25 June 2008

Economics Update

Just a few weeks ago, analysts were saying that the worst of the banking problems were over, but now they are saying oops! The banking downturn still has a way to go, so their "buy" message was premature.

This is not surprising, considering that analysts are low looking at something like $30 billion in additional losses just for WAMU for home mortgages, commerical loans, and credit cards.

I think that the only bank's revenue remaining stream is check bounce fees, it appears.

Not surprising, considering that real estate is still crashing, with mortgage applications continuing to crater, and new home sales falling 40% from this time last year (and off 63% from the 2005 peak).

It's no wonder that the changes in regulation allowing for Fannie Mae and Freddie Mac to repackage jumbo loans has had little effect, with the GSEs choosing instead to focus on repurchasing some of their own mortgage backed securities, which serves to minimize potential losses.

In terms of Jumbo loans, those over $417K, Fannie wrote $24 million and Freddie wrote $220 million since they could in March.

By comparison, in April alone, they spent $32.4 billion to buy back their old securities.

Nothing is moving until the players have a reasonable assurance that this is not all smoke and mirrors that they are dealing with.

Of course, the whole housing bubble breaking is not just academic. It now appears that a lot of the early babl boomers will have very little to live on retirement because of the housing crash.

In the wonderful world of energy prices, oil is down a bit on high inventory levels, and retail gas prices continue their downward path.

This lack of confidence, and lack of money, is probably why durable goods orders remain anemic.


Post a Comment