A report from NBC News. “Silicon Valley Bank is shutting down. The California Department of Financial Protection and Innovation said Friday that it was taking over and closing the distressed bank to protect deposits, naming the Federal Deposit Insurance Corporation as its receiver. The FDIC has formed a separate entity where all insured SVB deposits will be available by Monday morning. The closure marks the biggest bank failure since the 2008 financial crisis and the second-largest in U.S. history after Washington Mutual collapsed during that industry-wide meltdown, according to FDIC data.”
Bisnow London. “UBS has bought fellow banking giant Credit Suisse in a deal that will create a bank with an $80B commercial real estate loan book and more than $100B of real estate assets under management — making it the fourth-largest CRE lender in the world — but the key element of the deal for CRE is whether it can stop liquidity drying up in the banking system. ‘This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue,’ UBS Chairman Colm Kelleher said in a press release.”
The Evening Standard. “Mark Yallop, former chief executive of UBS in the UK, also raised the prospect that there is more to emerge of the risks surrounding Credit Suisse than currently publicly known. ‘Looking at what has been released about the term of the deal, it looks like an attractive transaction for UBS and its shareholders but obviously the fact that it is so attractively priced suggests that potentially there is more risk sitting on the Credit Suisse balance sheet than perhaps has been visible publicly before now,’ he said.”
From Bloomberg. “Some of Credit Suisse Group AG’s bond holders are furious with the terms of UBS Group AG’s takeover. The deal will trigger a complete write-down of Credit Suisse’s 16 billion Swiss francs ($17.3 billion) worth of Additional Tier 1 bonds, as the riskiest notes introduced after the global financial crisis are known. This would mark the biggest loss yet for Europe’s $275 billion AT1 funding market. To make matters worse, some traders were buying these notes over the weekend. They had hoped for a benign takeover and some quick profits.”
“Even at the current price, Saudi National Bank, a top investor, would be losing 1.1 billion francs less than 15 weeks from when it finished buying its stake. So sorry, Credit Suisse’s AT1 bond traders, life is unfair. Better luck next time.”
From Reuters. “Swiss media was also shocked by the developments. ‘A zombie is gone but a monster is born,’ read the title of a commentary in the Neue Zuercher Zeitung, often seen as the voice of the establishment. ‘A few months ago, nobody would have thought that Credit Suisse would fail. However it is not an accident,’ the newspaper wrote in the piece accusing the bank of arrogance and pride. ‘The Swiss bank had a stock market value of CHF 100 billion in 2007, of which CHF 7 billion were left last Friday,’ it said. ‘There has thus been a massive destruction of value, at the hands of managers who have carelessly underestimated risks and helpless board members who have too often failed to control things.’”
From Politico. “When Congress rewrote the rules for Wall Street following the 2008 financial crisis, it put the Federal Reserve at the center of oversight for the nation’s wounded banks. Now, the Fed is at the center of a political firestorm as Washington looks for culprits in a new banking crisis. Mark Calabria, who at the time of the 2018 rollback was chief economist to Vice President Mike Pence, rejected complaints by Democrats that the follow-up law gutted Dodd-Frank, the landmark 2010 legislation that was the biggest overhaul of financial rules since the Great Depression.”
“‘I tried to gut Dodd-Frank,’ said Calabria. ‘It was not successful. People who bought into ‘Dodd-Frank ended bailouts’ now have to admit it doesn’t,’ he added.”
From Cal Thomas. “A Wall Street Journal editorial has it right: ‘You can’t run the most reckless monetary and fiscal experiment in history without the bill eventually coming due. The first invoice arrived as inflation. The second has come as a financial panic with economic damage that may not end with Silicon Valley Bank.’”
The Daily Sentinel in Colorado. “The housing market in the Grand Valley remains rather stagnant, according to the February Bray Report. A total of 300 homes were sold in February 2023, down from 450 sales, or 33%, compared to February 2022. Active listings were up from a year ago with 479. The report also indicated that properties in Mesa County are staying on the market for longer. Houses were, on average, staying on the market for 76 days in February, up 55% from a year before.”
“‘It has been pretty slow lately, and a big part of that is because of the economic turbulence and uncertainty we’re seeing nationwide right now,’ said Maureen Wixom, a broker associate at Bray Realty. ‘Things have gotten worse. February is worse than January since interest rates have ticked up, over 6.5% generally now. That is the main factor as to why things have slowed. Every time interest rates go up, more people get knocked out of the market.’”
“The median home price has dropped. February was almost identical to February 2022‚ $359,750 to $359,000. But home prices started rocketing up way for much of 2022 before dropping at the end.The high median price for 2022 was $416,000. Wixom said that six months ago, she and her colleagues foresaw a drop in interest rates by spring 2023. It came as a surprise, Wixom said, when they only increased.”
The Union Tribune in California. “As he pushed the with his two young children up Ninth Avenue during his mid-day walk in downtown San Diego, Jarvis Leverson stopped at the intersection of F Street. Across the street, the sidewalk was crammed with tents and makeshift canvas shelters erected by the homeless people who have lived there for weeks, even months. Discarded cartons of food and piles of trash were scattered outside the tents, in the gutter and on the street. It’s a daily occurrence for Leverson, who lives in the Parkloft condominiums on Island Avenue.”
“People who live there, where some units with views of Petco Park sell for more than $2 million, say they are wearying of the worsening conditions in their neighborhood. Leverson and his wife bought a unit in the building in 2020. They had lived in the same unit as renters seven years earlier. Back then, Leverson said, it was an up-and-coming East Village neighborhood and sidewalks were clear of homeless encampments.”
“‘You name it, I’ve seen it,’ Leverson said, describing the contrast of walking from a $1 million unit into abject poverty, drug use and mental illness. ‘I’ve seen people OD on the street, seizuring, foaming at the mouth. Every day I walk past people doing meth and with needles in their arms. People with their pants down, defecating on the street. I’ve seen people fighting. I’ve seen a person beating someone with a pole. I’ve seen people having sex.’”
“Nathan Crowley, who has lived in Parkloft two years, has experienced worse. Around 4 p.m. on Jan. 30, Crowley said he was pushing a shopping cart at the neighborhood Ralphs when he saw a man who appeared dirty and disheveled, eating food from the shelf. A few minutes later, Crowley was in the meat section looking down when he saw the same man out of the corner of his eye charging forward with a wine bottle in his hand. Crowley was struck in the face with the bottle, and he dropped to the ground. ‘It was bad,’ he said. ‘Blood was everywhere. I couldn’t see. I was in huge pain.’ Crowley later learned he was the third person the man was suspected to have assaulted that day.”
The New York Post. “Louis C.K. has taken a hit on the sale of his historic Soho townhouse. The controversial Grammy-award winning comedian recently sold out Madison Square Garden, bought the five-bedroom property for $6.5 million in 2012. But, according to property records filed this month, the comedian sold the 35 Charlton St. spread for $5.8 million. The dwelling most recently asked $6.5 million — Louis C.K.’s purchase price. It listed last September for $8.49 million before lowering the asking price to $7.5 million a month later. The price then fell to $6.5 million in December, according to StreetEasy.”
From Fox Business. “A new report from real estate brokerage firm Redfin showed that the median U.S. home sale price fell 1.2% in February from the previous year. ‘Buyers are struggling because higher interest rates have increased the cost of homeownership, and sellers are struggling because they’re still adjusting to the fact that their home won’t sell for what their neighbor’s did a year ago,’ said Andrew Vallejo, a Redfin real estate agent based in Austin, Texas. ‘The drop in prices is bringing more house hunters off the sidelines, but they’re in no rush because rates are high and they have the upper hand.’”
The Globe and Mail in Canada. “In 2021 and early 2022, moneyed buyers from expensive cities such as Toronto and Vancouver flocked to suburbs and smaller towns looking for bigger homes and lower prices, ramping up competition in markets such as Chilliwack, London and Halifax. But now that home prices have plunged by between 10 per cent and close to 30 per cent in most of those areas, locals believe it’s their chance to get into the market.”
“In Chilliwack, where the price of a typical home dropped from a peak of $907,600 down to $677,600 in January, realtor Jason Sandhu said about 70 per cent of his buyers are now from the region. By contrast, in the first few years of the pandemic, 70 per cent of his clients were investors from Vancouver, Surrey and Langley, all more expensive areas.”
“In London, residential real estate prices in January were down 27 per cent compared to their pandemic peak of February, 2022. Yet a typical home still costs 60 per cent more than it did in January, 2019. In Halifax, where home prices started the year 10 per cent below their previous peak, the benchmark home price remains 70 per cent higher than it was four years ago.”
“In Saint John, real estate agent Lesley Oland would often see 25 to 30 offers on a property in 2021 and the first half of 2022, with bids as high as $50,000 over asking. Now, she said, multiple bids for a home priced at market value generally involve two to 10 buyers, with offers going $5,000 to $10,000 over asking. ‘And if a seller overprices, then he’s not gonna get any,’ she said. ‘Now, people will wait.’”