Government Moves to Stall the Truth in Stress Test Results

Treasury does not want any “complications”

WASHINGTON (Reuters) – The U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating stock market reaction, a source familiar with Treasury’s discussions said on Tuesday.

The Treasury is still talking about how results of the regulatory stress tests on the 19 largest U.S. banks will be released, and may disclose them as summary results that are not institution-specific, the source said.

The government is testing how the largest banks would fare under more adverse economic conditions than are expected in an attempt to assess the firms’ capital needs. The tests are due to be completed by the end of April, but Treasury has said they may be finished before then.

The source, speaking anonymously because the Treasury has not made a final decision on what to disclose, said officials do not want any test results released before the earnings season wraps up for most U.S. banks on April 24.

Two thirds planning layoffs

By Scott Malone

BOSTON (Reuters) – Two-thirds of U.S. chief executives plan additional layoffs and expect sales to decline in the next six months as their confidence in the economy continued to fall, according to a survey released on Tuesday.

The Business Roundtable’s quarterly CEO Economic Outlook Index fell to negative 5 — the first negative reading in the survey’s six-year history — and down from a fourth-quarter reading of 16.5. A reading below 50 means CEOs expect contraction rather than growth.

Still, the group’s head said there are signs the downturn may be reaching its nadir and held out hope that the Obama administration’s efforts to shore up the financial system and buoy the economy with a $787 billion stimulus program may be beginning to pay off.

“While recently implemented policies need time to make an impact they have already begun to restore confidence in our markets, which is obviously a critical first step,” said Harold McGraw, who serves as Roundtable chairman and is also chief executive of publisher McGraw-Hill Cos.

One hundred U.S. CEOs were polled between March 16 and March 27 said they now expect real U.S. gross domestic product to decline 1.9 percent this year. That is below their December forecast, which anticipated flat GDP.

The survey came during a time that U.S. stocks were rallying, with the Dow Jones industrial average gaining as much as 25 percent off its March 6 low. Stocks have since lost much of that momentum, with the major averages losing ground on Tuesday ahead of what is expected to be a season of weak earnings report from U.S. companies.

The majority of CEOs — 71 percent — said they expected to cut their U.S. work forces over the next six months and 66 percent said they expect to reduce capital spending. That came as 67 percent said they expect lower sales over that period.

Businesses still see tough times ahead. Diversified U.S. manufacturer Emerson Electric Co on Tuesday cut its profit target for the year, and investors are awaiting a report from Alcoa Inc later today that is expected to show a second consecutive quarterly loss for the U.S. aluminum producer.

But McGraw argued the U.S. economy may be reaching a bottom.

“We are very close to a bottom and the fourth quarter of last year and the first quarter of this year will probably be the most disappointing, McGraw said. “We’ll probably see the pace of decline slowing down and we could see positive growth in the fourth quarter.”

Business Roundtable member companies together employ almost 10 million people and generate about $5 trillion in annual revenue.

I hear from some mortgage friends that not all foreclosures are on the market. In essence being held back to hide the disgusting reality.

Foreclosures Worsen, Blocking Recovery
Posted By: Diana Olick
Topics:Interest Rates | Housing | Real Estate
Sectors:Financial Services | Construction and Materials

I said it yesterday, and I’ll say it every day: Until the number of foreclosures in this country starts to go down instead of up, we will not see a full recovery in the housing market; I don’t care how upbeat you are about buyer traffic this spring.

A new report out today shows foreclosures continue to rise.

Spring Real Estate Guide 2009 | A CNBC Special Report

Equifax, a well-respected credit bureau, found that 7% of homeowners with mortgages that were at least 30 days late on their payments in February, that’s up 50% from a year ago. And close to 40% of subprime borrowers are late, up from 23.7% a year ago.

Then I get an email from mortgage guru Mark Hansen of the Field Check Group, who tells me that foreclosures are about to soar in California near-term:

For months prior to March, banks/servicers were on and off of foreclosure moratoria with many on a complete hold awaiting Pres. Obama’s plan to save the housing market and homeowners. We track each foreclosure start through the entire foreclosure process individually and in aggregate – also by originator and servicer – and as soon as the Obama plan was made known, banks/servicer shifted their Notice-of-Default and Notice-of-Trustee Sale machines into overdrive. Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days.

On top of that, my colleague Jane Wells is out in the foreclosure capital of the world today, Stockton, CA, and while she reports good news that houses there are finally selling, the bad news, she says is that more and more as major lenders seek out troubled borrowers for modifications, that find, “the people are gone. Even if they’ve not been foreclosed on yet!”

Not good. With job numbers getting worse, more and more borrowers are going to end up missing payments, and no matter how much the banks and the Obama administration would like to help these folks, you can’t modify a loan down to a zero monthly payment.

Here is a preview for today’s earnings

Prices are dropping

Art prices plunged during the first quarter of the year as cash-strapped collectors looked to unload works by postwar masters that had earlier boomed in price along with the stock market.

The Mei Moses index, set for release on Tuesday, shows art prices fell 35 per cent in the first quarter, having held up during earlier months of the financial crisis.

The overall index fell 4.8 per cent last year.

The decline accelerated as people who lost money in the financial crisis, including victims of the Madoff fraud, put up works for sale, often at a loss, several art world insiders said.

The selling has particularly hit works by postwar and contemporary artists, they said. The Wall Street elite had favoured such works during a seven-year boom in art prices. The best performing postwar artist, Andy Warhol, saw a decline in the value of his work. A Warhol portrait of Mick Jagger sold for $1.1m in the quarter. The seller bought it in 2006 for $1.5m.

Postwar and contemporary art prices fell more than 30 per cent, according to the index, which combines New York and London prices. Such prices had enjoyed an average annual rise of 20 per cent for the past decade.

Works by Old Masters, a less fashionable genre in recent years, have declined less. A painting by J.M.W. Turner, “The Temple of Jupiter”, sold for $12.9m last quarter, a return of 10 per cent a year for the seller, who bought it in 1982 for $1.1m, said Michael Moses, a co-founder of the index.

The worst year on record for art investors was 1991, when prices dropped 41 per cent, said Mr Moses, who has collected data going back to the 1800s.

The index providers added that the art market tended to track the state of the economy but with a time lag.

Immediate inventories are needed

The world faces a permanent food crisis and global instability unless countries act now to feed a surging population by doubling agricultural output, a report drafted for ministers of the Group of Eight nations has warned.

The policy document, prepared by the G8’s Italian presidency for its first ministerial meeting on agriculture and seen by the Financial Times, says “immediate interventions” are needed.

It warns that global agriculture production must double by 2050 for the world’s fast-growing population to have enough to eat and to deal with the effects of climate change. Otherwise, the report says, the food crisis of the past two years in much of the world “will become structural in only a few decades”.

The report says that further food crises will have “serious consequences, not merely on business relations but equally on social and international relations, which in turn will impact directly on the security and stability of world politics”.

Agriculture ministers from G8 nations are due to meet this month in Italy. The meeting was prompted by last year’s spike in the prices of agricultural commodities, including wheat and rice, which triggered riots in more than 30 countries, from Bangladesh to Haiti.

Global food pricesAlthough agricultural commodities prices have since fallen by as much as 40-50 per cent, they are still well above their pre-crisis levels. Domestic prices in many developing countries remain close to last year’s records and have risen even further in some African countries.

“The issue of price volatility remains a crucial element for the world’s food security,” the report says. “There is a need for a fast increase of agricultural production in developing countries.”

James Bolger, chairman of the World Agricultural Forum and former prime minister of New Zealand, said the G8 meeting on agriculture was “hugely” significant. Political unity on agriculture was critical to avoid “random efforts by individual countries to secure their own food security”, he said

Tom Vilsack, US agriculture secretary, said Washington planned to double financial aid for agriculture development in poor countries to $1bn next year.

“We face the reality of a world population that’s growing by 79m people each year, a rate that may … challenge our capacity to grow and raise enough food,” he said yesterday ahead of the International Food Aid Conference in Kansas City.