LONDON (Reuters) – The global economic renaissance will remain in grave peril until banks and investors quit mourning the end of a long-dead real estate boom and face up to losses inflicted by years of reckless lending and spending.

While those on the global property market frontline have struggled through phases of shock, denial and acceptance, others are failing to cope with the bitter reality that property values and the price of debt are unlikely to see 2007 levels soon.

Leading industry figures at the 2009 Reuters Global Real Estate Summit will be asked whether reluctant lenders and pipe-dreaming sellers have a responsibility to realize losses, to soothe parched property markets and slake stubborn fears in the underlying weakness in some of the world’s biggest banks.
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NEW YORK (Reuters) – The United States and the United Kingdom stand on the brink of the largest debt crisis in history.

While both governments experiment with quantitative easing, bad banks to absorb non-performing loans, and state guarantees to restart bank lending, the only real way out is some combination of widespread corporate default, debt write-downs and inflation to reduce the burden of debt to more manageable levels. Everything else is window-dressing.

In 1952, the United States was emerging from the Second World War and the conflict in Korea with a strong economy, and fairly low debt, split between a relatively large government debt (amounting to 68 percent of GDP) and a relatively small private sector one (just 60 percent of GDP).
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REUTERS – Extreme uncertainty about the economic outlook and the depth of the recession has paralyzed normal lending activity by commercial banks in the United States and elsewhere. Even as the Federal Reserve has added liquidity and boosted bank reserves, the credit creation process has remained stalled as banks struggle to identify good borrowers willing and able to repay in a wide range of future economic conditions.

Credit is clearly cyclical. But the period since 1994 has witnessed a huge increase in credit extension and a massive rise in balance sheet risk overlaid with modest cyclical variations. Following a brief hiatus during the downturn of 2001-2003, explosive credit creation resumed and hit new heights in early 2008.
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NEW YORK (Reuters) – Bankrupt companies are three times more likely to have been cited for fraud by U.S. regulators, according to a study released on Monday.

The study from Deloitte Financial Advisory Services LLP DLTE.UL also showed that fraud incidents were much more likely to land a company in bankruptcy court.

“Many of the companies that commit financial statement fraud are dealing with adverse performance issues and committing fraud to cover those up,” said Toby Bishop, director of the Deloitte Forensic Center. “A significant proportion of them — 20 percent — will end up filing for Chapter 11 (bankruptcy protection).”
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By James Saft, Reuters, London

LONDON (Reuters) – The evaporation of borrowed money has fundamentally changed the way markets function, and what look like crazy anomalies may end up being closer to the new reality.

Across financial markets, especially in fixed income, strange things are happening. Take two examples:

The U.S. government takes Fannie Mae and Freddie Mac into conservatorship, essentially guaranteeing their debts. Investors first narrow the premium they demand to lend to the two mortgage giants, then stage a strike and send these premiums to all-time highs.
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