Round Two on Real Estate - Commercial RE

Analysts warn of foreclosure crisis in commercial real estate. Analysts said a wave of foreclosure on commercial properties in the U.S. likely will hit community banks especially hard. "There's been an enormous bubble in commercial real estate, and it has to come down," said Elizabeth Warren, chairwoman of the Congressional Oversight Panel. "There will be significant bankruptcies among developers and significant failures among community banks." The Washington Post (19 Feb.)

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Muni Crisis - The Next Hurrdle

The logic here is quite simple:

Lower wages + higher unemployment= lower tax revenues.

Lower tax revenues + greater government spending= greater deficits.

Greater deficits eventually = insolvency or default.

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Greece Melt Down - Who is Next???

Eurozone gives Greece 1 month to make progress on cutting deficit. Finance ministers from the eurozone took a get-tough approach with Greece, warning the country of additional spending cuts and taxes if a report due March 16 shows that the Greek government is not making progress in slashing its budget deficit. They told Greece it must stick with an austerity plan presented to the EU that promises to cut this year's budget deficit from 12.7% to 8.7% of GDP. "Greece has to actually deliver and is beginning to deliver," said French Finance Minister Christine Lagarde. Google/The Associated Press (15 Feb.) , Financial Times (tiered subscription model) (16 Feb.)

Google/The AP Article Link

In addition, EU wants details of Wall Street deals related to Greek debt: The European Commission wants an explanation from Greece regarding reports that Wall Street banks put together derivatives deals that allowed the country to hide billions in debt. Statistics agency Eurostat told the Greek government to provide details of the transactions by the end of this month, said the commission's Amadeu Altafaj Tardio. EUObserver (Brussels) (15 Feb.) , Financial Times (tiered subscription model) (15 Feb.)

Euobserver Link

Good News for Homeowners

Homeowners are building up equity again, Fed says. After three years of homeowners' equity contracting in the U.S., the longest ever, the trend has reversed. The Federal Reserve's "flow of funds" survey shows that between the first and third quarters of 2009, homeowners' net equity increased almost $1 trillion. Los Angeles Times (14 Feb.)

LA Times Article

Fed Prepares for Fiscal Stimulus Withdrawal

Fed prepares for cautious withdrawal of fiscal stimulus. The Federal Reserve is preparing to talk publicly about its strategy for withdrawing liquidity from the U.S. economy, after flooding it with trillions of dollars. Central bank policymakers and private-sector economists said the process will be tricky and dangerous, coming at a time when unemployment is projected to remain historically high. The Washington Post (09 Feb.)

Washington Post Article Link

Debt Refinancing May Be a Bigger Problem

Moody's warns on debt risks. In Moody's annual report on risks, the rating firm warned nearly 1,000 companies with a junk rating will face significant refinancing needs over the next several years, with around $700B of debt coming due between 2012 and 2014. "Longer-term maturities are vulnerable if the economic recovery doesn't continue to take hold," said Kevin Cassidy, a senior credit officer at Moody's. If unemployment and credit conditions worsen, "things could get tough pretty quick for some companies."

Source: SeekingAlpha.com, "Wall Street Breakfast"

Proposed $3.8 Trillion budget, WHAT???

Obama's budget seeks $100 billion for jobs, sets deficit record. U.S. President Barack Obama is expected propose a $3.8 trillion budget that includes a record-high deficit of $1.6 trillion as well as a $100 billion program to create jobs, Obama administration and congressional sources said. The spending to create employment includes tax cuts for small businesses, financial assistance for state and local governments, and extra money for social programs. To bring the budget deficit under control, Obama will rely on proposals including a freeze on domestic programs, taxes on big banks and the expiration of tax cuts for families with an income of more than $250,000 a year. The Washington Post (31 Jan.) , Los Angeles Times (31 Jan.) , The New York Times (01 Feb.)