Las Vegas real estate, mortgage, appraisal blog

It's official, Citigroup is being bailed out. Last night the government agreed to invest $20 billion more into Citigroup as well as take on the majority on the $300 billion in troubled mortgage assets. The Los Angeles Times reported that this is the largest single rescue to date.

The Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. will shoulder 90% of the losses on most of a $306-billion portfolio of toxic mortgages and related securities.

 

The company will cover the first $36 billion of losses, but beyond that will see its risk of loss shrink drastically.

In return for the protection and aid, Citigroup will grant Washington nearly $30 billion of preferred shares and warrants. The firm will give the government sweeping powers over its operations, allowing it to effectively prohibit stock dividends for the next three years and pass judgment on all executive pay packages.

 

And the company will agree to try to modify mortgages in the huge portfolio, using standards designed by the FDIC after the collapse of IndyMac Bank in Pasadena to keep as many homeowners as possible in their houses.

Citigroup already has received $25 billion from Treasury as part of the department's $700-billion financial rescue scheme. In return, Washington received an ownership stake in the firm. The $20-billion investment also comes from the department's Troubled Asset Relief Program.

"This weekend, the U.S. government and Citi worked together in an unprecedented way to address market confidence and the recent decline in Citi's stock price," said Chief Executive Vikram S. Pandit. "We appreciate the tremendous effort by the government to assure market stability."

Government officials, briefing reporters late Sunday, made clear they believed that permitting any further trouble at Citigroup could shake investor and depositor confidence in the global financial system and dramatically deepen what already is the country's worst financial crisis since the Great Depression.

"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," the three agencies said in a statement.

 

As recently as last Thursday, Pandit was declaring that the stock drop posed no financial danger to the company and that he had no intention of selling off pieces of the business in order to raise money.

But by Friday with Citigroup shares still falling even amid a market rally, executives had little choice but to seek help. The shares ended up losing $5.75 for the week, closing Friday at $3.77 a share. The executives presented a rescue plan Friday evening, setting off around-the-clock negotiations that lasted well into the night Sunday.

Among those at the table: Treasury Secretary Henry M. Paulson, Federal Reserve Chairman Ben S. Bernanke and Timothy F. Geithner, the head of the Federal Reserve Bank of New York and President-elect Barack Obama's pick for the top Treasury post.

Terms of the new rescue package are considerably more lenient than those the government imposed on failing insurer behemoth American International Group Inc. In AIG's case, Washington required that the company's current management leave and demanded a near-80% ownership stake before helping the firm.

Government officials made it clear that they did not want to impose punitive terms on Citigroup because its stability was crucial to protecting the financial system.

In March of this year, the Fed agreed to assume the management -- and risk -- of nearly $30 billion in troubled assets from Bear Stearns Cos. to pave the way for the investment house's fire sale to J.P. Morgan Chase & Co.

Last month, the FDIC agreed to bear losses above a certain threshold on troubled assets of Wachovia Corp. to facilitate Citigroup's purchase of the country's No. 4 banking firm. The deal ultimately fell through when Citigroup found itself outbid for Wachovia by Wells Fargo & Co.

Countrywide has caused even more woes for Bank of America as they have had to suspend foreclosure notices on nearly 2000 homes in Phoenix. Although there are lenders that are willing to work with those that are having problems making their mortgage payments this instead is forcing them to help out any mortgage heading towards foreclosure, including those of the same speculators and those who are able to afford their payments but simply do not want to pay.

The move, which will lead to cuts in people's mortgage payments, is part of the bank's recent settlement agreement with the office of Arizona Attorney General Terry Goddard and could help stem the growing number of foreclosures that has crippled the local housing market.

Last month, BofA agreed to modify loans for struggling borrowers if attorneys general from Arizona, Texas, Ohio, Iowa and Washington halted legal action against Countrywide. That action is based on the lender's "alleged use of deceptive practices" in its mortgage-lending business, according to Goddard.

The deal requires BofA to place a temporary hold on foreclosures on loans made up until the end of 2007 and work with buyers to make their mortgage payments more affordable so they have the option of staying in their homes.

Rick Simon, spokesman for BofA, said the bank will contact homeowners when its home-retention program is ready at the beginning of December.

It seems almost a veiled threat to other lenders that they follow suit.

"Now, we are asking other big mortgage firms to take on the same obligations to work with struggling borrowers as (BofA)," Goddard said.

"We have asked them to do it voluntarily without us filing a lawsuit, but investigations do continue into fraud and the possible inducement (of homeowners) into some of these mortgages by firms."

Money from the national housing-bailout plan passed last summer will be available in Arizona to help more struggling homeowners next year.

Until then, other big lenders are expected to step up efforts to help borrowers facing foreclosure.

On Friday, JPMorgan Chase announced that it would modify up to $110 million in mortgages nationwide. It expects to assist 400,000 families who need help making their home-loan payments.

"It's a far better solution to have companies working with buyers than foreclosures," Goddard said.

"This is important in getting us out of this mortgage meltdown and getting property values to firm up."

Some argue that this will only prolong the problem and encourage others to foreclose. Even those who are turned to for advice seem to have gotten in on the act. Here's a video of Jim Cramer with advice on what to do when you've lost equity.

Walk Away

If that seems unreal, he clarifies it the next day.

No really, I mean it

If that doesn't sound like encouragement to just dump I'm not sure what does. Not terribly encouraging for lenders or those looking to buy.

We've been hearing a lot lately about banks who are "too big to fail" and if you're like most Americans it's making you more than a little nervous. Too big to fail brings on the connotation of needing a "bailout" or that if failure should happen, the world would be turned on its ear. Well, now they're applying too big to fail status to a new market, cars. GM and Ford are being listed as too big to fail and what that could mean to the market has yet to be determined. Many are not sure that they will even reach that point but since people are losing their homes and falling behind in payments they are finding that buying a new car is starting to slip beyond their reach.

Amid concerns about access to credit, low consumer confidence and precarious cash positions, the debt ratings of the U.S. carmakers have slid deep into junk range. GM, once AAA rated, is now a B-, and Ford is slightly above it at B. On Thursday, Standard & Poor's said it would consider further downgrading GM. And this week, industry forecasters said U.S. car sales would be down 20% this year compared with 2007.

It's a grim financial picture, but talk of the companies' filing for bankruptcy protection has been surprisingly muted. Financial and industry experts are speculating that the automotive giants may simply be too integral to the economy to go under.

"For GM and Ford to fail, some pretty catastrophic things have to happen," said Brett Hoselton, equity analyst at KeyBanc Capital Markets. "Then again, things are pretty bad now."

Beyond just selling cars, the Michigan automakers have a huge financial reach, representing millions of jobs in the supplier, sales and aftermarket sector; they each have stakes in large financial services companies selling loans, leases, insurance and, in the case of GM, mortgages; and their value as symbols of U.S. industrial might is something few politicians are willing to overlook.

Although 2008 is proving a tough year for all carmakers -- Toyota Motor Corp.'s shares have slid 46% in the last year, and Honda Motor Co. is down 38% -- the picture for Ford and GM appears much worse.

Both are struggling under the weight of automobile lineups long on trucks and SUVs and short on the fuel-efficient cars consumers suddenly want.

Bruce Clark, an analyst at debt rating service Moody's, acknowledged that "their balance sheets are very weak" but said he would be surprised if either company went belly up. "It's not that a voluntary filing can't happen, but the costs associated with the bankruptcy of an automobile manufacturer are generally too high."

For starters, both companies still have a lot of money on hand. At the end of the second quarter, Ford had $26.6 billion in cash and cash equivalents, and GM had $21 billion, which even the most negative analysis suggests should be enough to get through this year and most of 2009.

Both still have access to lines of credit and are expecting significant cost reductions starting in 2010, when many of their healthcare and pension liabilities to retirees and union workers will be reduced under a new labor deal.

In recent months, executives at both companies have revealed plans to cut costs significantly by reducing production and workforce; both have also floated the possibility of asset sales.

"We face unprecedented challenges related to uncertainty in the financial markets globally and weakening economic fundamentals in many key markets," Renee Rashid-Merem, a GM spokeswoman, told Bloomberg News on Thursday. "But bankruptcy is not an option GM is considering."

According to Clark, a bankruptcy filing would probably have terrible effects on the residual value of cars and their warranties, making it even harder to sell new cars as consumers gravitate to other, more stable carmakers. That, he said, means that carmakers would choose to stay out of bankruptcy far longer than companies that might normally see it as a way out of untenable financial straits.

But perhaps the most compelling argument against going under comes as a result of the companies' unique position in American industry.

Despite perilously small market capitalizations -- GM is now worth less than $3 billion -- the two continue to bring in massive revenue and spread their money over a huge number of people. With more than 350,000 employees between them, they are true Goliaths, and when one factors in the estimated six indirect jobs created by every Ford and GM worker, nearly 2.5 million jobs are tied to the Big Two (Chrysler is privately held). By comparison, the U.S. has lost about 760,000 jobs this year.

Add to that the deeply symbolic role GM and Ford have in the country's industrial history, and many believe that no politician would ever let such a failure happen.

To that end, just two weeks ago President Bush signed off on a plan to guarantee $25 billion worth of low-cost loans to U.S. automakers and suppliers, a crucial lifeline at a time when borrowing at any price is almost impossible for large companies.

The mortgage "bailout" bill passed the Senate and although some are upset, as it had not passed the House, others are breathing a sigh of relief. In true Senate fashion several things were tacked onto the bill, two tax bills that no one could figure out how to pay for and a "temporary" increase in the deposit-insurance limits for banks and credit unions. The New York Times reported that this change could affect quite a few people and institutions, but perhaps not for the best.

The F.D.I.C. insures roughly $4.5 trillion in deposits, and has $45.2 billion in its fund. If the bill passes, those numbers would change substantially. Currently, the F.D.I.C. insures deposits up to $100,000. The proposal is to raise that to $250,000.

The limit has not been raised for nearly three decades and the increase is intended to bolster customers’ confidence and avert the kind of runs that toppled Washington Mutual, the nation’s largest savings and loan.

The Congressional Budget Office estimated that the new provision would extend F.D.I.C. coverage to $700 billion of currently uninsured deposits. That would increase insured deposits nationwide by about 15 percent, according to a letter sent Wednesday to Christopher J. Dodd, the Senate Banking Committee Chairman.

Proponents say that the move should help calm the nerves of depositors and stabilize the banking industry. After the emergency takeovers of WaMu and the Wachovia Corporation, bankers have worried about customers withdrawing their money.

Criticism comes from other corners, claiming that this increase won't do much good at all and could in fact make things worse by allowing banks to take on risks they normally wouldn't.

William M. Isaac, who was the chairman of the F.D.I.C. between 1981 and 1985, said that lifting the limit to $250,000 is “all show, no substance.” “It doesn’t do what needs to be done,” he said. “It might make somebody’s grandmother feel good, but that is not the problem that we have in the financial world: banks won’t lend to other banks.”

For more than a decade, the banking industry pressed the government to increase its insurance coverage. Congress last raised the limit on insured deposits in 1980, to $100,000 from $40,000. But despite years of rising prices, lawmakers resisted increasing the cap.

The concern was that raising the limit would increase the moral hazard, giving banks and customers incentives to take more risk than they otherwise would take. But with the banking industry under siege, that view appears to have changed.

Still, the move will put more pressure on the insurance fund.

Regulators arranged the emergency takeovers of WaMu and Wachovia without suffering any new losses. But a wave of new bank failures could deplete the fund, and eventually force the F.D.I.C. to draw down on its $30 billion line of credit from the Treasury, or at worst, ask Congress for more cash.

Here's the kicker. Sheila C. Bair, the F.D.I.C. Chairwoman says that they didn't have enough time to prepare for this...(all emphasis added by myself)

“It’s unfortunate that we didn’t have more time to build up the fund in the good times,” said Sheila C. Bair, the F.D.I.C. chairwoman, in an interview Wednesday. The F.D.I.C. did not have the power to raise its premiums until February 2006 and proposed using it for the first time two weeks after Ms. Bair took over the agency the following June. “It is what is, and we are dealing with the situation,” she added.

It's funny she should say that as the procedures the F.D.I.C. had taken towards these premiums in the previous decade or so had been...well, lax.

When banks were flush, most of them paid nothing for a golden government guarantee. Bank failures were so rare that, for a decade, the Federal Deposit Insurance Corporation waived most of the premiums it normally would have collected to insure bank deposits.

After forgoing premiums from 1996 to 2006, the agency must now turn to struggling banks and ask them to pay more, putting more pressure on the industry. If a large number of banks fail, the F.D.I.C. may have to turn to the Treasury for more money, forcing taxpayers to foot the bill.

I did a little digging after hearing about WaMu being taken over by the FDIC and then bought by J.P. Morgan. Washington Mutual (or WaMu), in 2001, announced that they would be using AVMs instead of appraisals and for many that was the turn towards failure. An article on Access My Library from Origination News dated August 1, 2001 went a little further into it.

Washington Mutual Home Loans & Insurance Services Group has announced an initiative to integrate automated delivery of real estate appraisal data into its Optis mortgage origination platform.

Called OptisValue, the new system is scheduled to be deployed in third quarter 2001 to streamline the appraisal process and cut costs through to provide electronic delivery of appraisal reports. OptisValue incorporates FNC Inc.'s Collateral Management System (CMS) to support OptisValue. The system is slated to offer 24/7 access to information and real-time status of ordered appraisal services.

Washington Mutual-approved appraisers will be required to use Appraisal Institute (AI) Ready software and to use FNC Inc.'s Appraisalport.com website to electronically receive assignments and submit completed appraisals.

"Our new real estate appraisal system will help support WaMu's substantial loan production and will contribute to the efficiencies delivered by Optis," said Stacey Arens, executive vice president of operations for the Home Loans & Insurance Services Group at Washington Mutual. "The OptisValue system supports our goal to enable closings in three to five days. With the use of AI Ready software, the system will create significant cost savings for Washington Mutual and ultimately for our customers."

AI Ready software is currently offered by Day One, a division of Appraisal.com Inc., Buffalo, N.Y. "I see this as a very smart action on Washington Mutual's part," said Appraisal.com president and CEO Mark Yellen. "Today 90% of lenders are still receiving appraisals on paper, and WaMu's pro- active stance is an important step toward industry-wide acceptance of electronic delivery. Access to a common pool of data is a solution that is going to benefit everyone."

In a related announcement, AIRD Inc. (www.airdport.com) announced that Appraisal Partner Inc. (API) has incorporated the Open Appraisal Document Interface (OADI) for its forms software products. The interface allows forms companies to implement the Appraisal Institute's Residential Data Storage and Transmission Standard.

AIRD, a joint venture between FNC and the Appraisal Institute, is offered as the first XML-based Internet-accessible, nonproprietary national database of residential physical property data based on factual information submitted by appraisers.

Software conforming to the standard bears the logo "Appraisal Institute Ready" and allows banks and their vendors to transmit and receive data to and from other participating software, as well as AIRD, without re-keying.

"Through the standard and through the Appraisal Institute Ready initiative, API's clients will be able to deliver appraisals and retrieve information easily online and thus will be able to work more efficiently," said Ann Spitzley, president of AIRD Inc.

On May 4, 2005 Andrew LaPlante told the Federal Reserve that appraisals were unnecessary for every loan and that the likelihood of failure for those loans was minimal.

The New York Times recently discussed the pros and cons of the bailout bill that has been splashed all over the front pages of newspapers and home pages of news sites. Although many enduring mortgage woes are hoping that this bailout will help them to keep their homes and keep banks from falling under the wheel of the "mortgage crisis" it is also raising fears that the government is biting off more than it can chew.

Some question the prudence of adding to the nation’s overall debt at a time when the Treasury relies on the largess of foreigners to cover the bills. Even so, there is wide agreement that a broad intervention like the one Treasury is proposing is necessary.

“It goes a long way; it ameliorates it very substantially,” said Alan S. Blinder, an economist at Princeton and a former vice chairman of the board of governors at the Federal Reserve, who has said for months that the government must step in forcefully to buy mortgage-linked investments.

“We’re deep into Alice in Wonderland’s rabbit hole,” Mr. Blinder said.

But significant skepticism confronts the plan. Under a proposal circulating Saturday, the Treasury could spend as much as $700 billion to buy mortgage-linked investments, then sell what it can as it works out the messy details of the loans. But no one really knows what this cosmically complex web of finance will be worth, making the final price tag for the taxpayer unknowable. One may just as well try to predict the weather three years from Tuesday.

It seems as though many have forgotten exactly what has caused this crisis. With rumors about banks and mortgage companies and doomsayers claiming the end it is sometimes hard to recall just when this started and how.

“The risk of ending up like Japan, with 10 years of stagnation, is now much lessened,” said Nouriel Roubini, an economist at the Stern School of Business at New York University. “The recession train has left the station, but it’s going to be 18 months instead of five years.”

If the plan works, it will attack the central cause of American economic distress: the continued plunge in housing prices. If banks resumed lending more liberally, mortgages would become more readily available. That would give more people the wherewithal to buy homes, lifting housing prices or at least preventing them from falling further. This would prevent more mortgage-linked investments from going bad, further easing the strain on banks. As a result, the current downward spiral would end and start heading up.

“It’s easy to forget amid all the fancy stuff — credit derivatives, swaps — that the root cause of all this is declining house prices,” Mr. Blinder said. “If you can reverse that, then people start coming out of their foxholes and start putting their money in places they have been too afraid to put it.

In a written statement in a hearing before the Committee on Financial Services Subcommittee on Housing and Community Opportunity in the United States House of Representatives, Margaret Burns Director, Office of Single Family Program Development for HUD had this to say about homeowner downpayment assistance programs:

As you may know from previous public statements and testimony offered by the FHA Commissioner, our agency has been concerned with seller-funded downpayment assistance for some time now. While well intended, the programs have had a significant negative impact on FHA's business for the last several years. Loans made to borrowers who rely on these types of seller-funded gifts perform very poorly. The foreclosure rates on these loans are more than twice those of all other home purchase loans insured by FHA. Moreover, FHA experiences higher loss rates from the sale of the properties associated with these particular foreclosures, a reflection of the overvaluation that occurs with these programs. The higher foreclosure rates represent a financial burden for FHA and taxpayers, but of greater concern, they hurt the families who lose their homes and the neighborhoods in which those homes are located.

The core problem with these programs is not that the borrowers they serve are riskier or less credit-worthy; it's that the programs disrupt the natural negotiations between buyers and sellers in a way that results in inflated sales prices and thus higher mortgage amounts. Seller-funded downpayment assistance programs flourish in weak real estate markets. In weak markets, low buyer demand means that sellers are less likely to get full asking price for their homes and are therefore willing to participate in programs that will help them sell for a higher price. As such, the property overvaluation associated with seller-funded gift programs occurs in markets that are least able to adjust to and accommodate pricing variations.

For example, in fiscal year 2006, more than 50 percent of FHA's purchase mortgage business in both Ohio and Indiana was for borrowers who relied on nonprofit seller-funded gifts. In these states, home values have been stagnant or declining. In soft housing markets, borrowers with no or negative equity who face any kind of financial hardship have fewer options to recover and can slip into foreclosure fairly quickly, despite the best efforts of FHA's loss mitigation programs. High foreclosure rates in these communities contribute to additional deterioration in home values and a vicious cycle of property depreciation.

Burns went on to discuss studies that supported her stand and mentioned the programs the FHA has initiated to help buyers purchase homes.

FHA sought legislative authority to eliminate its own 3 percent cash investment requirement: to offer cash-poor, but creditworthy, borrowers a safer, more affordable alternative to the seller-funded gift programs. It was our view that a modernized FHA would reduce borrowers' reliance on seller-funded gift programs, an outcome that would be good for borrowers and taxpayers. Because congressional efforts have yet to result in FHA being permitted to offer better and more flexible financing options, we determined it was time for our agency to stop recognizing this particular type of assistance.

As you have heard Commissioner Montgomery state many times, FHA financing is the most consumer friendly on the market today, helping families access prime rate mortgages. FHA financing has none of the harmful features that are common in the subprime market, features that have been the subject of much congressional discussion and debate. FHA does not permit prepayment penalties or negative amortization; FHA requires lenders to escrow for taxes and insurance; FHA underwriting ensures the borrowers' capacity to repay meets a suitably high threshold; and FHA requires evidence of a borrower's income and employment. In essence, FHA makes it possible for first-time homebuyers to obtain home financing that is safe and fair and affordable.

That is our objective at FHA - to help borrowers who otherwise wouldn't qualify for prime rate financing. We want these families to receive the tremendous protections offered by FHA, both through FHA's underwriting and in the form of our successful loss mitigation program. And we continue to work with this Committee to enact needed reforms that would help our traditional borrowers, such as risk-based pricing and "Zero Down" financing.

But now, we find ourselves in a position where we can no longer sit back and wait for that alternative. If we did nothing, some would appropriately question FHA's capacity to manage risk and FHA's own data shows that the poor performance of the loans to borrowers using seller-funded gifts must be addressed as soon as possible.

It seems that her statement has fallen on deaf ears, however, as a recent post in a New Jersey news source says that a compromise to keep downpayment assistance is being pursued diligently.

Chairman of the House Financial Services Committee, Barney Frank, has discussed publicly the fact that he has negotiated an agreement with HUD Secretary Steve Preston that will provide for the continuation of privately funded down-payment assistance.

The agreement allows HUD to impose risk-based pricing on downpayment assistance transactions which provides Secretary Preston the fiscal protection he seeks for the FHA insurance fund.

According to an Inman News article published Tuesday, Chairman Frank is quoted as saying "The FHA loved the ban on down-payment assistance (but) hated the ban on risk-based pricing," Frank said at Saturday's hearing. "That seemed to me to offer an opportunity. So (HR 6694) will replace both bans with middle ground -- and it will pass the House, I can guarantee you. What you want to do now obviously is talk to your senators. We think it will go through there -- it has the approval now of the Secretary of HUD."

Bank write-offs continue to increase as homes are being foreclosed on throughout the country. While everyone watches the larger institutions for a sign of recovery there is talk that this is only going to get worse before it gets better, according to Market Oracle.

We have seen some $505 billion in bank write-offs so far in this credit crisis. It is serious naiveté to assume that this will be the extent of it. Most of the write-offs have been mortgage-related. We have not yet seen the write-offs that will come as consumers start defaulting on credit cards, auto loans, and other consumer debt. Neither have we seen the losses that will come from commercial real estate or corporate loan as the recession progresses. You can't write off something until it goes bad, although you can increase your loan loss provisions. This of course hits earnings and your stock price and thus your ability to raise new equity. It presents a very difficult dilemma for bank managers and investors deciding whether to invest or go away.

Sober-minded analysis from the IMF suggests that the total write-offs by all banks may be $1 trillion. Dr. Nouriel Roubini is much more alarmed and puts the potential losses at closer to $2 trillion. That means that banks over time are going to have to increase their loan loss provisions, hitting both earnings and capital. And that means they will have to raise more investment capital and equity at a time when their stock prices are low.

It is a vicious spiral. Banks have less capital, so they are able to lend less to the very businesses that need the money; and without said money the businesses will be less capable of paying their current loans, which means that banks have less capital. Rinse and repeat.

That only prolongs the recession and Muddle Through Economy, which hurts consumers and corporate profits, which in turn puts more pressure on banks. Ultimately it means that banks are going to have to raise a lot more capital than anyone who is buying financial stocks today imagines. And it is largely going to be expensive capital. Look at this note from Bennet Sedacca of Atlantic Advisors:

"Financial entities like banks, broker/dealers, regional banks, finance companies, and insurance companies need credit at reasonable rates in order to finance themselves. I have been concerned for many years that the door would finally shut on banks, brokers and others to raise new capital in the debt markets.

It continues to discuss the problems with Fannie Mae and Freddie Mac as well as the estimates of just how badly the credit write-offs will be (estimated $850 billion). It seems that although we'd all like to see the light, we're not quite out of the woods yet.

The last few weeks have been encouraging, gas prices dropping and the economy appearing to make a comeback. Whether or not this change is simply temporary has many people concerned. A recent article in the LA Times has more on the argument.

Market bears would argue that economic readings are still weak, particularly for the average U.S. consumer. Other countries' economies are declining too, and the credit markets that companies rely on to borrow and lend remain tight.

But on the more positive side, prices for commodities including oil are much lower than they were a month ago. The housing market, though probably not due for recovery anytime soon, is showing signs of bottoming. And the stock market tends to rebound before the economy does.

It's easy to argue both sides; it's harder for an investor to decide where to put his money. That's why many market analysts are predicting that stocks are going to stay volatile for a while longer.

Back-and-forth movements are typical when the market is trying to put in a bottom, said Scott Wren, equity strategist for Wachovia Securities. Plus, he said, "you're getting a lot of mixed news."

Consumers have been buying fewer items, in general, because prices have been rising. Last week, the Labor Department reported a hefty 0.8% increase in consumer prices for July.

Wall Street's hope is that the pullback in oil will alleviate some of these pressures. But some economists believe that even if commodities stay down from their recent highs, it won't be enough to shield consumers from unmanageable prices.

"It's too early to be overly confident about the economy," said Dan Laufenberg, chief economist for Ameriprise Financial. "I still think inflation is the greatest risk to the economy."

He noted that although oil prices are down sharply from their mid-July record, they are still about 50% higher than a year ago. Moreover, he said, "inflation is starting to spill over into other goods and services."

How this will effect the banking industry is still to be determined but for now economists are not offering any rosy predictions.

And lastly -- though certainly at the front of investors' minds -- is the situation with the still-stumbling global banking system. Banks such as JPMorgan Chase & Co. and UBS last week augured further credit losses, while banking industry analysts reduced their earnings estimates again in anticipation of more dismal profits in the third quarter.

"A year from today, we'll still be talking about financial problems. It's not going away," said Alexander Paris, economist and market analyst for Barrington Research. "You're going to have a lot more bank failures."

After coming under criticism for their lending standards and a panicked withdraw of $1.3 billion by depositors, IndyMac is filing for liquidation of its remaining assets. An article on Bloomberg today discussed what this entails.

IndyMac's liabilities are between $100 million and $500 million, according to the Chapter 7 filing by the bank holding company yesterday in U.S. Bankruptcy Court in Los Angeles. IndyMac said it has less than 50 creditors, including law and accounting firms and other banks, none of whose outstanding claims were listed.

IndyMac was seized by U.S. regulators on July 11 after a run by depositors left the mortgage lender strapped for cash. The Federal Deposit Insurance Corp. is running a successor institution, IndyMac Federal Bank, and regulators have said they intend to eventually sell the seized bank.

The FDIC ``has been in sole possession custody and control of all of the books and records of'' IndyMac Bancorp and the court filing was made without access to information that bankruptcy laws typically require, Chief Executive Officer Michael W. Perry said in court papers.

While banks are prohibited from filing for U.S. bankruptcy protection, bank holding companies aren't. Perry is Pasadena, California-based IndyMac Bancorp's sole remaining employee, according to the filing. The company has $50 million to $100 million in assets.

IndyMac Bancorp racked up almost $900 million in losses as home prices tumbled and foreclosures hit records. California ranked second among U.S. states, with one foreclosure filing for every 192 households in June, 2.6 times the national average.

IndyMac was the largest OTS-regulated savings and loan to fail and second-biggest financial institution to close behind Continental Illinois in 1984, according to the FDIC. The failure will cost the federal deposit insurance program that repays customers when a bank fails about $4 billion to $8 billion, the FDIC said in a statement last month.