Bank Failure Friday, Lagging Home Sales, Should the TARP be Rolled Up, and Tracking the Charts for the S&P 500
Only one bank failure on Bank Failure Friday brings the total to 50 in the third quarter,
Georgian Bank became the 95th bank failure in 2009 bringing the total to 120 since “The Great Credit Crunch” began at the end of 2007.
Like almost all bank failures this $2 billion private bank had overexposures to C&D and CRE loans with risk to capital ratios of 559% and 741% versus the ignored regulatory guidelines of 100% and 300%.
I estimate that the FDIC’s Deposit Insurance Fund is in arrears by $4.6 billion.
Existing and New Home Sales are running out of stimulus
Sales of single-family homes, townhouses, condos and Co-ops declined 2.7% in August to an annual rate of 5.1 million units, but above the year earlier level of 4.93 million.
Sales of new single-family homes were at an annual rate of 429,000 units in August up 0.7% versus July, but down 3.4% year over year.
Keep in mind that 30% of all home sales are from first time homeowners, and 31% of existing home sales are from distressed homes.
Home sales will thus slow with the sunset of the $8,000 first time home buyer tax credit, which ends at the end of November. Given the mountain of additional paperwork, and with the time between contract and closing now averaging sixty days the impact of the tax credit stimulus is all but over.
Should the US Treasury roll up the TARP?
I predict that the US Treasury will extend the TARP through 2010 as a rainy day protection as the threat of more bad loans and failed banks continues. I see storm clouds right through 2011 as 500 to 800 banks fail.
Yet another trial balloon is being pumped up by our banking regulators and Congress is to use TARP money to bail out struggling community banks.
I am against that. Small public and private banks are not suitable investments for US taxpayers. I do not want to bailout banks in violation of regulatory guidelines.
We have already given more than $300 billion to the smaller banks without an increase in lending and most banks do not want TARP and others are defaulting on TARP dividends.
I suggest that the US Treasury should lend TARP funds to the FDIC at the yield on the 10-Year Note. Instead of assessing banks to increase to the Deposit Insurance Fund, assess the interest payments on the TARP loan. TARP can be extended indefinitely until the DIF is back where it should be by law.
The daily and weekly charts for the S&P 500 - Courtesy of Thomson / Reuters
The daily chart for the S&P 500 shows declining momentum and a close below the 21-day simple moving average at 1039.78 is the next bearish warning. The 50-day and 200-day simple moving averages are supports are 1012.52 and 896.50.
The weekly chart for the S&P 500 still shows overbought MOJO with a reading down a notch to 9.1. A weekly close below the five-week modified moving average at 1020.89 signals a return of the multi-year Bear Market if MOJO is declining below 8.0. My annual pivot is 967.1 with weekly resistance at 1076.
Disclosure: I Hold No Positions in the Stocks I Cover.
