Economy Watch: Losing the Euro

By Dees Stribling, Contributing Editor

The Greek crisis has gone in fairly short order from “Greece will never leave the euro zone” to warnings about the cost of Greece leaving the euro. When some of the leading lights of the euro-experiment are wringing their hands about the dislocation and expense of the Greeks pulling out, that probably means that it’s already on the way. Besides, there’s now a word for it: “Grexit.”

The country might still have euros for the time being, but one thing it doesn’t have is a government. A caretaker will be in place until the next round of elections next month, the Greek president said on Wednesday. The “gasoline on the fire” round, in other words.

Meanwhile, the Greek people themselves seem to have an opinion about Grexit. According to the president of the Greek Central Bank—a thankless job if there ever was one—the citizens of the country have withdrawn about 700 million euros from bank accounts in the last week alone ($900 million), and are continuing to withdraw. If Grexit comes, it will mean a loss in depositor value with the reintroduction of the drachma as well as strict currency controls, at least for a while, and Greeks are obviously looking to get ahead of that curve.

Mortgage delinquencies down

The Mortgage Bankers Association reported on Wednesday that 11.79 percent of U.S. mortgage loans were either one payment or more delinquent, or in the foreclosure process, during the first quarter of 2012. That’s a downtick from the fourth quarter of 2011, when the total was 11.96 percent, and in fact the lowest level since the early quarters of all the housing unpleasantness back in 2008.

The delinquency rate—one or more payments missing, but not in deep enough for foreclosure—decreased to 7.4 percent of all loans outstanding as of the end of the first quarter of 2012, a decline of 18 basis points from the previous quarter, according to the organization’s National Delinquency Survey. Compared with a year ago, the decrease was 92 basis points.

The percentage of loans in the foreclosure process at the end of the first quarter was 4.39 percent, up a very slight 1 basis point from the fourth quarter and 13 basis points lower than a year ago. “The problem continues to be the slow-moving judicial foreclosure systems in some of the largest states,” Michael Fratantoni, MBA’s vice president of research and economics, noted in a press statement. “While the rate of foreclosure starts is essentially the same in judicial and non-judicial foreclosure states, the percent of loans in the foreclosure process has reached another all-time high in the judicial states, 6.9 percent.”

FOMC mulls QE3? Maybe

The Federal Open Market Committee released the minutes of its April 24-25 meeting on Wednesday, and as ever the game among Fed-watchers is to figure out what the opaque central bankers intend to do. “Operation Twist,” which involves extending the average maturity of the securities the Fed holds, is winding down. What next?

QE3, by any chance? Naturally, the FOMC didn’t say, but “several members” said they’d support more “monetary policy accommodation” if need be, according to the minutes. That’s up from “a couple” of members since last time. Such are the tea leaves that economists are pondering these days.

Wall Street wasn’t exactly in a panic on Wednesday, but investors were a mite nervous over the uncertain prospects for Grexit. The Dow Jones Industrial Average lost 33.45 points, or 0.26 percent, while the S&P slid 0.44 percent and the Nasdaq declined 0.68 percent.