So here are some economic updates.<\/p>\n
First, it appears that the first major bank casualty of the housing bust is upon, Northern Rock, a bank which is responsible for about one in five mortgages in the UK<\/span>. They have apparently been done in by a 1930s style run on the bank. They got some temporary liquidity through a \u00a324 Billion (about $US 50 Billion) loan from the land of England, but it still appears that they are headed for liquidation<\/a>, with the Tory shadow of the chancellor of the exchequer*<\/sup> George Osborne asking that, “The chancellor had not explained how taxpayers would get their money back.” The testimony of the CEO of Northern Rock<\/a>, is more concerning though:<\/p>\n He told the Treasury Select Committee that the bank had planned how it would cope with a 40% fall in house prices.<\/span><\/p>\n But it had not planned how to respond if its ability to borrow dried up.<\/span><\/p>\n “What wasn’t stress-tested was the event deemed implausible – of the global markets freezing up overnight,” he said.<\/span><\/p>\n “The rapid and long-lasting closure of the global markets was not stress-tested,” he added.<\/span> <\/p><\/blockquote>\n Basically, we have a world capital market that resembles juggling, and if you lose one ball, others follow.<\/p>\n On top of this, we have a new home builders survey that is positively grim<\/a>. The current outlook remains at a record low, but the 6 month outlook looks grim.<\/p>\n On the more macro level, we have Countrywide shares plunging<\/a> as the insurance rates it must pay on its loans jumped by 30 % (!), both Fannie Mae and Freddie Mac taking major hits because about the security of their mortgages (here<\/a> and here<\/a>), and Citigroup faces $15 billion write down<\/a> in addition to having the good fortune of Goldman Sacks downgrading them to “sell” from “neutral”.<\/p>\n