There are a number of developments to point out this evening so let us get right into it, shall we?

FDIC Friday!

9 Banks closed were shuttered by the FDIC on Friday with a total asset base of $19.1B in total – and I thought the 7 from last week were bad .  The banks in question are:

• California National Bank, CA
• Bank USA, NA, AZ
• San Diego National Bank. CA
• Pacific National Bank, CA
• Park National Bank, IL
• Community Bank of Lemont, IL
• North Houston Bank, TX
• Madisonville State Bank, TX
• Citizens National Bank, TX

How much will the 9 closings cost the FDIC DIF fund? A nice little sum of $2.5B.  Nice, huh?

Stimulus has saved, created 650,000 – Bullsh*t

The magic of being a politician is that one can say just about anything without providing much detail about your statement or claim and very few people will have the ability to debunk your claim.  Then, if someone does attempted to make sense of your statement, you can simply attack them without using facts and claim the person questioning you is unfit or unqualified to be asking such a question.

In 2008 Mr. Obama stated he would “save or create 3.5 million jobs by 2011” including “600,000 “created or saved” this year.  There are so many problems with this claim it is laughable.

There is virtually no way to hold him accountable to this number as there is no realistic way to count a “saved” job.  So, to hear the administration claim a total of 650,000 jobs were saved due to $159B in stimulus spending is highly questionable.

If you break it down one could imply there were 650,000 new/saved jobs that pay $160,000 per year? God forbid one actually questions the administration on such a thing:

Jared Bernstein, chief economist and senior economic advisor to the vice president, called that “calculator abuse.”

He said the cost per job was actually $92,000 — but acknowledged that estimate is for the whole stimulus package as of the end of 2010.

Stay classy Bernstein.

Two areas that allegedly benefited where construction (80K) and education (325K).  You mean to have the public believe roughly 400,000 construction and teaching jobs were created AND pay 92K a year?

Really?

Look at the base average of those two groups and tell me there is any truth there.

We already know the official unemployment number reported is severely under reported, and the method of collecting data for this survey is faulty, how can anyone believe this claim?

It’s politics, pure and simple.

The coming (Commercial) Real Estate Crash

Capmark was the big signal last week that CRE lenders are really feeling the economic pinch.  While people have been warning of the CRE implosion for almost a year now, the press is beginning to really take notice of the situation.

Wilbur Ross Jr, the leveraged buyout specialist, is warning of the impending doom:

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate — the return that investors are demanding to buy a property — are going up.”

Let’s put this into terms most people can relate to.

You have a mall and each vendor needs to make rent; however, you have a bad holiday season.  As a result, quarter of the vendors can no longer make their monthly payments.  Stores close, occupancy goes down. Unfortunately the property owner must have a certain occupancy rate to meet the demands of their loan.  No longer being at this threshold the property owner defaults and banks now have a “toxic” loan on their hands.

Rinse. Repeat.

This story is going on all over the United States in both retail on office. Unfortunately for CRE lenders the Federal Reserve is saying “Hey, good luck with that!”

Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers’ financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined.

Just a matter of time until the banks get hammered.

For months now, the Fed and the Treasury Secretaries (Paulsen and Geithner) have expressed confidence in the free market. Extreme market conditions call for unprecedented actions by the government, all in the name of propping up the U.S. financial system. What if, however, there is more at work?

Yesterday, the Fed refused to provide information on what financial institutions obtained money. The reasoning? Such information would potentially damage the reputations and/or create a lack of confidence in banks that obtained money.

Fed Refuses to Release Bank Lending Data, Insists on Secrecy

The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast “a stigma” on recipients of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral.

If you note, the same article points out:

Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson said in September they would meet congressional demands for transparency in a $700 billion bailout of the banking system.

What changed between September and now? Aside from the economic desperation increasing more than anyone could have expected, not much else. Auditors, economists and government officials all knew the financial institutions were facing insolvency. The financial markets were well aware then, as they are now, the banks were on the brink. As such, it is hard to make the argument that confidence in banking system would be tarnished by releasing information showing who received money.

The damage is done; the horse is out of the barn.

While reassuring to hear the Fed say transparency would be forthcoming, the reality is the Federal Reserve acts independently of Congress and the President. This body has the ability to do whatever they wish, without the need for government approval and have no duty to explain their actions to a governing body.

Maybe the lack of transparency comes from the Federal Reserve deciding who is going to survive the crisis? Maybe the Federal Reserve is taking advantage of the credit crisis in order to reshape the financial system after years of neglect.

I do not wish to sound paranoid, or some crackpot conspiracy theorist, but looking at the whole body of evidence it is clear the Federal Reserve, as well as the Treasury, is withholding information for some unknown reasons. Be it a lack of economic understanding, or something more calculated, it’s clear there is an undercurrent the general public is being left out of.

If the actions of the Federal Reserve are designed to select the survivors of the financial crisis, and not let the market direct such a decision, this would be a clear sign that the idea of capitalism as the world believed it to be was a failure.