McKonomics

Bank Failure Toll Reaches 94

From (CNNMoney.com)  Regulators closed subsidiaries of Irwin Financial Corporation in Kentucky and Indiana Friday, bringing the total number of bank failures this year to 94, according to the Federal Deposit Insurance Corp.

Customers of the bank, however, are protected. The FDIC, which has insured bank deposits since the Great Depression, currently covers customer accounts up to $250,000.

Irwin Union Bank and Trust Company and Irwin Union Bank, F.S.B. operated a combined 27 branches in nine U.S. states. Both banks were run by Columbus, Ind.-based Irwin Financial Corp.

First Financial Bank, NA, which is based in Hamilton, Ohio, will assume all of the deposits of the two banks.

ABC Unveils New Construction Backlog Indicator

Associated Builders and Contractors (ABC) recently released a Construction Backlog Indicator (CBI), a forward-looking measurement reflecting the amount of work to be performed by contractors in the months ahead.  

The report is a key economic indicator as it offers a specific report on US commercial, institutional, industrial and infrastructure construction industries. The most recent report shows the nation's nonresidential construction industry rebounded in May to 6.3 months of backlog, up from 6.2 months in April, but still down by roughly 24 days since November 2008. 

Keep an eye on this report as it will be a true indicator of when this economic downturn is ending.

Commercial Real Estate: How Bad Is It?

Commercial real estate is bad… How bad is it?  Some have suggested even if it is a problem, it is much smaller than the residential crisis.  Some people have even questioned if it even impacts them.  Many are calling it a ticking time bomb.  What is the status of commercial real estate?

Let me start by saying that I am not an expert on commercial real estate.  The things that I do know I have learned by reading and listening.  Let’s start with some facts.  Currently, 26 percent of all loans in FDIC insured bank portfolios are backed by the commercial real estate market.  Residential and other nonresidential real estate loans make up about 40 percent.  So the commercial real estate sector is a bit smaller, but not by a lot.  It still comprises over $3 trillion in outstanding loans.  Obviously this entire $3 trillion is not at risk, but how much is?

The Economy: Green Shoots or The Worst is Yet to Come

A few months ago Ben Bernanke, chairman of the Federal Reserve Board, stated during an interview with 60 Minutes that he detected “green shoots” of economic recovery.  Since then many journalists and analysts have been using the phrase and trying to determine if they too see the “green shoots.”  But now over three months later, are we really seeing “green shoots” or have we not yet hit the bottom?

Headlines tell us that US economy appears poised to start growing again.  The GDP report came out this week and only fell at a 1% annual pace (better than expected).  Large banks are reporting profits. Housing had an uptick in sales and prices this week.  All these headlines seem to tell us that “green shoots” are sprouting up.  But is that really the case?

US Government has Pledged $23.7 Trillion

Today Neil Barofsky, the special inspector general of the Troubled Asset Relief Program (TARP), testified before Congress that the United States has pledged up to $23.7 trillion to provide stability to the current financial crisis.

If you remember, late last year our government committed $700 billion for the TARP program in order to save the financial sector and prevent a deep recession.  What his report indicates is that the government has actually committed significantly more through several other federal agencies and programs (Federal Reserve, FDIC, FHA, GNMA…)

Real Unemployment Increases to 16.8 Percent

Most people are familiar with the Bureau of Labor Statistics report called U-3; otherwise known as the unemployment report.  However, most economists think a better report to truly understand unemployment is the U-6.  This report measures the real rate of unemployment in the United States.

This U-6 report includes the total unemployed plus all marginally attached workers and those employed part time for economic reasons.  Meaning this report includes all those who want to work full time, but due to the economy cannot find full time jobs. This also includes what is often termed the discouraged worker, those that have just given up looking.