Financial Update #4 of 5/ Week of August 24, 2009

Good Morning Everyone and Happy Thursday! Yesterday was an interesting day as the bears and the bulls on Wall Street had a tug of war all day and ended basically where they started – flat. The auction of 5 year T-bills went well yesterday which helped credit markets stay even for the day, too. Today we have an auction of 7 year T bills, and await the news of how that turns out. The stock market dropped off the curb this morning right out of the gate, but quickly hit the glass floor and the 3 major indices have bounced back almost to even so far. The battle rages on as the bears on the trading floor want to get the selling going in equities and the bulls who refuse to let things fall.

Traders were hit with a barrage of economic news this morning all at once. The GDP for the 2nd quarter of 2009 dropped 1.0% in line with the preliminary number that we already rec’d earlier, no big surprise there. Personal consumption fell 1.0% in Q2, not as bad as the 1.3% expected. Thursday is our day for jobless claims from the week prior. Last week fewer people filed for initial jobless claims from the week previous – by 10K. Continuing claims dropped 119K to 6.13M which is better than expected, but many analysts admit that much of this is due to the loss of job benefits, not necessarily workers finding employment.

The FDIC reported this morning that the “Problem List” of troubled banks keeps growing. It is now at a 15 year high, but of course, we didn’t have very many failures up until the last couple years. Still, banks continue to deal with bad debts and noncurrent loans and leases, and this of course, is expected to continue. There is some concern that the FDIC will eventually run out of money and not be able to insure the deposits of the bank’s customers. This will have a whole new effect on the recession, if it happens.

Our rates are within a few bps of where we were yesterday. I will be in the office all day today. Please call me here or email me with your pricing or loan scenario questions. Have a terrific Thursday!