May 7 2010

FDIC backing 8,000 banks with $13 trillion in assets and a negative deposit insurance fund. FDIC survey finds millions of U.S. households are underbanked. Too big to fail banks add branches and grow even bigger.

The FDIC has a big problem on its hand.  Some would say it is a too big to fail problem.  The Federal Deposit Insurance Corporation looks over 8,000+ banks and protects the deposits at these banks.  Yet this seemingly large number is merely a front for where the assets are congregated.  The top 4 banks of Bank of America, JP Morgan Chase, Wells Fargo, and Citibank make up 55 percent of all banking assets.  This number is absolutely large.  FDIC backed institutions have $13 trillion in total assets.  Even yesterday as Wall Street demonstrated the dangers of concentrated power in a few big investment banks, rumors were flying around that some of the bigger banks made sizeable gains in their trading portfolios.  This brings up many questions for average Americans who are under the impression that their bank is actually keeping their money safe and sound instead of placing major bets on the stock market.

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May 5 2010

California construction employment back to 1997 levels. California building permits at all time record low.

Solving the California state budget crisis just got that much tougher.  Estimated tax revenues came in nearly $3 billion less than expected wiping out a steady stream of months where things seemed to be improving at least on the revenue front.  And this should come as no surprise.  California has done very little to wean itself off its dependence on real estate.  So it should come as no shock that with real estate still in the doldrums, that income is reluctant to pick up.  California takes in nearly half of its revenues through payroll taxes and with a 12.6 unemployment rate, a revenue short fall is mathematically expected.

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May 4 2010

Middle class getting pushed into poverty and working poor status – The cloaked recovery for the middle class. How 30 percent of the poor are unemployed.

Over 6.5 million of the 15 million unemployed Americans have been out of work for 27 weeks or more.  As a percent, this is the highest number of long-term unemployed we have had since the Great Depression.  What is not discussed in this recession is the working poor and middle class have taken on the burden of this financial calamity disproportionately.  We are not all in this equally.  When was the last time you heard on the mainstream press that 40 million of your fellow Americans are now receiving food assistance?  And when was the last time you heard that jobs for the middle class are still largely disappearing?  Since much of the media represents the top 1 percent they assume all is well because Wall Street has been on a record breaking bailout rally.  At the same time, we have 30 percent unemployment at the lower end of our income scale.

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May 2 2010

Commercial real estate pushes $7.4 billion in FDIC Losses in one day – Hard to hear the CRE collapse with investment banks finally being called out in the court of public opinion. $3 trillion CRE market will keep Fridays busy for the FDIC.

The $3 trillion commercial real estate market is still in a state of economic turmoil.  Many people might have missed the big news on Friday given the massive spotlight on Goldman Sachs.  On Friday, the FDIC closed down 7 banks at a stunning cost of $7.4 billion to the FDIC.  As we have mentioned, the FDIC deposit insurance fund (DIF) is already depleted yet the FDIC has front-loaded premiums to make sure they have a buffer to combat the continuing bank collapses.  The Friday bank failures will cost the FDIC the most since the collapse of IndyMac almost two years ago.  IndyMac collapsed because of toxic residential loans including option ARMs.  Many of the banks collapsing now are deep in the commercial real estate game and that is the next thing to go bust.

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Apr 29 2010

Not all is well on the housing front. Housing still too expensive for middle class Americans – 9 Years of Housing Inventory and 7 Million Homes 30+ Days Late or in Foreclosure. How the government is keeping and encouraging expensive housing.

Since the recession started in December of 2007, over 7 million foreclosures have been initiated.  In no other time in history have we seen this magnitude of problems in the housing market.  And these problems still persist.  It is estimate that another 6 to 9 million homes are at risk of foreclosure in the upcoming years given the current economy and overhang from the housing bubble.  If we measure the health of the housing market through foreclosures, we are only half way through this housing calamity.  In many ways, the problem still stems from homes being too expensive relative to the income people make.

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