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Bank worries continue

There have been several posts and articles about troubled banks and federal regulators increasing staff to manange upcoming failures. The last three banks to be closed were smaller banks that had evidently suffered liquidity problems from commercial real estate. Jim Crawford, of Atlanta, wrote about the most recent bank to fail.

Some high profile economists are now indicating that there will be one or two large banks to fail. These banks have already moved in some way to reduce their mortgage lending operations.

Former IMF chief economist Kenneth Rogoff is quoted as looking for a major failure to take place in the next few months. Various other economists seem to agree, with Lehman Brothers, Wachovia and Merrill Lynch among the names mentioned.

At the same time, with last week's Consumer Price Index numbers indicating higher than expected inflation, there is pressure to increase interest rates. This was compounded by reports yesterday that the Producer Price Index making a larger than expected increase. The good news on the inflation front is lowering oil prices.

All of this is compounded by the well publicized losses that Fannie Mae and Freddie Mac are suffering. This weekend the Federal Reserve will hold the annual conference of ecomonists.

There are many matters of interest to be discussed.

How to recapitalize Fannie Mae and Freddie Mac?

How will stock holders be treated in any restructuring of the GSE's?

How to respond to increased numbers of struggling banks, many of them large banks?

How to contain inflation and hold off recessionary pressures?

How to manage the world wide financial crisis that seems to be developing?

How to turn the housing market around in an environment with tightening credit standards?

How to restore bank solvency and liquidity, and how to determine which banks to allow to fail?

Mark Organek, a real estate agent in Arizona, asked how long would it take to recover if we were at bottom. Have we reached the bottom? Liquidity remains an issue. Reduced numbers of qualified home buyers remains an issue. The loss of mortgage programs remains an issue.

And just this morning, Goldman Sachs lowered earnings projections for 5 major banks.

It is going to be an interesting few months.

Richard Smith

Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

Posted by Richard Smith Mortgages Home Loans FHA TN GA AL on 08/20/2008 06:48 AM

Comments (16)

bank failures, federal reserve, jackson hole conference, fannie mae, freddie mac, banking liquidity

Originally posted at: Richard's Real Estate Thoughts: Bank worries continue

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16 Comments on Bank worries continue

AUG

2008

Richard are you discussing just the Mortgage end of the whole structure of the bank, including the securities and the every day retail side of a bank?

Its going to be ugly in the near future. All the governments ideas are just fueling the fire to make it harder for the economy.

Congratulations!!

You've been featured on "Just Real Estate, The best of ActiveRain for the hard core real estate fanatic. No recipes, no jokes, no SEO, no fluff"

I'm using the new ActiveRain reblog tool to create a blog of reblogged posts that just focus on real estate.

I thought your post was good and wanted to get you a little more exposure.

Those are all great questions. I am not expert on this. I do think there are other ways to look at the financials that people miss.

Nancy,

The way I read the linked articles, we are discussing a bank failure. The mortgage operations of all the banks mention have already been cut back. There are more articles that those I linked.

http://www.cnbc.com/id/26291011

But these are not my insights into the solvency of these institutions. Like Chuck, I am not expert on this. I know how to calculate LTV and DTI.

But the pros are sounding more alarms.

Thanks,

Richard

Laura,

The government is in no position to revive the market - how low are rates now? I think we need a major project - TVA like, infrastructure, energy independence development, some reinvestment.

Monetary policy seems to be a lame tool to address the problem, but we are out of money.

Did you see Jan Wood's post? Look at the video.

Richard

Timothy,

Thank you very much. I am honored.

Richard

Richard, these reports I keep reading seem ominous and underscore the seriousness of our economic outlook and how deep this credit crisis has become. If the any of the really big ones fall, the government is probably going to be stepping in to smooth things out. The question is how much involvement does Uncle Ben and the Treasury need to stabilise the markets. The conundrum is no involvement could cause a bad situation to spiral out of control. Too much involvement might only prolong any sort of tunr around.

So what do I do?......keep working!

Thanks

Chuck,

There is no expert here either, but there are things happening and people making decisions. It is a good thing that the Internet makes some of these decisions more transparent.

Richard

HI RICHARD!

Will the worries ever stop? Will we this mess ever really, truly be fixed? New picture? Showing off the busy person that you are!!!

Richard,

Great post and we should all buckle up until after the election. It is going to be a bumpy ride going into 2009. Thanks and have a great day.

Richard,

Thanks for the post. I agree with Laura Jefferson and Tom Elder. The current crew in Washington D.C. just hasn't a clue. Their policies at best are ill conceived. Once they realize that the core issue is the economy (as it has been for the last eight years) then reality based legislation will make the difference. Until then, buckle up it is going to be a bumpy ride.

AUG

2008

Bo,

Keep working. But I do think that what I am working at is changing. Keeping aware of the market is something that I just had not done in the past. Should have, but had not.

Richard

Yvette,

I do not see how there is a quick and easy end to all this. Thanks for noticing the new photo. The old photo is just not web 2.0. I need to come out a little, don't you think. No more stuffy guy. :)

Actually, I probably am going to redo the photo again, hopefully with a better quality camera.

Thanks,

Richard

Tom,

I will be pleased if it is a bumpy ride only into 2009.

Richard

William,

What would it take to turn the economy? Monetary policy and a $600 tax credit are limited in their reach and their effectiveness. What do you think needs to be done to invigorate and expand the economy.

Good to hear from you.

Richard

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