News Links of Interest
Fed Sees 4.25 Million More Foreclosures Through 2012
The Federal Reserve expects about 4.25 million more foreclosure filings through 2012, and problems with the home-seizure process may threaten the U.S. housing and economic recovery, Fed Governor Elizabeth Duke said in prepared testimony.
“In the end, an overhang of homes awaiting foreclosure is unhealthy for the housing market and can delay its recovery, as well as that of the broader economy,” she said in remarks that will be presented to a congressional subcommittee tomorrow.
The Fed estimates that the U.S. will have about 2.25 million residential foreclosure filings this year, and again next year, followed by 2 million more in 2012, she added in the statement to the Subcommittee on Housing and Community Opportunity.
“Financial institutions face a number of risks if inadequate controls result in faulty foreclosure documents or failure to follow legal procedures,” Duke said. “We are gathering information to ensure that the institutions we supervise have adequately assessed these risks and have accounted for them properly
US launches criminal probes into bank officials
The federal government has opened criminal investigations into approximately 50 executives and directors of U.S. banks that have collapsed during the financial crisis.
Deputy Inspector General Fred Gibson said Wednesday the inspector general's office at the Federal Deposit Insurance Corp. has been probing the role of the executives in bank failures around the country.
The criminal investigations are separate from civil lawsuits approved by the FDIC's board against some 80 bank executives, employees and directors. The FDIC is seeking to recoup about $2 billion in bank losses that the regulator says were the result of negligence or misconduct by executives or directors.
The FDIC has shut down or seized 311 banks since January 2008 at a cost of around $77 billion. The criminal probes were reported earlier by The Wall Street Journal.
Bank executives could face prison terms if convicted of criminal charges. But the burden of proof is higher than in civil cases and usually involves showing deliberate intent to commit fraud or other violations.
California Will Default On Its Debt, Says Chris Whalen
Municipal bonds have plummeted in recent days, as investors have suddenly focused on huge state and city budget deficits that there's no easy way to fix.
Nowhere has this collapse been more visible than California, which faces a massive $25 billion shortfall and red ink for as far as the eye can see.
After years in which every looming financial crisis has been met with a government bailout, you might think that the same solution awaits California, as well as all the other states that have huge obligations that they can't afford to meet.
But this time that may not happen, says Chris Whalen, a financial industry analyst and Managing Director of Institutional Risk Analytics.
In fact, Whalen thinks that California will default on its debt--hammering all the pension funds and other investors who have loaded up on apparently safe state bonds.
The state won't immediately default, Whalen says. It will start by issuing the same sort of IOUs that it issued to by itself time during its budget crisis last year. But, eventually, the debts will have to be restructured, and this will result in those who own California's bonds receiving less than 100 cents on the dollar.
EU Officials Fly to Dublin as Talk Shifts to Bailout
European Union and International Monetary Fund officials jet into Dublin today as the Irish government edges closer to accepting a bailout for its national finances and the banking system.
“We are in the end game,” said James Nixon, co-chief European economist at Societe Generale SA in London. “A bailout is desperately needed, not just for the sovereign but for the banking sector.”
Ireland’s banking woes are “spilling over to the sovereign,” Rehn told reporters on Nov. 16. The decision to send EU officials to Ireland “should be considered as an intensification of preparations for a request from Ireland for an EU-IMF program.”
ECB President Jean-Claude Trichet may make his first public comments on a potential Irish bailout when he speaks on a panel at 2:30 p.m. in Frankfurt today.