facilities rates) is hefty, but banks prefer it to taking the counterparty risk of other banks, even overnight. Instead of commercial banks A and B lending directly to each other at longer maturities than overnight, bank A could lend to the Bank of England, and the Bank of England could then on-lend to bank B, more or less ‘on demand’. This would require the Bank of England to take a view of what the interbank rate ought to be at all the maturities where it acts as the universal counterparty of last resort - something it has been loath to do. It could do this either for unsecured transactions or for both secured and unsecured transactions. The spreads and other fees associated with this counterparty of last resort role would vary with the maturity of the loan, the quality of collateral, and the Bank of England’s assessment of the creditworthiness of the banks borrowing from it.

Following The Fed .....This morning they announced plans to increase the size of its loans to banks to a potential $900 billion

Paige Rausch (PAR) — Mon, 06 Oct 2008 07:37:39 -0500

The Federal Reserve and Treasury Department separately announced Monday new steps to deal with the continuing financial market turmoil. The Fed said it would increase the size of its loans to banks to a potential $900 billion.

The central bank announced that it will begin to pay interest on bank reserves. This will give the Fed "greater scope" to address conditions in credit market. The Treasury actions were aimed at the massive borrowing needs required under the new mortgage financing plan approved by Congress last week.

Treasury adjustments:

1. Increase the size of bill and note auctions

2. Continue issuing cash management bills(some of longer-duration)

3. The are also considering bringing back the 3-year note in November

Press Release

Release Date: October 6, 2008

For release at 8:15 a.m. EDT

The Federal Reserve Board on Monday announced that it will begin to pay interest on depository institutions' required and excess reserve balances. The payment of interest on excess reserve balances will give the Federal Reserve greater scope to use its lending programs to address conditions in credit markets while also maintaining the federal funds rate close to the target established by the Federal Open Market Committee.

Consistent with this increased scope, the Federal Reserve also announced today additional actions to strengthen its support of term lending markets. Specifically, the Federal Reserve is substantially increasing the size of the Term Auction Facility (TAF) auctions, beginning with today’s auction of 84-day funds. These auctions allow depository institutions to borrow from the Federal Reserve for a fixed term against the same collateral that is accepted at the discount window; the rate is established in the auction, subject to a minimum set by the Federal Reserve.

In addition, the Federal Reserve and the Treasury Department are consulting with market participants on ways to provide additional support for term unsecured funding markets.

Together these actions should encourage term lending across a range of financial markets in a manner that eases pressures and promotes the ability of firms and households to obtain credit. The Federal Reserve stands ready to take additional measures as necessary to foster liquid money market conditions.

Interest on Reserves
The Financial Services Regulatory Relief Act of 2006 originally authorized the Federal Reserve to begin paying interest on balances held by or on behalf of depository institutions beginning October 1, 2011. The recently enacted Emergency Economic Stabilization Act of 2008 accelerated the effective date to October 1, 2008.

Employing the accelerated authority, the Board has approved a rule to amend its Regulation D (Reserve Requirements of Depository Institutions) to direct the Federal Reserve Banks to pay interest on required reserve balances (that is, balances held to satisfy depository institutions’ reserve requirements) and on excess balances (balances held in excess of required reserve balances and clearing balances).

The interest rate paid on required reserve balances will be the average targeted federal funds rate established by the Federal Open Market Committee over each reserve maintenance period less 10 basis points. Paying interest on required reserve balances should essentially eliminate the opportunity cost of holding required reserves, promoting efficiency in the banking sector.

The rate paid on excess balances will be set initially as the lowest targeted federal funds rate for each reserve maintenance period less 75 basis points. Paying interest on excess balances should help to establish a lower bound on the federal funds rate. The formula for the interest rate on excess balances may be adjusted subsequently in light of experience and evolving market conditions. The payment of interest on excess reserves will permit the Federal Reserve to expand its balance sheet as necessary to provide the liquidity necessary to support financial stability while implementing the monetary policy that is appropriate in light of the System’s macroeconomic objectives of maximum employment and price stability.

The Board also approved other related revisions to Regulation D to prescribe the treatment of balances maintained by pass-through correspondents under the new rule and to eliminate transitional adjustments for reserve requirements in the event of a merger or consolidation. In addition, the Board approved associated minor changes to the method for calculating earnings credits under its clearing balance policy and the method for recovering float costs.

The revisions to Regulation D and the other changes will take effect on Thursday, October 9, 2008. The Board recognizes that depository institutions may choose to adjust their typical liquidity management practices in light of the payment of interest on required reserve balances and excess balances; the primary credit program and other Federal Reserve liquidity facilities are available to help institutions meet temporary funding requirements.

The Board’s notice of its actions regarding the amendments to Regulation D and associated changes is attached. While the action is effective immediately, the Board will accept public comments until November 21, 2008, and the proposal will be published in the Federal Register shortly. The Board will adjust the rule as appropriate in light of comments.

Substantial Further Increases in Term Auction Facility Auctions
The sizes of both 28-day and 84-day Term Auction Facility (TAF) auctions will be boosted to $150 billion each, effective with the 84-day auction to be conducted Monday. These increases will eventually bring the amounts outstanding under the regular TAF program to $600 billion. In addition, the sizes of the two forward TAF auctions to be conducted in November to extend credit over year end have been increased to $150 billion each, so that $900 billion of TAF credit will potentially be outstanding over year end.

Exemption to Allow Limited Bank Purchases of Assets from Money Market Mutual Funds
The Board on Monday published a letter granting a request by a depository institution for an exemption from the limits on transactions with affiliates under section 23A of the Federal Reserve Act and the Board’s Regulation W to allow the institution to purchase assets from affiliated money market mutual funds under certain circumstances. The Board is open to considering similar requests from depository institutions under similar circumstances.

Federal Register notice (56 KB PDF)

Interest on Required Reserve Balances and Excess Balances FAQs (23 KB PDF)

Interest on Reserves and the Implementation of Monetary Policy FAQs

2008 Monetary Policy Releases

The UAE Announces "Liquidity Facility"

Paige Rausch (PAR) — Wed, 01 Oct 2008 01:47:44 -0500

The UAE Central bank announced special 50b dirham ($13.6b) liquidity facility to provide capital to banks which are exposed to the withdrawal of foreign capital and freezing of global credit markets. The new funding facility will be available to banks operating in the country. The central bank has reviewed additional resources to provide support as needed.

There is huge demand for funds in the UAE market and there has been a massive shortfall in the availability of funds in the context of credit squeeze in the international markets. The fund infusion will certainly help ease the shorfall," said Jason Goff," Head of Treasury sales at Emirates NBD.

Marios Maratheftis Regional Head of Research, Standard Chartered Bank, said: "UAE authorities have the financial strength to add liquidity when needed, and this move suggests that the central bank is seeing the need to provide the market with added liquidity now. Even with liquidity drying up and interbank rates rising, in real terms, interest rates are still significantly negative."

Analysts view this move as similar to those made by major central banks including the Federal Reserve and European Central Bank, which resulted in markets responding positively.

What makes even the UAE vulnerable?

Are either one of the Candidates getting advice from Financial Experts?

Paige Rausch (PAR) — Tue, 30 Sep 2008 23:31:22 -0500

Republican John McCain and Democrat Barack Obama proposed that the government insure consumers' bank deposits up to $250,000 by raising the $100,000 federal limit as each sought to navigate the unpredictable politics of the financial crisis.

I’m curious, where do you think the money for this will come from?

Taking into consideration that the FDIC is already under a strain from the recent string of bank failures, and it will take time for the FDIC to build up some reserves to back a new $250,000 limit. Those additional reserves will have to come from additional insurance premiums paid by banks, many of which are already in financial trouble. So in the meantime, taxpayers will be on the hook for the additional insurance.

The Federal Deposit Insurance Corp., an independent federal agency created in 1933, insures deposits in banks and thrift institutions for at least $100,000. Premiums paid by member institutions and investment earnings in Treasury securities fund the agency, which has an insurance fund of more than $49 billion, according to its Web site.

The FDIC says it insures more than $3 trillion in deposits and already provides up to $250,000 in insurance for retirement accounts such as individual retirement accounts and Keoghs. A five-person bipartisan board of directors appointed by the president manages the agency.

Name: Paige Rausch

Email: Contact Paige Rausch

Office Phone:(239) 443-2500

Cell Phone:(239) 691-4321

Fax: (239) 425-8653

The bailout was for $700 Billion dollars, and the over 1 Trillion dollar loss in the market equates to more than $300 Billion dollars then the amount of the Bailout LOST in Just ONE DAY!

Paige Rausch (PAR) — Mon, 29 Sep 2008 22:21:55 -0500

Congressmen voted 228 to 205 against the measure to authorize the biggest government intervention into markets since the Great Depression. The Dow Jones Industrial Average slid 778 points for its biggest point drop ever as $1.2 trillion in market value was erased from American equities.

A horrible misconception is greatly disturbing me, it seems that people want to blame Wall Street for all the ills of the market, and I appreciate that feeling, BUT....

I also appreicate that Lehman Brothers, and Bears Stearns are now nonexistent, and Goldman Sachs and Morgan Stanley are fighting to stay alive.

The blame for this mess is not the "Big Guys" fault alone, Wall Street created financial securities, specifically secondary markets in asset backed securities, that allowed Americans to live the American dream. Buying new cars, going to Disney Land, investing in multiple homes in which they had NO business doing(and sometimes exagerating their incomes on loan applications-which is criminal). Wall Street created securities, they bought them and sold them, held them for investment and traded them for fee. That's all they did. Meanwhile, as a result, the every day Joe and Jane were able to own their first home and a new car too.

A few points from my perspective on the ongoing events, and who should share in the blame for the need for a "Bail Out":

1. The Vote today was Not Bailing Out Wall Street. We were not bailing out Wall Street, but if we were, they would deserve as much as the Main Street banks we really are saving. Washington Mutual is not located on Wall Street, nor is Wachovia. National City is no where near Wall Street.

2. Standard & Poor's and Moody's? We rely on them to analyze securities, and one should ask did they negligently label too many of them as investment grade? When the housing values were soaring, it didn't matter, but it surely did as the housing bubble popped. Thank them for some of the problems.

3. Mortgage Brokers(Sorry, there are many of you that are my friends, but you know that not everyone holds themselves to the same ethical standard so please don't take offense). Who created liar loans? The market for the most part has taken care of the problem brokers, but part of the blame can be attributed to loan products that were simply unnatural and fell into the category of too good to be true. Also, some of the banks that originated these loans took on great risk for the sake of greed. Greedy men working for those banks originated bad loans, and sought Wall Street's help to package them and sell them since they could be rated investment grade and dumped onto others.

4. Society(US) People just like you and me made these mistakes, and people like me and you allowed it to happen by not staying informed with the goings on of our society and by not seeking to improve upon it.

5. The Treasury plan from Paulsen needs work, the plan did not address the need to recapitalize badly undercapitalized financial institutions. Nor did the plan include an HOLC-style program to reduce across the board the debt burden of the distressed household sector. Our leaders need to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. For everyone from traders, investors and banks to the average American, the latest development in the TARP means one thing-The Treasury has failed to restore confidence in the financial markets and it could be some time before there is stabilization.

Quotes and information in the media today that should impact your thoughts on the events of today:

``They've got to come up with something or the damage is unimaginable,'' said Henry Herrmann, Overland Park, Kansas-based president and chief executive officer of Waddell & Reed Financial Inc., which manages $70 billion.

``There's a real opportunity for this thing to totally unwind into chaos if we can't get some real direction from Washington,'' said Russ Kamp, chief executive officer of Invesco Quantitative Strategies, which manages about $461 billion in New York.

Wachovia Corp. tumbled 82 percent after the bank was sold to Citigroup Inc. in a deal brokered by the Federal Deposit Insurance Corp., sending shares of Sovereign Bancorp Inc. (The second-largest U.S. savings and loan)down 72 percent and National City Corp. (Ohio's biggest bank)63 percent lower.

Goldman Sachs Group Inc. (Warren Buffets Baby)and Morgan Stanley, the two largest Wall Street securities firms, fell more than 12 percent.

General Motors Corp., Chevron Corp. and Intel Corp. sank more than 10 percent each.

The next 10 days will be very interesting, likely a worldwide market cataclysm such as we have not yet seen. Our financial system needs fixing. This is the problem, but where are the true leaders and brilliant minds that know the answers?

The bailout was for $700 Billion dollars, and the over 1 Trillion dollar loss in the market equates to more than $300 Billion dollars then the amount of the Bailout LOST in Just ONE DAY!

In closing, Please take time to consider that volatility in the financial markets benefits no one.

How will we know if the Bailout worked?

Paige Rausch (PAR) — Mon, 29 Sep 2008 09:55:54 -0500

Some of the banking industry's first responses won't be immediately visible to most Americans, but they are critical to the proper functioning of the U.S. financial system.

For instance, a drop in a crucial short-term lending rate called the London Interbank Offered Rate , or Libor, would be a telltale sign that banks are less anxious about extending credit to each other - and the rest of us.

In the short term, there are several economic reports to watch for clues about whether credit conditions are improving:

1. The Federal Reserve's quarterly senior loan officers' survey, which tracks banks' appetite to lend; Every quarter the Federal Reserve System surveys a panel of senior loan officers at major banks across the nation. The results of this survey have been found in previous studies to provide useful information in predicting gross domestic product. This paper extends that work, finding that sector-specific survey results are relevant for predicting real activity in those sectors but, strangely, that the informative power of the survey results only marginally extend to various measures of performance in the banking sector. May 2008 Survey

2. The Fed's weekly report on emergency loans provided to banks and investment firms

3. Freddie Mac's weekly report on mortgage rates

4. The Mortgage Bankers Association's quarterly survey of home foreclosures and delinquencies.

Citigroup Inc. to Acquire Banking Operations of Wachovia

Paige Rausch (PAR) — Mon, 29 Sep 2008 09:50:55 -0500

Press Releases

Citigroup Inc. to Acquire Banking Operations of Wachovia
FDIC, Federal Reserve and Treasury Agree to Provide Open Bank Assistance to Protect Depositors

FOR IMMEDIATE RELEASE
September 29, 2008

Media Contact:
Andrew Gray (202) 898-7192
angray@fdic.gov

Citigroup Inc. will acquire the banking operations of Wachovia Corporation; Charlotte, North Carolina, in a transaction facilitated by the Federal Deposit Insurance Corporation and concurred with by the Board of Governors of the Federal Reserve and the Secretary of the Treasury in consultation with the President. All depositors are fully protected and there is expected to be no cost to the Deposit Insurance Fund. Wachovia did not fail; rather, it is to be acquired by Citigroup Inc. on an open bank basis with assistance from the FDIC.

"For Wachovia customers, today's action will ensure seamless continuity of service from their bank and full protection for all of their deposits." said FDIC Chairman Sheila C. Bair. "There will be no interruption in services and bank customers should expect business as usual."

Citigroup Inc. will acquire the bulk of Wachovia's assets and liabilities, including five depository institutions and assume senior and subordinated debt of Wachovia Corp. Wachovia Corporation will continue to own AG Edwards and Evergreen. The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.

In consultation with the President, the Secretary of the Treasury on the recommendation of the Federal Reserve and FDIC determined that open bank assistance was necessary to avoid serious adverse effects on economic conditions and financial stability.

"On the whole, the commercial banking system in the United States remains well capitalized. This morning's decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury," Bair said. "This action was necessary to maintain confidence in the banking industry given current financial market conditions."

Wachovia customers with questions should call their normal banking representative, service center, 1-800-922-4684 or visit www.wachovia.com. The FDIC's consumer hotline is 1-877-ASK-FDIC (1-877-275-3342) or visit www.fdic.gov.