Archive - Sep 2009 - Story

Just when you thought the Fed was trying to gradually disintermediate itself from capital markets, they are off to the races with another POMO action. As of this auction, $276.3 of the $300 billion in Treasury repurchase allocation has been used up, leaving less then $25 billion for future POMO actions. As Zero Hedge discussed before, this total will be used up in the next 2 weeks. What then? All of a sudden the invisible bid under equities is looking very, very precarious.

"When you hear about the Federal Reserve Transparency Act getting stalled in committee, think of Daniel Webster, bought and paid for with central bank money. When you read Fed apologia in the New York Times, The Economist, and the Wall Street Journal denouncing the "reckless populism" of the Act, think of the newspaper editors in Biddle's pocket."

So just where does that leave CRE owners who need to refinance this year or early next? In trouble, that’s where. And if this were not enough, we can tell you from first hand knowledge that bank regulators have been crisscrossing the country examining bank CRE loans intently. They do not want another mortgage debacle as was residential real estate on their current watch. Like they have a choice, right? In many cases current CRE appraisals are being conducted against existing bank property loans and capital calls are going out to CRE owners who have always been model credits and have never missed a payment in their lives. And CRE values will improve in this type of a regulatory and available capital environment? Quite the opposite, as you already know.

If you needed confirmation of just how spectacularly overvalued CIT stock is, look no further - the company issued an 8-K stating that even though it was supposed to sell its common stock under an indenture to satisfy an interest payment, it was unable to do so in a Commercially Reasonable Efforts mechanism. In other words - there was absolutely no institutional interest for CIT's stock at current levels, or any discounts from current levels, thereby confirming that CIT is essentially a zombie name traded daily by a bunch of speculative computers.

• Is the next shoe in Europe dropping behind the scenes? European countries voluntarily increase IMF funding (Berninger, h/t Dave)
• Next industry in line for bailouts: Commercial jet market still awaits recovery, EADS chief says (Bloomberg, h/t Jake)
• 10 year Eurozone jobless high: 9.5% (BBC)
• What banks are really doing with foreclosures (Diana Olick)
• The coming deposit insurance bailout (WSJ)

• Asian shares were mixed Tuesday, with Shanghai's 0.3% gain supporting some markets.
• Australia's performance of manufacturing index rose 7.2% to 51.7 in August.
• Brazil’s top sugar region may miss output forecast: reports.
• China’s manufacturing expanded at the fastest pace in 16 months in Aug. with record lending.
• Consumer prices in the euro zone fell 0.2% in August from a year earlier.
• Eurpoean and US share prices are under pressure today.
• German retail sales rose 0.7% in July after tumbling in the preceding two months.