Inadequate Loan Loss Reserves At Numerous Minnesota Banks

At Minnesota banks, bad loans are piling up much faster than the amount of money being set aside to cover them. The StarTribune takes a look at the problem in State"s banks below norm in reserves.

Despite repeated warnings of economic trouble ahead, banks in Minnesota have failed to keep pace with the rise in bad loans. Among those banks, the ratio of past-due and nonaccrual loans -- or loans for which payment is in doubt -- as a percentage of total loans rose 50 percent since 2006, while the reserves to total loans ratio remained virtually unchanged.

Many Wall Street analysts watch bank reserves more closely than bank profits, said analyst Crabtree in Minneapolis. "Earnings mean very little nowadays, because no one believes them," he said. "Reserve levels and capital ratios are by far more important."

As of the third quarter, the average coverage ratio for Minnesota banks fell to its lowest level in nearly two decades.

As of Sept. 30, the coverage ratio for Minnesota banks was 61 percent, which means that for every $1 in noncurrent loans the banks have set aside 61 cents to cover future losses, according to the FDIC. That"s down from 81 percent a year earlier. Nationwide, the coverage ratio stands at 85 percent -- nearly a third higher than Minnesota"s.

Nearly 40 of the state"s 400 banks have coverage ratios below 30 percent, a level that is less than half the state average. Among the larger ones are First Minnesota Bank of Minnetonka, with more than $370 million in assets, and Minnwest Bank Minnesota Valley in Redwood Falls with assets of $510 million.

One reason Minnesota banks are reserving less than peers in other parts of the country is that the state experienced a boom in bank startups earlier this decade. So, like Summit, many of these banks are still building reserves.

Another theory is that Minnesota has a larger number of small, community banks than other states. Those banks made fewer of the subprime mortgages that defaulted in the credit crisis, but did more of the commercial real estate loans that have only just started to turn sour, said several bank experts.

The Article is 4 pages long with two interesting graphics worth a good look. Here is one of the graphs.



Nearly 40 Minnesota banks have coverage ratios below 30 percent. They are at severe risk. Mainstreet Bank, one of Minnesota"s largest and oldest community banks received an FDIC order to change. Please see Hazardous Lending and Lax Collection Practices for more details.

Three More Banks Shut Down

On Friday, Three More U.S. Banks Were Shut by Regulators.

Three banks, two in California and one in Georgia, were seized by regulators, bringing this year�s tally of closings to nine as a recession and record foreclosures extend the biggest financial crisis in more than 70 years.

County Bank of Merced, California, with deposits of $1.3 billion and assets of $1.7 billion, was shut yesterday by the state�s Department of Financial Institutions, according to an e-mailed statement from the Federal Deposit Insurance Corp. Westamerica Bancorporation, holding company for Westamerica Bank, acquired all the assets and deposits.

The Georgia Department of Banking and Finance closed McDonough-based FirstBank Financial Services Inc., which had $337 million in assets and $279 million in deposits as of Dec. 31, the FDIC said in a statement. The California Department of Financial Institutions shut Culver City-based Alliance Bank, with assets of $1.14 billion and $951 million in deposits.

Nine bank closings this year is a drop in the bucket for what is coming. And were it not for taxpayer bailouts of Citigroup (C) and Bank of America (BAC) they would already be under as well. For further discussion see Extreme Leverage In Reverse Portends Global Systemic Crash. In aggregate, the entire global banking system is insolvent.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Currency Intervention And Other Conspiracies

The US dollar rallied fast and furious last week. The dollar rally was the biggest in 8 years vs. the Euro. This immediately brought out calls of Dollar Intervention such as the one below. Note: the arrow and circle in deep blue were added by me.

click on chart for sharper image

The very large drop recently (the pale blue line) tells part of the story. Another part is told by the Treasury site itself - that recent data about the drop was delayed for almost three weeks before it was made public.

Another part is told by very recent data not being made public for the last two weeks running.

What the ESF did is simply sold about 10 billion Euros and bought dollars - plain and simple massive intervention that virtually everyone has missed or ignored or pretended doesn"t exist or whatever.

The raw facts are sitting there at U.S. International Reserve Position.

Assuming one buys the story, what stands out is 13 consecutive alleged interventions that all failed.

Mystery Solved

James Turk on GoldMoney is writing Mystery Solved.

On July 15th the US Dollar Index closed at 71.87, the lowest close since reaching its record low in April. However, rather than continue lower and fall off the edge of the cliff, the Dollar Index suddenly and mysteriously reversed course. It has now risen on 12 of the 17 trading days since reaching that low, and closed today at 74.55, a 5-month high. What caused this index to suddenly pull back from the brink and then reverse course to shoot higher over the past three weeks?

There has not been any news exceptionally favorable to the dollar. In fact, the banking problems in the United States continue to mount, while the federal government"s deficit continues to soar out of control. On July 28th Reuters reported that "The Bush administration on Monday plans to project the U.S. budget deficit will soar to a new record...because of the slowing economy and an economic stimulus plan approved this year."

So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. ...

For the record, I respect James Turk. However, there was plenty of news favorable to the dollar.

• Oil was falling which would help the US balance of trade.
  
  
• Container shipments into the US were weakening which would also suggest an improvement in the balance of trade.
  
  
• Economic activity in Europe had started to crater.

Those are very significant items. I talked about them at length in Trichet Puts Spotlight on the Euro, Dollar.

The dollar rally continued on Friday and I posted some Thursday To Friday comparison charts on the Dollar Index, the Euro, and the British Pound in U.S. Dollar Rally Continues. Here are the charts of the dollar index.

$USD - US$ Index Daily (Thursday Evening)



Click on chart for sharper image

$USD - US$ Index Daily (Friday Evening)



Click on chart for sharper image

Marc Faber Weighs In

There is a very interesting Bloomberg video interview of Faber that I commented on in Marc Faber - Bullish On The US$, Bearish On Commodities.

I transcribed a portion of it. Here is the key snip:

Q: Is the Euro Doomed to keep falling?

A: Whenever global liquidity tightens relatively speaking, it is very US$ supportive. Obviously, there are always time lags between economic events until the the market perceives them. So as a result of weak demand in the US, lower imports, the demand for oil declines, and that led to a tightening of global liquidity which led to the strong dollar. Investors speak of weak oil price as being bullish but the point is that it signals the global economy is in recession already.

Can Currency Intervention Halt the U.S. Dollar�s Nosedive?

Now let"s address the question as to whether or not 10 billion Euros would be massive enough to do anything.

GATA the Gold Anti-Trust Action Committee is reporting on the currency intervention option and monetization of oil in its usual conspiracy-minded fashion:

The story below from the Associated Press, the largest news agency in the world, may be most notable for acknowledging the potential for government intervention in the currency markets -- market manipulation, really -- and for reporting the surmise of an expert in the energy business that oil has been monetized, replacing the U.S. dollar as the world currency, becoming the "new gold."

The one thing that made the most sense in the article mentioned was this paragraph. "It would take great sums of money to make any difference. The foreign exchange market is the largest in the world, with over $1 trillion traded each day."

On July 2nd Peter Schiff stated Currency Intervention Won�t Halt the U.S. Dollar�s Nosedive

Intervention advocates must believe that if the European Central Bank (ECB) and a few other central banks joined the fray, that a better outcome would be achieved. However, any additional efforts to artificially prop up the ailing dollar will be equally ineffective.

Even if ECB intervention could slow the dollar�s descent, what possible reason would the Fed�s European counterpart have for doing so? The ECB is already concerned about inflation and is preparing to raise rates as a result.

Interestingly, Schiff claims intervention won"t work and the ECB is prepared to hike while others claim intervention was responsible for the rally even though intervention failed 13 consecutive times before there was a success .

A Look At Japan"s Intervention in 2003-2004

Japan was intervening in the currency market and you know they were doing it because they admitted it. Please consider this article from 2004 called The dollar and yen: why they matter.

Why is Japan intervening? Because it believes the yen needs to be held down to keep Japanese exports competitive.

The policy of intervention began in earnest in August last year, when the decline of the dollar gathered pace. In 2003, the Japanese government spent $100bn buying dollars in an attempt to hold down the value of the yen. In the first two months of this year, it spent another $100bn. And Japan�s parliament has authorised the spending of a further $360bn this year.

Note those numbers. Japan spent hundreds of billions in 2003 starting in August, attempting to prop up the dollar.

Japan halted its currency intervention in March of 2004 according to the International Herald Tribune article EU officials soften stance on yen"s weakness.

Yen vs. Japan"s Intervention 2003-2004



click on chart for sharper image

If ever there was proof of the absurdity of currency interventions there it is. Ironically the Yen started plunging shortly after Japan stopped trying to force down the value of the Yen.

So now we are supposed to believe the dollar rallied because of a so called "massive" one time 10 billion Euro trade when Japan produced negative results after spending $300 billion over the course of 7 months!?

The Primary Trend Cannot Be Suppressed

The primary trend in currencies cannot be suppressed and even a cyclical countertrend move cannot be suppressed. The same holds true for gold, silver, and even the equity markets. Sadly we see GATA and others arguing over every tick in gold and silver. The most frequently pointed out item is that there is an enormous cartel that is short silver, thereby suppressing the price.

No one ever bothers to mention that for every short there is a long. It would make nearly as much sense to say there is a massive conspiracy to force up the price of silver. And those doing this ridiculous whining better think through the implications of getting what they seem to be asking for.

Imagine what would happen if the futures trading commission decided to limit silver contracts to what could be delivered in a month"s time. I suggest it would not be pretty because the commercials would know what was coming and be prepared in advance. One nice lock limit down opening in silver would start the ball rolling for good.

It"s time to realize that gold and silver have rallied massively in 7 years. And if both can do that in the face of such massive intervention, the logical thing for gold and silver bulls might be to ask for more of it.

If and when the US dollar rally fails it will be because the rally was ready to fail. That might be a week from now, a month from now or even a year from now. No one knows. What we do know is intervention (or lack thereof) will not be a factor when it does happen.

There is one more point I want to mention about the US dollar. There is a secular shift underway in the US from consumption to saving. The word that best describes this is "frugality". An frugality is very dollar supportive.

And it was Professor Kevin Depew who coined the phrase It"s Cool to Be Frugal. I commented on frugality at great length in The Future Is Frugality.

Inquiring minds will certainly want to take a look.

Here"s the deal for dollar bears: The dollar rallied because it was damn good and ready to rally. Those with their eyes open spotted fundamental reasons in advance. Those who did not, blamed intervention.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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The man who knows too much

He exposed the My Lai massacre, revealed Nixon"s secret bombing of Cambodia and has hounded Bush and Cheney over the abuse of prisoners in Abu Ghraib... No wonder the Republicans describe Seymour Hersh as "the closest thing American journalism has to a terrorist". Rachel Cooke meets the most-feared investigative reporter in Washington

American investigative journalist Seymour Hersh. Photograph: Martha Camarillo
Every so often, a famous actor or producer will contact Seymour Hersh, wanting to make a movie about his most famous story: his single-handed uncovering, in 1969, of the My Lai massacre, in which an American platoon stormed a village in South Vietnam and, finding only its elderly, women and children, launched into a frenzy of shooting, stabbing and gang-raping. It won him a Pulitzer prize and hastened the end of the Vietnam war. Mostly, they come to see him in his office in downtown Washington, a two-room suite that he has occupied for the past 17 years. Do they like what they see? You bet they do, even if the movie has yet to be made. "Brad Pitt loved this place," says Hersh with a wolfish grin. "It totally fits the clich� of the grungy reporter"s den!" When last he renewed the lease, he tells me, he made it a condition of signing that the office would not be redecorated - the idea of moving all his stuff was too much. It"s not hard to see why. Slowly, I move my head through 180 degrees, trying not to panic at the sight of so much paper piled so precipitously. Before me are 8,000 legal notepads, or so it seems, each one filled with a Biro Cuneiform of scribbled telephone numbers. By the time I look at Hersh again - the full panorama takes a moment or two - he is silently examining the wall behind his desk, which is grey with grime, and striated as if a billy goat had sharpened its horns on it. LinkHere

Rail Traffic Down; Truck Traffic Down; Air Cargo Hoping For A Bottom

Green shoots are not yet showing up in cargo statistics. Let"s take a look starting with AAR: Rail freight traffic down from a year ago.

Freight traffic on U.S. railroads during the week ended May 23 remained down in comparison with last year, although it did show an increase from the previous week this year, the Association of American Railroads reported today.

U.S. railroads originated 259,265 cars during the week, down 21.5 percent from the comparison week in 2008, but up 4.9 percent from the previous week this year. In comparison with last year, loadings were down 16.4 percent in the West and 28.0 percent in the East.

All 19 carload commodity groups were down from last year, with declines ranging from 4.8 percent for farm products other than grain to 59.7 percent for metallic ores.

Intermodal volume of 188,885 trailers or containers was off 19.1 percent from last year, with container volume down 14.2 percent and trailer traffic off 37.2 percent. Intermodal volume was up 0.2 percent from the previous week this year.

For the first 20 weeks of 2009, U.S. railroads reported cumulative volume of 5,295,843 carloads, down 19.3 percent from 2008; 3,720,454 trailers or containers, down 16.8 percent; and total volume of an estimated 562.0 billion ton-miles, down 18.2 percent.

Canadian railroads reported volume of 53,316 cars for the week, down 33.5 percent from last year, and 37,052 trailers or containers, down 18.9 percent. For the first 20 weeks of 2009, Canadian railroads reported cumulative volume of 1,193,070 carloads, down 23.4 percent from last year; and 810,785 trailers or containers, down 14.5 percent.

Mexican railroads reported originated volume of 13,102 cars, virtually the same as last year, and 5,188 trailers or containers, down 18.8 percent. Cumulative volume on Mexican railroads for the first 20 weeks of 2009 was reported as 219,541 carloads, down 12.3 percent from last year; and 95,217 trailers or containers, down 19.8 percent.

Combined North American rail volume for the first 20 weeks of 2009 on 14 reporting U.S., Canadian and Mexican railroads totaled 6,708,454 carloads, down 19.9 percent from last year, and 4,626,456 trailers and containers, down 16.4 percent from last year.

Rail Carloading Report

The Weekly Railfax Rail Carloading Report has the hollowing charts of interest.

Total Industry Charts, US, Canada, Mexico



Additional charts show numbers up from earlier in the year. However the charts also show a seasonal dip at the beginning of the year.

Is truck freight bottom close?

Fleet Owner is asking Is truck freight bottom close?

Freight tonnage fell again in April, according to numbers released by the American Trucking Assns. (ATA), indicating that trucking companies are still facing lean times.

The ATA said its seasonally adjusted for-hire truck tonnage index fell 2.2% in April, after plunging 4.5% percent in March. Compared with April 2008, tonnage contracted 13.2%, which was the worst year-over-year decrease of the current cycle and the largest drop in thirteen years, said Bob Costello, ATA chief economist.

�While most key economic indicators are decreasing at a slower rate, the year-over-year contractions in truck tonnage accelerated because businesses are right-sizing their inventories, which means fewer truck shipments,� he explained. �The absolute dollar value of inventories has fallen, but sales have decreased as much or more, which means that inventories are still too high for the current level of sales. Until this correction is complete, freight will be tough for motor carriers.� Costello added that truck freight has yet to hit bottom and it could be a few more months before this occurs.

However, Eric Starks, president of research firm FTR Associates, pointed out that while the freight market might not have bottomed out as of yet, it�s very close to doing so. �We still think we�ll reach that bottom around the middle of summer,� he told FleetOwner.

The �million dollar question� from Stark�s perspective is how long the freight market will stay at the bottom. �Even once we reach the bottom, [trucking companies] are not out of the woods. We could sit with some very depressed freight levels for some time,� he cautioned.

Air cargo at a bottom?

The International Air Transport Association says air cargo market probably hit bottom.

A decline in the air cargo freight market following the international financial crisis seems to have hit bottom, the head of the International Air Transport Association said on Sunday. Air cargo, a key barometer of world trade, has slumped amid the global economic downturn and shortage of financing. Global air freight volumes in January saw a record 23 percent year-on-year dive.

"I would say, looking at the numbers, that it has hit bottom," the global association"s Director-General Giovanni Bisignani told Reuters.
Bisignani said the market had at least been stabilising at levels around 20 percent lower than a year ago.

"It"s not yet enough to say that the situation is picking up because this is also linked with the level of inventories of the manufacturers. So we have to wait at least another 3 or 4 months in order to see if we start moving."

Rebound Questionable

Shipping may have bottomed, but as long as the economy is losing 500,000 jobs a month and housing is still in a decline, any rebound will be anemic at best.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

The Corporation

Video

This is an extraordinary film about the creation of the American corporation, its legal organizational model, its global economic dominance and its psychopathic tendencies, and its incredible ambition to influence every aspect of culture in its unrelenting pursuit of profit. LinkHere

Weiner Takes Lieberman On For "Audacity" Of Filibuster

Rep. Anthony Weiner (D-N.Y.) took on Sen. Joe Lieberman (I-Conn.) on "Morning Joe" Monday, chastising the former Democrat for pledging to join a filibuster against health care reform if it contains a public option.

"It"s inconsistent with common sense to say I oppose something that will hold down costs for the taxpayers and residents of Connecticut," Weiner said. "The insurance industry is a powerful force in Washington and so is the status quo, but the audacity to saying, and I think he backed away from it, "I will not permit a vote on the concept?" Let"s let the majority decide this issue."

Weiner offered to debate the senator, saying "If you want to bring Lieberman here, I think that I can talk him into it." LinkHere

Visit msnbc.com for Breaking News, World News, and News about the Economy

�Holding him up in honor stimulates the worst impulses of human nature and makes a mockery of our nation"s values,"

COUNTY NAACP JOINS PROTEST AGAINST �GLENN BECK DAY� IN MOUNT VERNON

Sky Valley Chronicle Washington State
(REGIONAL) -- The NAACP has now added its voice to the protest against Mount Vernon Mayor Bud Norris" controversial decision to present FOX news TV and radio talk show commentator Glenn Beck with a key to the city Saturday September 26 in a $25 dollar a ticket event called "Glenn Beck Day" in Mount Vernon.
The Snohomish County Chapter of the National Association for the Advancement of Colored People announced its protest Friday with president Janice R. Greene, saying �Holding him up in honor stimulates the worst impulses of human nature and makes a mockery of our nation"s values," highlighting Beck"s inflammatory July 28th remark that he believed President Obama to be a "racist."
The statement cost Beck over three-dozen national advertisers who ordered their commercials not run within his show.
Beck is also known for such on- air musings as pondering about the killing of filmmaker Michael Moore (who�s new movie is �Capitalism: A Love Story�) and poisoning House Speaker Nancy Pelosi as well as perpetuating the long discredited "death panel" false claim about proposed health-care reform. LinkHere