First, it appears that the first major bank casualty of the housing bust is upon, Northern Rock, a bank which is responsible for about one in five mortgages in the UK. They have apparently been done in by a 1930s style run on the bank. They got some temporary liquidity through a £24 Billion (about $US 50 Billion) loan from the land of England, but it still appears that they are headed for liquidation, with the Tory shadow of the chancellor of the exchequer* George Osborne asking that, "The chancellor had not explained how taxpayers would get their money back." The testimony of the CEO of Northern Rock, is more concerning though:
He told the Treasury Select Committee that the bank had planned how it would cope with a 40% fall in house prices.Basically, we have a world capital market that resembles juggling, and if you lose one ball, others follow.
But it had not planned how to respond if its ability to borrow dried up.
"What wasn't stress-tested was the event deemed implausible - of the global markets freezing up overnight," he said.
"The rapid and long-lasting closure of the global markets was not stress-tested," he added.
On top of this, we have a new home builders survey that is positively grim. The current outlook remains at a record low, but the 6 month outlook looks grim.
On the more macro level, we have Countrywide shares plunging as the insurance rates it must pay on its loans jumped by 30 % (!), both Fannie Mae and Freddie Mac taking major hits because about the security of their mortgages (here and here), and Citigroup faces $15 billion write down in addition to having the good fortune of Goldman Sacks downgrading them to "sell" from "neutral".
In consumer spending, auto sales could hit 15-year low.
*It's an artifact of the parliamentary system that the minority party has a shadow cabinet, which is there to keep the various minister's feet to the fire.
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