Here is an article on the recent comments from Professor Kenneth Rogoff who is a former chief economist for the IMF. He predicts that there will be not only smaller banks failing in the US but also a large bank or investment bank. I do not disagree, however, another way to look at this gentleman’s comments would be to think about the fact that they are being made as indicative of a changing social mood rather than seeing them simply for what they are, an opinion of a large bank failure per se.

Quote:

Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was highly likely.

“The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come,” Prof Rogoff said at a conference in Singapore.

In an ominous warning, he added: “We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one — one of the big investment banks or big banks,” he said.

Here is a link to this article:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4563171.ece

Michael

This is not exactly “new news” but the housing market continues to crater. “Banks repossessed almost three times as many U.S. homes in July as a year earlier and the number of properties at risk of foreclosure jumped 55 percent as falling prices made it harder to sell or refinance.

Bank seizures rose 184 percent to 77,295, the steepest increase since reporting began in January 2005,…”

Here is a link to the full article: http://www.bloomberg.com/apps/news?pid=20601087&sid=aLY_H8XQz_iM&refer=worldwide

In a related story, home prices have fallen as the housing market continues to slump. “Nationwide, the median existing single family home price plunged 7.6% to $206,500 in the second quarter, down from $223,500 in the same period of 2007. The median price represents the point at which half of all homes sold for more and half sold for less.

Here is a link to that article:
http://biz.yahoo.com/cnnm/080814/081408_quarter_three_home_prices.html?.v=6

Michael

The Federal Reserve has followed through with its plan for an auction of money with an 84 day term. This action by the Fed was once considered impossible but finding new and better ways to print and pump money into the economy, no matter the negative effect on the value of the dollar is now commonplace. And, no one notices or objects. Likewise, the federal government’s bailout of the private companies, Fannie Mae and Freddie Mac, has caused no noticeable furor. This is in direct contradistinction to the uproar which accompanies the loan guarantees made by the federal government to Chrysler back in the 1970’s. In that case, there was a huge public reaction and yet all that was offered was a guarantee of loans which were paid back by Chrysler, with interest, to its lenders. Here the risk to the federal government as a result of this bail out is enormous by comparison and yet no one objects or even notices. This idea is not original to me, but came from an article several weeks ago by my favorite car/economics writer, Ed Wallace, whose columns appear in the local paper, the Star Telegram. [As an aside, here is a link to his latest article: http://www.star-telegram.com/ed_wallace/story/819483.html .]

“The credit squeeze hit with force a year ago and the central bank has shoveled out billions of dollars in loans. From September through April it also was aggressively cutting interest rates to keep the financial turmoil from pushing the country into a deep recession.

The Fed's interest-rate setting panel met again last week and for the second meeting held interest rates unchanged amid concerns that lowering rates further could stoke inflation pressures.”

Here is a link to the whole article from Yahoo Finance online: http://biz.yahoo.com/ap/080812/fed_credit_crisis.html?.v=2

Michael

We are delighted to announce that the law firm of J. Michael McBride has celebrated it's 10th anniversary with a reception. On July 31, the offices held an open house. The offices were transformed for the event by the placement of new artwork throughout. The local art gallery, Artspace111, hung works by varius artists such as Daniel Blagg, Dennis Blagg, John Hartley, Leslie Lanzotti, Nancy Lamb and Eric Stevens. Mike's sister, Betty Alcorn, also had several wonderful pieces displayed as well. The artwork put up by Artspace111 will reside in the law office on display for several months. Please come in and take a tour!

We were pleased that our reception was covered by the local business press.

Here is alink to the article in the Fort Worth Business Press
http://www.fwbusinesspress.com/display.php?id=8062

Michelle

We have previously noted the precipitous decline in the value of MBIA and Ambac, the companies which insure certain types of securities. Once again, the market had already given its opinion of the value of the companies by pushing their stocks into the basement before the ratings companies officially downgraded their credit. The other interesting thing to watch is the overall market impact which these downgrades have on the general market. One would assume that the buyers of the insured products must adjust the value of their portfolio every time the quality of the insurance backing that product falls. However, I have not read where this is being done, at least broadly.

Quote:

MBIA and Ambac have lost their triple-A credit ratings this year as guarantees they sold on mortgage-backed securities and more complex mortgage-related securities called collateralized debt obligations, or CDOs, soured. Without top ratings, bond insurers struggle to sell new policies.

Here is a link to the latest article on these insurers and their proposals to try and adjust their business models to adapt to the current conditions.
http://www.marketwatch.com/news/story/mbia-ambac-fall-concern-about/story.aspx?guid=%7B1EB8C327-B201-4585-B24D-F50A95F45EF8%7D

Michael