Moral Contagion
The bankers are afraid financially distressed and/or underwater homeowners are suspending mortgage payments in anticipation of being offered restructured terms. The Murdoch Street Journal calls it a fear of “moral contagion”. The bankers won’t reduce mortgage principal out of the fear that homeowners will stop making payments in order to take advantage of a principal reduction loan modification. How do you catch a monkey? The old trick is to bury a jar in the ground and put an apple (as large as possible) in the jar. The monkey will try to take the apple out of the jar but can’t

Problem Bank List Grows
The FDIC released its quarterly report on the condition of the banking industry for the third quarter: The FDIC’s deposit insurance fund fell to negative $8.2 billion at the end of the third quarter, a decrease of $18.6 billion. The negative balance will soon be boosted by a new FDIC program bringing in $45 billion in prepaid fees from banks. This explains the slow pace of bank closures. The number of “problem” banks, which are at a greater risk of failure, rose to 552 in the third quarter, up from 416 at the end of the second quarter.

3Q GDP Revised Down
Third quarter GDP grew at a 2.8% annualized pace, down from an earlier estimate of 3.5% growth. GDP dropped 6.4% in the first quarter and 0.7% in the second quarter.  Growth in the third quarter was the strongest in two years, despite the downward revision. The reading breaks a string of four consecutive negative readings, the worst string since the Great Depression.

Bank Failure
The over/under on bank failures is 4; if you picked under, you are apparently a winner. Commerce Bank of Southwest Florida falls to Central Bank. What exactly is the connection between a Stillwater Minnesota bank and a Fort Myers Florida bank? Deductible business trips, baby (all winter long). The incredible recovery continues with 9 bank failures so far in the month of November. I’m counting on the after-Christmas Commercial Real Estate Collapse to really spike the bank failure Friday.

Lloyd's Prayer
This one came from Richard Ambrose and it’s worth repeating. THE LLOYD’s Prayer Our Chairman, Who Art At Goldman, Blankfein Be Thy Name. The Rally’s Come. God’s Work Be Done On Earth As There’s No Fear Of Correction. Give Us This Day Our Daily Gains, And Bankrupt Our Competitors As You Taught Lehman and Bear Their Lessons. And Bring Us Not Under Indictment. For Thine Is The Treasury, The House And The Senate Forever and Ever. Goldman.