Just when I thought we were beginning to see the light... This economic mess continues to unfold as the US taxpayer is now the victim of the largest fraud ever conceived. What happened to the "bailout"???

READ ON...

Ryan Ogata
Senior Mortgage Consultant

From: Rob Chrisman Subject: Jan 15 - ripples from Chase. Banks in the news, and not in a good way...

How are banks doing out there? For big banks, things are not good. B of A is having difficulty absorbing Merrill Lynch, and may soon ask the US Government for more money to aid the process. JP Morgan's earnings for the 4th quarter dropped 76%, although it was apparently better than anticipated. And Citi is breaking itself up. Barclays published their view on bank earnings. Focusing on asset quality, securities write-downs, goodwill impairments, and capitalization, Barclays expects financial performance to be weak due to deteriorating loan quality, continued losses on risky securities, and goodwill impairments. "Economic conditions will cause problems in loan portfolios to migrate from residential-related products to credit cards and commercial real estate, leading to materially higher nonperforming assets and exposing the inadequacy of loan loss reserves, in our opinion".Barclays does go on to say that banks should be ok as long as government intervention continues, especially for Bank of America, JP Morgan, and Wells Fargo, "three banks that have exceptional systemic importance, in our opinion. We remain cautious on regional banks given the continued deterioration in asset quality".

Speaking of deterioration, our housing market is pretty grim. This morning's RealtyTrac report on foreclosures shows an 81% increase for '08, with the December level at 303k -- up 41% year-over-year. RealtyTrac's CEO notes that foreclosure prevention programs offered by banks and some legal delays "have not had any real success in slowing down this foreclosure tsunami." And folks wonder why Treasury rates go down while mortgage rates do not.

This morning we have already seen the Labor Department's Producer Price Index fall for a 5th straight month, -1.9% in December after dropping 2.2% the previous month. Core producer prices, for people who do not heat their homes or eat, increased by 0.2 percent in December. Core producer prices were up 4.3 percent over the last 12 months. Gasoline, which accounts for about 7.4 percent of PPI, fell more than 25%. Jobless Claims shot up by 54,000 to 524k from 470k the week before. The four-week moving average for continuing claims, at 4.498 million, was the highest in 26 years. We still have some news ahead of us later this morning, but for right now the 10-yr is wallowing around 2.22% and mortgages are, once again, roughly unchanged.

Rob Chrisman