Remember the definition of the TED spread–The difference between what banks and the Treasury pay to borrow money for three months.
This really is a helpful chart. Make sure also to look at the weekly picture and then the monthly chart. Basically, the higher this goes, the more clogged the world financial system becomes, until a heart attack becomes inevitable.
The Federal Reserve and U.S. Treasury continue to fail in their attempts to stabilize the U.S. financial system. That is due to failure to grasp the nature of the problem, which concerns the parallel banking system. Rescue policy remains stuck in the past, focused on the traditional banking system while ignoring the parallel unregulated system that was permitted to develop over the past twenty-five years.
This parallel banking system financed vast amounts of real estate lending and consumer borrowing. The system (which included the likes of Thornburg Mortgage, Bear Stearns and Lehman Brothers) made loans but had no deposit base. Instead, it relied on roll-over funding obtained through money markets. Additionally, it operated with little capital and extremely high leverage ratios, which was critical to its tremendous profitability. Finally, loans were usually securitized and traded among financial firms.
This business model has now proven extremely fragile. First, the model created a fundamental maturity mismatch, whereby loans were of a long term nature but funding was short-term. That left firms vulnerable to disruptions of money market funding, as has now occurred.
Second, securitization converted loans into financial instruments that could be priced according to market conditions. That was fine when prices were rising, but when they started falling firms had to take large mark-to-market losses. Given their low capital ratios, those losses quickly wiped out firms’ capital bases, thereby freezing roll-over funding.
In effect, the parallel banking business model completely lacked shock absorbers, and it has now imploded in a vicious cycle. Lack of roll-over financing has compelled asset sales, which has driven down prices. That has further eroded capital, triggering margin calls that have caused more asset sales and even lower prices, making financing impossible for even the best firms.
Here in the heart of Kansas, the sky isn’t falling and Chicken Little isn’t running around without a head. Community banks like mine are still making loans and serving the needs of customers.
I used to worry about competing in the world of mega “too-big-to-fail” banks. But now I know community banks offer something the monsters can never offer — real personal service. Many financial-type businesses say they offer the same thing, but they usually don’t list personal numbers in the phone book and probably aren’t driving the volunteer fire truck. My father always told me that character repaid many more debts than collateral ever would. Community banks form long-term relationships with customers.
During the farm crisis of the 1980s the over-line credits we had placed with the city correspondent banks were called. A community bank used to rely on participating loans with large metro banks. For example, if my bank had a regulatory loan limit of a million dollars and I made a two million dollar loan, I would “sell” the over-line to a large bank. These large banks suddenly suspended and called all rural credits. This is probably similar to what is happening to borrowers who use super-large banks in today’s panic environment. There was nothing wrong with these loans but every small bank suffered from this irrational wrath.
A successful plan to stabilize the U.S. economy and prevent a deep global recession must do more than buy back impaired debt from financial institutions. It must address the fundamental cause of the crisis: the downward spiral of house prices that devastates household wealth and destroys the capital of financial institutions that hold mortgages and mortgage-backed securities.
The recently enacted financial rescue plan does nothing to stop this spiral. Credit will not flow and liquidity will not return to the banking system until financial institutions have confidence in the solvency and liquidity of other banks.
Because of the 20% fall in the price of homes since the bursting of the house-price bubble, there are now some 10 million homes with mortgages that exceed the value of the house. Residential mortgages are generally “no recourse” loans, meaning that if the homeowner stops making payments, the creditor can take the property but cannot take other assets or attach income. Individuals with loan-to-value ratios greater than 100% therefore have an incentive to default even if they can afford their monthly payments, and to rent an apartment or other house until house prices stop declining. When individuals default and creditors foreclose, the property is added to the stock of unsold homes. That depresses prices further, increasing the number and magnitude of negative equity houses.
The prospect of a downward spiral of house prices depresses the value of mortgage-backed securities and therefore the capital and liquidity of financial institutions. Experts say that an additional 10% to 15% decline in house prices is needed to get back to the prebubble level. That decline would double the number of homes with negative equity, raising the total to 40% of all homes with mortgages. The mortgages of five million homeowners would then exceed the value of their homes by 30% or more, which could prompt millions of defaults.
Weather services reported an 8 m.p.h. wind in Chicago on Friday. They failed, of course, to factor in the collective sigh of Cubs Nation.
“Good grief!” fans shrieked, as the Cubs stumble toward a possible Saturday elimination.
Holy Cow, oh wow, it’s deja vu all over again.
How””just how””they asked, could the team with the National League’s best record deliver this 72 hours of ineptitude and misery?
Eleven months after being barred from performing episcopal acts, an ecclesiastical court has determined that Diocese of Pennsylvania Bishop Charles E. Bennison should be deposed from the ordained ministry in the Episcopal Church.
The Court for the Trial of a Bishop, which spent four days in June hearing the case against Bennison, ruled September 30 that deposition was appropriate “in recognition of the nature of the offense and because [Bennison] has failed to demonstrate that he comprehends and takes responsibility for the harm that he has caused.”
Bennison was determined by the court in June of having engaged in conduct unbecoming a member of the clergy.
“We are extremely disappointed with the Court’s decision today,” Bennison’s Philadelphia attorneys James A. A. Pabarue and Carolyn Bates Kelly said in a statement emailed to ENS. The statement said that the court’s determination in June “was completely wrong” and that a sentence of deposition would be “utterly immoral in light of the Bishop’s four decades of faithful service to the Episcopal Church.”
A nine-member church court has ruled unanimously that the Rt. Rev. Charles E. Bennison, Jr., the inhibited Bishop of Pennsylvania, should be deposed from ministry in The Episcopal Church.
The court ruled on June 25 that Bishop Bennison was guilty of conduct unbecoming a member of the clergy. The court found that Bishop Bennison failed to report that his brother, the Rev. John Bennison, had engaged in sexual relations with a female member of the youth group at St. Mark’s Church, Upland, Calif., when Charles Bennison was rector there in the early 1970s. The court also found that he failed to protect the young woman from further sexual advances by his brother, or to provide adequate pastoral care to the young woman or her family.
Brad Babbitt and Hamilton Doherty, Jr., two attorneys who helped the Court for the Trial of a Bishop conduct the trial, released the sentencing documents late Friday morning. The two documents ”” the sentence and an order denying Bishop Bennison’s final motions to dismiss the case ”” are both dated Sept. 30.
1. Under the Canons and Constitution of the Diocese and the Episcopal Church, it is not possible for the Diocese or parishes within the Diocese to leave the Church. People may leave the Church; dioceses and parishes may not. Therefore, parishes, clergy and laity that wish to remain in the Episcopal Church will not recognize the legitimacy of “realignment.”
2. At the close of Convention on October 4, we will no longer recognize those members of the current leadership of the Diocese of Pittsburgh who “realign” as being legitimate. Ecclesiastic authority will shift to those members of the Standing Committee who are known to be remaining in the Episcopal Church.
3. Soon after October 4, the remaining members of the Standing Committee will determine whether any of the other members of the current Standing Committee are remaining in the Episcopal Church. Those who are not will cease to be recognized as members of the Standing Committee. The remaining members of the Standing Committee will appoint two additional individuals to serve as members of the Standing Committee.
When the Episcopal Diocese of Pittsburgh meets in convention October 4, in addition to considering whether to align with the Anglican Province of the Southern Cone, deputies will be asked to create four new parishes.
Seeds of Hope, Bloomfield; Charis247 Community, Coraopolis; Somerset Anglican Fellowship, Somerset; and Grace Anglican Church, Slippery Rock, are all asking for admission to the diocese.
Admitting the four as parishes would add at least 12 votes (two deputies and one clergy person from each congregation) to total of those who will be asked to approve resolutions (see resolutions one, two and three here) to align with the Buenos Aires-based Southern Cone.
“This is the most important organizational decision that Pittsburgh congregations will face for years to come,” Jenni Bartling, the diocese’s congregational developer for church plants, said in July while announcing the anticipated vote. “Because all of our church plants will be directly affected by the decision[s] of Diocesan Convention, we believe it is important that as many as possible are able to vote on this issue, just like any other congregation of the diocese.”
Hundreds of clergy and lay leaders in the Episcopal Diocese of Pittsburgh are scheduled to vote today on whether to leave the New York-based church for a more conservative affiliation.
The voting at St. Martin’s Episcopal Church in Monroeville would occur about two weeks after a group of Episcopal bishops representing the U.S. church removed Bishop Robert Duncan as head of the Pittsburgh diocese for supporting efforts to split from the church.
If a majority votes to leave the Episcopal Church, the Pittsburgh diocese will become a member of the more conservative Anglican Province of the Southern Cone in Buenos Aires, Argentina, “as soon as the gavel falls,” said Deacon Peter Frank, a diocesan spokesman.
Those on both sides expect the Episcopal Diocese to vote today to secede from the U.S. denomination and join an Anglican province in South America — but with at least 17 of approximately 73 parishes choosing to remain in the Episcopal Church.
In the first of two required votes, last year the laity voted 118-58 and clergy voted 109-24 to secede. While some think a reversal is possible, no one is predicting it.
Opponents were more optimistic earlier, when some church leaders who admired Pittsburgh’s then-Bishop Robert Duncan were nevertheless wary of secession, said Rich Creehan, spokesman for Across the Aisle, a group for those who intend to remain Episcopal. But the Sept. 18 vote of the Episcopal House of Bishops to remove Bishop Duncan changed that.
“They saw that action by the House of Bishops as an insult and said they didn’t want to be part of people who acted like that,” Mr. Creehan said.
“There is one thing necessary to understanding what is happening and it is this: no one at U.S. banks, no one at the Federal Reserve, and no one in politics can accept the reality that real estate assets in this country remain oversupplied, overpriced and overleveraged.”
“It is that simple.”
—Kevin Depew, Five Things You Need to Know: Will the Bailout Succeed
FITCH SAYS THE U.S. WILL LIKELY OVERTAKE FRANCE AND GERMANY TO BECOME THE MOST HEAVILY INDEBTED “AAA” RATED NATION IN 2009.
So, when the prospect of “leaving” the Episcopal Church (I’ve always contended that we were staying, they had left, but those are just different words now) presented itself before last year’s convention, I began analyzing every possible reason not to: We don’t need another Protestant split, we need to stay and fight, what witness will be left if we go, no one is preventing us from preaching the gospel, and on and on. But gradually, as each argument failed, I found myself staring at the one big elephant left in the room: What will ministry life be like outside of the comfort, security, and status I had known all my life in the Episcopal Church? A question I had talked a good game about but never really faced seriously, and it was daunting.
Of course, some of that concern is natural; we all want a job so we can feed our families, and most people prefer provision, beauty, and comfort over poverty and pain, but, for me, they had become somewhat of an idol, a dependency that had exerted more influence on my thinking than I realized.
The testimony in all this is that, over time, through no contribution on my part, except resistance, that dependency and fear has been gently lifted and in its place a small gift of faith that has allowed me the freedom to face and even embrace the prospect of ministry outside of the Episcopal Church.
Go here, then go to grandparents day album and you will see the picture on the top row the third on over from left to right.
I’m posting this here and on Anglicana, as I’m really scratching my head here, and would be grateful for any sensible explanation of what’s gone wrong and when and how it will be remedied.
I have two questions:
1) What happened to epiScope?…
2) What on earth has happened to the Episcopal News Service?….
And while I’m thinking of it, that leads to a third question:
3) Where’s the accountability?
The House of Representatives gave final approval on Friday to the $700 billion bailout for the financial system, reversing course to authorize what may be the most expensive government intervention in history.
At 1:21 p.m., applause and cheers echoed through the House chamber as the number of “aye” votes crossed the threshold needed for passage with just seconds remaining in the official 15-minute voting period. The vote was 263 to 171.
And in a sign of the urgency surrounding the package, Congressional staff rushed the newly printed legislation into a news conference where Democratic leaders gathered after the vote and Speaker Nancy Pelosi, Democrat of California, signed it, at exactly 2 p.m.
Within an hour, the legislation had been conveyed to the White House and signed by President Bush. Standing in the Rose Garden shortly before signing the document, the president thanked Congressional leaders of both parties by name and said they had achieved something “essential to helping America’s economy weather the financial crisis.”
