With the continued turmoil in the housing market, it comes as no surprise that foreclosures hit a new record high in 2009. According to RealtyTrac's year-end market report, 3,957,643 foreclosure filings - including default notices, scheduled foreclosure auctions, and bank repossessions - were reported on 2,824,674 U.S. properties last year. That's a 21 percent increase in the number of properties in some stage of foreclosure compared to 2008 and a 120 percent increase over 2007.
The chiefs of four of the nation's most powerful financial institutions made the trek to Capitol Hill Wednesday - Bank of America, JP Morgan Chase, Goldman Sachs, and Morgan Stanley. It was day one of the Crisis Commission's probe into what caused the near collapse of the financial system in the fall of 2008. The bankers all admitted that their firms made mistakes and underestimated the severity of the meltdown. The commission resumes hearings again Thursday. It's expected to be an 11-month long inquisition before they reveal their conclusion.
The anticipated surge in commercial mortgage defaults this year could wipe out profits at a number of U.S. banks, according to a research study published by SMR Research Corp. However, SMR said this problem is not likely to morph into a true crisis that would endanger U.S. or global financial systems. None of the nation's largest banks risk failure due to commercial defaults, but it's a different story for medium-sized and smaller banks, where commercial real estate accounts for nearly a third of their assets.
The FDIC may raise fees on banks whose compensation practices encourage executives to take excessive financial risks without considering the long-term consequences. The agency's board has approved a proposal that would tie the amount banks pay in deposit insurance premiums to the design of their employee pay structures. The FDIC says firms that shell out large bonuses to reward short-term yields will take greater risks to achieve more immediate results, and in turn, increase the chances the bank could go under and the FDIC would have to move in for clean-up.
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