The Great Credit Crunch Is Deepening

Minyanville ^ | 11-19-2009

[blam]

The Great Credit Crunch Is Deepening

Minyanville Staff
Nov 19, 2009 9:20 am

Consumers will feel the effects in the form of tighter credit standards.

Editor's Note: This article was written by Richard Suttmeier, chief market strategist at ValuEngine.com, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day.

Within the proposed banking reform bill, the House Financial Services Committee wants banks and funds to make payments in advance for companies deemed “too-big-to-fail”.

This fund will be capped at $200 billion, insuring that taxpayers won't wind up paying for a bailout should a big bank fail.

The Senate version permits bank regulators to use taxpayer funds to unwind a failure and later recoup from the banking industry.

Guess what? These costs will be passed onto consumers in terms of tighter credit standards and less favorable borrowing rates. This will extend “The Great Credit Crunch”.

Wall Street Banks Have Record Profits, While Main Street Banks Fail

This is the end result of the dollar carry trade. (See also, The Decoder: Carry Trade). Wall Street will get record bonuses because of proprietary trading, while Main Street faces higher unemployment, reduced pay, mortgage defaults, and foreclosures.

Why did this happen? Because we bailed out the “too-big-to-fail” banks while we ignored the risk guidelines that would have helped community and regional banks survive “The Great Credit Crunch”.

Housing Starts Fell Sharply In October

Housing Starts declined 10.6% in October sequentially and are down 30.7% year-over-year. So where's the housing recovery? The annual rate of starts is just 529,000 units annualized.

Single family homes, the beneficiary of the $8,000 first-time home buyer tax credit fell 6.8% to an annual rate of 476,000 units. Will this be just a lull, as the tax credit expired but then extended beyond November 30? Go to contract by April 30 and to closing by June 30 to qualify.

It’s tough to keep a housing recovery going with community and regional banks choking on C&D and CRE loans, strapped to pay Deposit Insurance Fees and TARP Dividends. Bank failures will continue.

[snip]

[blam]

The DJIA is down 101 as I post. See here.

[FromLori]

You sure have found great articles are you keeping a ping list? If so please include me.

By the way here is more on the gold story

http://fofoa.blogspot.com/2009/11/is-dollar-good-as-tungsten.html

[MeneMeneTekelUpharsin]

I’ll believe it when I see it and not until then. Constant harping on how bad things are and things keep chugging right along. Is some of this negativity political or based on a genuine concern for people? I’m beginning to wonder.

[blam]

I’ve made note of your suspicions. BTW, very negative things are happening in the world today.

[Chances Are]

Hey! That reminds me - whatever happened to the meme the Democrats used to shout about the Bush economy being “the worst since the Great Depression”?

Boy, don’t you miss those headlines???

CA....