That’s good news for banks who would otherwise have to take billions of dollars in fresh writeoffs if Ambac’s credit ratings sink. The eight banks leading the bailout of the company include Citigroup and UBS, which can’t exactly spare the capital these days.
We’re still wondering how it makes sense for a company to bail out its own insurer. Aren’t insurers supposed to bail out their insureds?
Mixed reviews of borrower rescue
The WSJ reports on A3 that the Hope Now Alliance mortgage plan helped a million borrowers stay afloat in its first seven months.
The Washington Post on D1 is confusing about the details of the new report, but notes that a banker who helps run the Hope Now program questions its long-term viability. The banker says those “helped” by the program could face higher costs in the long run.
The Journal also says most people don’t get helped:
Critics say that while the industry is intensifying its efforts, it still isn’t helping most of the borrowers in trouble. “Seven out of 10 homeowners who are seriously delinquent get no attention at all” from their mortgage company, and thus aren’t benefiting from workout programs, said Mark Pearce, deputy banking commissioner in North Carolina, citing a recent study by state officials. Mortgage companies say they have a hard time reaching many borrowers who fall behind on their loan payments.
Buffett: it’s a recession
In economic news, a manufacturing gauge fell to a five-year low—and a level indicating that the industry is in recession—while construction spending fell nearly 20 percent in January—the biggest drop in fourteen years.
Commercial real-estate building, which has helped keep the construction industry afloat as homebuilding slowed dramatically, dropped 0.8 percent. The WSJ on C1 says office-building sales tumbled 42 percent in the fourth quarter while mall and strip-mall sales took a 31 percent dive.
Warren Buffett is glum in a CNBC interview:
“By any common sense definition, we are in a recession,” Buffett said. “Business is slowing down. We have retail stores in candy, home furnishings and jewelry; across the board, I’m seeing a significant slowdown.”
He also says stocks are not yet cheap.
And finally, more bad news
Car and truck sales in the U.S. fell 10 percent in January, the NYT says on C1. Gas-guzzling light trucks were particularly shunned, with sales down about a quarter at Chrysler and General Motors.
The WSJ says on A3 that the decline is the fourth in a row.
Computer-chip sales slid by 7 percent in January as consumers retrenched.