The Journal says regulators have had private talks with Treasury about “the potential fallout from a large number of bank failures.” In a C1 story, it reports that the troubled National City bank has been placed on a “serious” and “fairly rare” form of probation by federal regulators because of its bad practices.

National City probably isn’t alone in operating under such a memorandum of understanding. Regulators, hoping to fend off a wave of bank failures, have been pushing lenders to raise more capital, curtail their growth, and improve their risk-management and underwriting practices. Banking experts estimate that a handful of midsize banks recently have entered MOUs.

Ironically, European banks have been hit harder than their U.S. counterparts by the financial crisis that began in the U.S., the Financial Times reports on page one, showing just how good Wall Street was in unloading its junk until everyone caught on and it got stuck with a good portion of it.

Homeowners hit some sour benchmarks

The Journal says the banks had hoped a spring thaw in the housing-market freeze would ease their woes, but it hasn’t happened. News yesterday showed we’re in an ice age.

The NYT on C1 writes that one in eleven homeowners in the U.S. are in trouble, with their mortgages either late or in foreclosure. It was the highest level since a mortgage group started tracking the numbers in 1979.

Perhaps most insidiously, home loans to borrowers with good credit are now going bad in addition to the notorious subprime mortgages that burst the bubble in the first place—something the Journal emphasizes in its A5 story on the data. It says prime mortgages are now going into foreclosure faster than subprime mortgages, at least in overall numbers if not percentages.

In an amazing stat, the WSJ says one in ten houses built after 2000 are vacant, compared to one in fifty pre-2000 homes. The NYT says adjustable-rate mortgages are driving the defaults, but in a bad sign “people who took out such mortgages are falling behind even before those loans reset to a higher adjustable rate.”

Thirty-six percent of all mortgages in foreclosure are in California and Florida, the LAT says. In a separate story, it looks at Temecula, California, marketed as the “Napa of Southern California” where “children’s playrooms (are) larger than the average Manhattan apartment,” and where neighbors now paint the dirt lawns of abandoned houses green to keep up appearances. Some 15 percent of its homes are in some form of foreclosure.

We like this vivid piece of reporting (the type that is likely in its final days with the above news), which contains our Cement Pond Quote of the Day:

At a home off Loma Linda Road, Kersten used an electric screwdriver to open the gate of an abandoned house. The backyard was enormous — and apocalyptic looking, with weeds growing unfettered and a rusting swing set swaying in the breeze.

The pool was bright green, with a dead bird and other debris floating in the middle. Kersten dipped a cup in the muck, then peered into his sample. “Oh, yeah,” he said. He retrieved pesticide from his truck, then began spraying it into the pool.

“Watch,” he said. “The pool is going to start to percolate.”

In seconds, the water churned with thousands of larvae and pupae, each trying to escape the poison. Kersten locked the gate again, saying he would do his best to keep pace.

The NYT says on C4 that the attorney general—to the chagrin of Democrats—is declining to form a task force to investigate mortgage fraud, which it overstates in saying is “at the root of the nation’s housing crisis.”

The Journal in a separate A5 story says the housing bust helped send net household wealth down 2.9 percent in the first quarter, “a worrying sign for consumer spending.”

Americans still shopping

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at