Yes Michael Jackson is still in the news, this time though it is his Doctor who is making headlines yet again. Dr. Conrad Murray who is still a focal point of investigation into Michael Jackson’s death is making news in a different way. He is facing foreclosure. In a long list of A listers, celebs and pro athletes who have not been spared during the financial meltdown Dr. Murray is next on the list.

A home in Nevada on Red Rock Country Club is in default. In an article in the Las Vegas Review Journal he has not made one of the $15,000 a month mortgage payments this year.

Earlier this week DEA and the LAPD searched his medical office in hopes of finding clues and answers in  the death of Michael Jackson, “The King of Pop”.

No LoanClassroom has not been forgotten about, we do need to originate loans at Eversley Capital Mortgage LLC Norwalk, CT to pay the bills and July has been great.

Not that awesome for consumer sentiment though. In July it continued to head down. In fact consumer confidence in July dipped from an index level of 49.3 in June to 46.6 in July. Keep in mind a rating of 90 is a number that suggests the economy is humming along.

Hey, just because the stock market is up does not mean consumer spending is back. In fact the Dow is now is positive territory for the year and up a staggering 38 percent from the March low of 6,500. Just because there was some positive housing news in July does not mean we are heading up from here. A gain in housing starts or existing home sales is pale in a comparison. When you are saying home figures have increased you are starting at historic lows to compare the increase from so in reality it really is not much to hang your hat on.

The number to watch is the job report. If you have religiously read my blog here you would know I have preached jobs, jobs, jobs, jobs. They are the key to any recovery. Forget the equity market, forget existing home sales or permits. If the job market picture is looking better then consumer confidence is going to be better. Once we get some stabilization where job losses are concerned and have several consecutive strong months then we can start yelling turnaround.

This week if you glanced at the financial and real estate news things on the surface look great! Dig into the nuts and bolts of this week’s news and things are all not as they seem.

We have seen earnings reports streaming in from the likes and Bank of America, Citigroup, Goldman Sachs and JP Morgan Chase this week. The common theme was big earnings when most analysts figured on moderate earnings to a loss. So on the surface one would think things are getting better, the banks are starting to pay back some of the TARP money and we are seeing billion dollar quarterly earnings from the banks. Dig a little deeper in the fine print and things are not exactly so. All things considered every bank said credit quality as well as losses in that department worsened. In fact Citigroup posted such a big quarterly gain due to its realized gain from the sale of Smith Barney. Bank of America posted quarterly earnings in a large part due to the sale of investments it had to raise and bolster capital. All four of the banks that I mentioned sited gains in trading activity is what helped earnings and that yes the credit market continues to struggle and will for the rest of the year.

Today we had new home construction figures reported by The Commerce Department. The figures show a 3.6 percent increase from the previous month. Applications for building permits were also up 8.7 percent. While it is encouraging that we had a gain you are comparing small increases to historic lows. Unemployment will continue to rise. Presently we stand as a nation at 9.5 percent. President Obama had publicly said that unemployment will surpass 10 percent this year.

Taking the news apart and divesting the realities of the information and things are not as rosy as one would seem.

What appeared to be a somewhat quiet beginning into the summer months of banking has heated up. After a very quiet four weeks from the end of May till the end of June where we witnessed only several bank failures we have had twelve in two weeks. Seven last Friday and five the week before that, bringing us to a total of fifty two bank failures for the year. Predictions were that we could see well over a hundred failures this year but at the current pace we may see that by the fall.

41) Community Bank of West Georgia, Villa Rica, GA  Cost to the FDIC $85 million

42) Neighborhood Community Bank, Newnan, GA Cost to the FDIC $66.7 million

43) Horizon Bank, Pine City, MN Cost to the FDIC $33.5 million

44) MetroPacific Bank, Irvine, CA Cost to the FDIC $29 million

45) Mirae Bank, Los Angeles, CA Cost to the FDIC $50 million

46) The John Warner Bank, Clinton, IL Cost to the FDIC $10 million

47) First State Bank of Winchester, Winchester, IL Cost to the FDIC $6 million

48) Rock River Bank, Oregon, IL Cost to the FDIC $27.6 million

49) Elizabeth State Bank, Elizabeth, IL Cost to the FDIC $11.2 million

50) First National Bank of Danville, Danville, IL Cost to the FDIC $24 million

51) Millennium State Bank of Texas, Dallas, TX Cost to the FDIC $47 million

52) Founders Bank, Worth, IL Cost to the FDIC $188.5 million

Are you confident? I sure the heck am not! So it should not be any surprise that a report from an independent research group showed consumer confidence dropped in June after showing gains in April and May. The consumer confidence figures are held in high regard as an indicator of the economy, if consumer sentiment improves then so does spending and we all know what road that takes us down, the slow road to recovery. As consumer spending increases it is a direct trickle down for the rest of the economy.

There are a lot of factors that need to be in place to help consumer sentiment. The obvious first one is the job market; it is hard to see an increase in spending while the un employment number is growing. The other is the housing market whether it is the purchasing of homes or refinancing. All of these are still weak. The housing market has showed a little growth but then again we are comparing this to some historically low numbers. Mortgage refinancing was brisk in the first half of 2009 and abruptly slammed the breaks on as rates shot up. Some signs of real recovery I do not think will be seen for a while. We may have for now found a “resting place” but to say we go up from here is way too early to tell.

Post your thoughts or comments on what your consumer sentiment is.

                                The FDIC was busy Friday making up for lost time. Three banks alone were shut down and taken control of by the FDIC. In fact there had been only one bank that has gone under since May, 22^nd and that was June 5^th when the Bank of Lincolnwood was taken over by the FDIC. The rash of bank interventions this past Friday will mark the 38^th, 39^th and the 40^th bank to be taken or placed in receivership with the FDIC this year.

37) Bank of Lincolnwood, Lincolnwood, IL  cost to the FDIC $83 million

38) Southern Community Bank, Fayetteville, GA cost to the FDIC $114 million

39) Cooperative Bank, Wilmington, NC cost to the FDIC $217 million

40) First National Bank of Anthony, Anthony, KS cost to the FDIC $32.2 million

Bank of America CEO Ken Lewis testified in front of a house committee today, during his testimony he said B of A purchased Merrill Lynch “partly” because it was pressured by the Fed to do so. He stated that then Treasury secretary Paulson and Fed Chairman Bernanke pressured him to buy Merrill as well as keep quiet in regards to Merrill’s mounting losses. Lewis also said that the Fed threatened to “remove” top executives at Bank of America if it walked from their promise to buy Merrill Lynch and its assets.

                The committee has been formed to investigate the allegations against the Fed, Paulson and Bernanke. Documents and e-mails have also been subpoenaed by the U.S. House Oversight Committee to shed some light on the allegations of pressure by the Fed. It is interesting to note that once the Merrill/ B of A deal received shareholder approval and closed in December 2008 upon first quarter earnings results in January 2009 Merrill Lynch reported a massive $15 billion dollar loss.

                The live testimony of Ken Lewis which aired on CNBC can be seen here: 

                KEN LEWIS LIVE TESTIMONY

Forget zombie banks is the U.S. broke? In an interview this morning on CNBC with Jim Grant he made a very strong argument that the Fed itself is insolvent. He likened a scenario of the Fed having its own auditors take a look at the Fed themselves in the same manor they would let’s say Citigroup and his thoughts are the Fed would be shut down for being undercapitalized.

The Fed’s answer for anything during the financial crisis has been throw money at it. As time has dragged on and the Fed as relied on printing money which entails them auctioning treasury notes. The appetite for these notes has plummeted. The Fed auctioned 10 year treasury notes today and the contributing factor to the sell off for the Dow, S&P and NASDAQ was the weakness in the bond auction.

It is crazy to me that there are economists out there talking about how things are improving. In the past three months yeah things have improved. There have been signs the economy has a heartbeat. It does not flash neon yellow that we have hit bottom though. Over the past three months interest rates hit historic lows now rates have shot up, needless to say a continuing improvement in the housing market may have been short lived for now.

There are legitimate concerns out there that the government’s debt load is growing too large which would lead to higher inflation and rising interest rates. Funny that rates have spiked already, we are on a slippery slope. The fact that there are credit default swaps that imply a 10 percent probability of the Fed defaulting is very unnerving. But yet in the rose colored eyes of some economists we as a country are humming along just fine. Watch the interview on CNBC with Jim Grant and it kind of puts things in perspective.    CNBC

Good news/Bad news, the unemployment rate spiked to 9.4 percent, the good news the pace of layoffs dropped to the lowest number since September of 2008. Employers slashed 345,000 jobs in May. The announced number of lost jobs was much lower than analysts had expected and signals that we may be nearing the bottom of the job market.

Most analysts and economists have predicted that the unemployment rate would top 10 percent and would not level off until early 2010. It appears that these estimates may be right on. The May 9.4 percent rate of unemployment is up from the April rate of 8.9 percent. The average workweek in May fell to the lowest level since 1964 and is presently just over 33 hours a week.

Factory jobs continued to dissipate while the construction industry that has been a leading industry for job layoffs showed almost a 50 percent decline in layoffs from April. Things are looking better and better, we are not there yet but the economic date that was released last week certainly is showing some signs of improvement.

                Federal Reserve Chairman Ben Bernanke testified in front of the House Budget Committee yesterday. His opinions seemed to be a little more realistic than that of the overzealous Obama administration. Bernanke testified that economic recovery could be slow as businesses will continue to remain cautious on hiring. He also called for emphasis on the country’s fiscal balance.

                In testimony Bernanke expressed extreme concern for the ballooning fiscal deficit. The deficit is poised to reach $2 trillion this year and grow another $1.3 trillion in 2010. He brought to light that the growing deficit would leave the “debt to GDP” ratio at its highest level since the 1950’s and post World War II and went on to say that “Unless we demonstrate a strong commitment to fiscal sustainability in the longer term we will have neither financial stability nor healthy economic growth.”

                Not all was ominous in Bernanke’s testimony. He added that the housing market has show signs of bottoming, which I would have to agree that in some parts of the country that is certainly true. As a whole though I am not sure I would be brazen enough to call bottom here as I have repeatedly said there are still hurdles ahead. The labor market is more likely a better indicator for the stabilization of the housing market.