Freddie Mac Earnings

Freddie Mac has released their earnings and its a lot worse than expected. Three times worse than expected. Fannie Mae will be releasing earnings later in the week and those are expected to be really bad too. This is just another sign of exactly how bad this economy is. The mortgage crisis along with the high cost of gas is really putting pressure on all segments of the economy and no one seems to have a plan to fix it.

Congress goes on vacation well the dumocrats in congress while the republicans stage a protest and make the dumocrats( no its not misspelled) look like they don’t care. It does not help the dumocrats cause for winning in November to have Nancy Pelosi acting like an idiot and not allowing even a resemblance of a vote on energy polices. This just shows how out of touch our elected officials are. The dumocrats offered all types of promises when they grabbed majority of the house two years ago, but up to this point have done nothing. And you can’t blame Bush, if they had presented decent legislation which was vetoed then maybe you could give Bush some blame, but the truth is they have not done anything and the fact that Pelosi would not even allow a vote may signal the end of our society.

The Dumocrats have already chosen not elected their nominee and now they won’t to do away with Congress. I guess the government set up by our fore fathers is about to get thrown out with the bath water in the name of PC.  Its time for Congress to get back to work and pass some legislation to fix the issues that Freddie Mac and Fannie Mae face as well as the entire banking community. They also need to get back to work and lift the bans on domestic drilling so we can bring down the price of oil and give the American workers a break.

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Texas Ratio - Bank Failures

With the recent failure of Indymac Bank and the ensuing issues at Fannie Mae and Freddie Mac many people are starting to take a look at the Texas Ratio. The Texas Ratio is a calculation which shows how likely some banks are to fail. The definition of a Texas ratio is:

The Texas ratio is a measure of a bank’s credit troubles. Developed by Gerard Cassidy and others at RBC Capital Markets, it is calculated by dividing the value of the lender’s non-performing loans by the sum of its tangible equity capital and loan loss reserves.

In analyzing Texas banks during the early 1980s recession, Cassidy noted that banks tended to fail when this ratio reached 1:1, or 100%. He noted a similar pattern among New England banks during the recession of the early 1990s.

Apparently this is one of main calculations that the federal reserve uses when deciding which banks should go on its troubled bank list. The federal reserve shocked a lot of people last week when it stated that it now had at least 90 banks on its troubled bank list and some analyst estimate there could be as many as 150 banks who are close to being placed on the list. The Federal reserve does not actually release the bank names who are on the list, but earnings reports can be a good indicator of which banks may be on the troubled banks list and thus have a chance of failure.

Many people are concerned about these developments and rightly so as if you are unlucky enough to have money in one of the failed banks then even if its insured by the FDIC, your money could be frozen for a time while all the paperwork and investigation is done. This is not good for people in an economy such as we have as many people are feeling the crunch of the high gas prices. These continued fears could send the economy into an even deeper recession and many people are now starting to talk about depression.

 

Senate Banking Committee Speeches

Wall street has had a dreary outlook lately. This lackluster performance comes form fears about the credit market, to rising energy costs, the FDIC’s list of troubled banks. The Federal reserve chairmen Ben Bernanke did not help the mode this morning at the Senate Banking Committee:

"The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth," Bernanke said in a speech to the Senate Banking Committee this morning. "At the same time, upside risks to the inflation outlook have intensified lately."

Inflation "seems likely to move temporarily higher in the near term," Bernanke said.

Bernanke also highlighted the problems in the financial markets, which he said remain under "considerable stress."

"Helping the financial markets to return to more normal functioning will continue to be a top priority of the Federal Reserve," Bernanke said.

This is not good news for an economy which is increasingly coming under pressure. Yesterday the FDIC added to its list of troubled banks and there has been a multitude of fear surrounding the collapse of the IndyMac Bank as well as many fears about the financial state of Fannie Mae and Freddie Mac. These are all issues that must be addressed or our economy is going to continue to worsen as time goes along. Many Americans are already feeling the crunch of the sagging economy and there seems to be no end in sight.

Since it does not appear we have any leadership in Washington either in any office or running for an office, then there does not seem to be a light at the end of the tunnel. As I type the markets are slumping with the Dow Jones off another 130 points today to go along with yesterday’s decline. Obama is giving a speech where he is talking about what we should have done and not what he plans to do. No leadership any where by anyone. No telling where we will end up next.