Daily Archives: February 22, 2010

Simone Baribeau An Atlantis of commercial real estate

February 22, 2010 11:43 pm by Simone Baribeau

That other real estate market came back into the spotlight today as Chris Dodd, chairman of the Senate Banking Committee sent letters to a number of regulators, including the Federal Reserve, asking them to report on their efforts to stabilise the commercial real estate market.

By any realistic estimate, CRE has yet to finish wreaking havoc on the economy. Nearly half of CRE loans are currently “underwater” and the largest loan losses haven’t yet occurred, according to the Congressional Oversight Panel.

Mr Dodd asked Federal Reserve chairman Ben Bernanke to update the committee on any success the Federal Financial Institutions Examination Council’s 2009 CRE guidance was having in stabilising the market. He also asked the Fed chief for “an explanation of how the Federal Reserve has addressed the CRE issue so far, and what additional steps you plan to take.”

Separately, Janet Yellen, president of the Federal Reserve Bank of San Francisco, earlier today outlined some of the problems in the CRE market.

Commercial real estate remains a bleak spot and investment in nonresidential structures is likely to stay depressed for some time. The recession drove up vacancy rates for office, retail, warehouse, and other income-producing properties, severely reducing demand for new buildings. In addition credit is tight. Lenders and investors are demanding extra compensation for risk, driving up commercial real estate financing rates compared with pre-recession levels. And the market for commercial mortgage-backed securities remains distressed, despite support from the Fed’s Term Asset-Backed Securities Loan Facility, or TALF.

So, all in all, the Atlantis of CRE is likely to be with us for awhile.

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Posted in Federal Reserve |

Simone Baribeau O brave new world that has such consumer protections in’t!

February 22, 2010 11:06 pm by Simone Baribeau

Today many of the long awaited credit card consumer protections passed by Congress and interpreted by the Federal Reserve take effect. The Fed has launched a new website to help consumers understand their rights.

There’s no news, per se, but it’s worth remembering what banks said would happen if they were prevented from raising interest rates based on a number of now prohibited factors, including changes in consumers’ credit scores, their behaviour with other companies, approaching credit limits, and making minimum payments.

I believe that not using a cardholder’s behaviour on their other debts as part of your predictive model is like taking the batteries out of a smoke detector – Roger C. Hochschild, president Discover Financial Services

I believe if we drop our ability to monitor credit, we could (be compared to)…the subprime mortgage business – Bruce Hammonds, president, Bank of America Card Services

We’ll see what happens. Meantime, the Fed today released another document

Continue reading: “O brave new world that has such consumer protections in’t!”

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Posted in Federal Reserve |

Simone Baribeau Yellen: V-shaped recovery may not be ‘in the cards’

February 22, 2010 8:50 pm by Simone Baribeau

Janet L. Yellen, president of the Federal Reserve Bank of San Francisco, today spoke of an ‘impressive’ turn-around in GDP and said that the tide of dismal economic news ‘appears to have turned.’ But there the upbeat message of the a leading dove ended.

The annual 5.7 per cent growth in fourth quarter GDP was unlikely to be sustained, she argued.

Unfortunately, I’m not at all convinced that a V-shaped recovery is in the cards. That fourth-quarter leap in GDP overstates the underlying momentum of the recovery.

The reason for her scepticism in the sustainability of last quarter’s growth was, of course, the same as everyone else’s: most of it was due to a slowdown

Continue reading: “Yellen: V-shaped recovery may not be ‘in the cards’”

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Posted in Bank of England, European Central Bank, Federal Reserve |

Dubai World ‘incredibly unlikely’ to pay Nakheel bond

February 22, 2010 5:01 pm by Emma Saunders

Dubai World is unlikely to pay off developer Nakheel’s $980m Islamic bond, a source familiar with the matter told Reuters on Monday, and all options are open. The issue is due on May 13. “It is very unlikely that the bond will be paid off,” said the source. “Incredibly unlikely.” Dubai World is currently in talks to restructure about $22bn in debt and is due to present a proposal in March.

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Posted in Uncategorized |

Israel holds rates at 1.25%, as expected

February 22, 2010 4:48 pm by Emma Saunders

The Israeli central bank has chosen to keep its benchmark interest rate on hold at 1.25 per cent. The decision was widely expected, though some predicted a small cut in rates. Inflation in the country is falling faster than expected, with CPI down 0.7 per cent in January, versus expectations of 0.3 – 0.5 per cent. Israeli economic activity has risen, although fixed investment has dropped significantly. Internationally, “there remains the risk of another recession, whose probability may even have increased.”

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Posted in Uncategorized |

Greece misses data deadline… due to strikes

February 22, 2010 3:16 pm by Emma Saunders

The Greek finance ministry failed to deliver currency swap information to the European Commission by the deadline, last Friday. When asked, EC spokesman Amadeu Altafaj Tardio told MarketNews: “Eurostat has received some information but not all relevant information from the Greek authorities.” He added: “Athens told us that the reason for the delay was partly to do with the 4-day strike at the finance ministry.”

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Posted in Uncategorized |

Serbia holds rates at 9.5%

February 22, 2010 2:39 pm by Emma Saunders

The Serbian central bank has held the two-week repo rate at 9.5 per cent for the second month. The dinar has recently been falling, restricting policymakers’ options on rate cuts.

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Posted in Uncategorized |

Hungary cuts rates 25bp to 5.75%

February 22, 2010 1:27 pm by Emma Saunders

The Hungarian central bank governor has cut the base rate from 6 to 5.75 per cent, effective today. The move was expected, and a further cut is seen as likely before easing stops. Rates were last cut 25bp on January 25.

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Posted in Uncategorized |

Economics news headlines

February 22, 2010 1:12 pm by Emma Saunders
  • Hungary cuts rates 25bp to 5.75% – Money Supply
  • Greece set for critical bond issue within days – FT
  • The ECB turns shy – Money Supply
  • Debt threat to Kuwait investment houses – FT
  • Jordan cuts rates 50bp – Money Supply
  • US core inflation falls first time since 1983 – Money Supply, Friday
  • Honohan: reducing Irish wages ‘essential’ – Money Supply
  • ETFs start to underperform – Felix Salmon
  • George Soros: euro central bank without treasury “patently flawed” – FT
  • Inflating away debt should not be embraced too readily – Munchau, FT
  • The rise of ‘euro-emerging’ multinationals – VoxEU
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Posted in Uncategorized |

Swedish financial watchdog ‘must grow by 1/3′

February 22, 2010 11:51 am by Emma Saunders

Sweden’s financial regulator needs a bigger budget to cope with its expanding role. The Financial Supervisory Authority is seeking a 10 per cent budget increase per year for three years, on top of its 300m krona ($41m) budget, director-general Martin Andersson told Bloomberg.

Sweden’s banks, which are expected to lose $3.7bn this year from operations in the Baltic countries, might also be facing a housing bubble at home. Record low interest rates have increased mortgage arrangements in spite of rising unemployment. House prices rose 5 per cent in the last quarter, having already passed pre-crisis peaks.

The central bank has commissioned a thorough investigation of the housing market. And the FSA wants to stop banks lending more than 90 per cent of the purchase price, starting July 1, to allay their concerns.

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Posted in Uncategorized |
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Chris Giles Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS

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Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS

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