Two More Banks Fail

NEW YORK (CNNMoney.com) — Two more banks shut their doors Friday, according to the federal government, bringing the total number of failures up to 31 in 2009.

The first failure was a wholesale banking operator that served 1,400 other lenders across the country and was the fifth biggest bank failure during the current recession in terms of assets.

Georgia “bankers’ bank”

The Federal Deposit Insurance Corp. said in a statement that it created a bridge bank to take over the operations of Silverton Bank, National Bank, headquartered in Atlanta.

Unlike the other 30 banks that have failed so far in 2009, Silverton Bank did not take deposits directly from the general public or make loans to consumers. Instead, it was a “bankers’ bank,” offering a wide variety of services, such as foreign wire transfers, as well as clearing and cash management, to other banks.

Silverton was cooperatively owned by community banks throughout the Southeast and was heavily invested in loans to real estate developments in Florida, Georgia, and other parts of the Southeast, according to Christopher Marinac, managing principal of financial firm FIG Partners LLC based out of Atlanta, Ga.

When real estate values sank in the current downturn, the assets backing those properties also lost their value. The Southeast has seen numerous regional banks topple as the housing bubble burst.

At the time of its closing, Silverton Bank had approximately $4.1 billion in assets and $3.3 billion in deposits, all of which are expected to be within the FDIC’s insurance limits.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $1.3 billion, making it the fourth costliest bank failure since the start of the recession. “It is a bigger hit to the insurance fund than they have seen in the last couple weeks,” Marinac said. “This is a bigger issue than we have seen in awhile.”

Silverton served banks in 44 states and operated six regional offices. The FDIC created a bridge bank to take over the assets of the institution and has contracted The Independent Bankers Bank, out of Irving, Texas, to assist. The FDIC does not expect to see any significant impact to the bank’s clients, at least in the near term.

However, the bridge bank only plans to be operational for 60 days, with a possible 30-day extension. When the bridge bank services terminate, the banks that were serviced by the cooperatively owned bank will have to go out and find another institution to take care of those services.

“There is no clear cut answer on a situation like this,” said Marinac. “This is a little bit more complex and therefore there are more uncertainties about how this will unfold.”

Thus far, the FDIC has not been able to find another wholesale bank to agree to take over Silverton’s operations. The FDIC will attempt to sell off the assets, but it could pose a challenge to find a buyer for risky commercial loans. However, the FDIC could try to find a buyer by discounting the debt. “Everything has a price,” said Marinac.

New Jersey bank shuts

State regulators shut down Citizens Community Bank Friday night, and named the FDIC as the receiver. The Ridgewood, N.J.- based bank had total assets of approximately $45.1 million and total deposits of $43.7 million as of December 31.

North Jersey Community Bank, of Englewood Cliffs, N.J., has agreed to assume all of the deposits of the failed bank. The failed bank’s single office will reopen Monday as the North Jersey Community Bank.

North Jersey Community Bank paid a premium of 0.67% to acquire all of the deposits of the failed bank and has agreed to purchase approximately $11.5 million in assets. The FDIC will hold onto the rest of the assets to dispose of later.

Through the weekend, depositors of Citizens Community Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the failed bank will continue to be processed, and the FDIC said loan customers should continue to make their payments as usual.

The FDIC will continue to fully insure individual accounts up to $250,000 through the end of 2009.

Stress tests awaited

Local banks have been shutting down in droves as the recession has made it harder for customers and businesses to pay their loans. Nearly every Friday so far this year, at least one bank has failed. Last week, four regional banks were shuttered.

Even as the government has committed unprecedented amounts of money to increase liquidity and jumpstart the economy, the pace of bank failures has accelerated. In all of 2008, 25 banks failed, compared with 2009’s 31 banks.

It is not only smaller, regional banks that have felt the pressure of the recession. The nation’s largest banks have also been hit by rising default rates and a decline in business spending.

Among the big banks that have received government aid, Citigroup and Bank of America have each received $45 billion in funds from the government’s Troubled Asset Relief Program, or TARP.

In order to assess the health of the nation’s financial industry, the Obama administration has unveiled details of its plan to conduct “stress tests” on 19 of the nation’s largest banks.

The assessment of the bank’s health was expected to be made public May 4, but an announcement from the Treasury Department Friday indicated that results would be delayed until May 7.

Market watchers are anxiously awaiting the results of the stress tests, which have been designed to assess the banks’ preparedness to weather further downturns in the economy, including further increases in unemployment and decreases in home prices.

The End Of Lower Oil Prices

NEW YORK (CNNMoney.com) — Crude closed at $33.87 a barrel earlier this winter, and that’s likely the lowest we’ll see for some time. Oil prices crossed the $50 a barrel mark Thursday, the first time since early January. Thursday’s uptick is largely due to the falling dollar, but the underlying fundamentals in the oil market indicate low prices are behind us. While demand remains abysmal, production cuts from OPEC and scaled-back investments from oil companies are beginning to curtail supplies. That, say analysts, means crude prices won’t likely trade below the $40 range they’ve been locked in for the last three weeks.

“OPEC cuts are taking hold,” Adam Sieminski, chief energy economist at Deutsche Bank, wrote in a recent research note. “Looking into the second quarter we believe oil prices are starting to find a floor.”

OPEC has been ratcheting back production since late last year. While the cartel often has trouble making some cash-strapped members actually comply with the production cuts, this time around nearly everyone is on board. OPEC has announced production cuts totaling 4.2 million barrels a day, and is thought to have achieved at least 80% of that so far, according to the research firm Platts. Production in non-OPEC countries has also tightened, as deteriorating economic conditions force companies to cut back their exploration and production efforts. All this is beginning to show up in U.S. inventories.

During the first part of the year, crude oil stored at refineries, tank farms and other places in the U.S. soared, often swelling by 5 or 6 million barrels a week, according to the government’s Energy Information Administration. Now those gains have been cut way back. Wednesday showed a gain of 2 million barrels, but the week before inventories dropped by 200,000 barrels.

“All these are signs that the physical market is tightening,” said Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank.

Demand is the other side of the oil price equation. At first glance the numbers seem terrible. February demand for oil in the U.S. was at its lowest level since 1999, according to the American Petroleum Institute. Diesel, used in trucks and trains, was particularly hard hit as freight shipments have been slashed during the recession, dropped a staggering 12%, according to API.

But that’s not the whole story. Gasoline demand in the U.S. actually rose 2%, which API said may be attributed to lower gas prices. And overseas much has been made of China’s drop in oil imports. But Barakat said those numbers may be misleading, as they compare to a period last year when the country was stockpiling oil ahead of the Olympic games.

“You could make a compelling case for stability, maybe even higher prices” in the coming months, said Paul Smith, chief risk officer for Mobius Risk Group, which secures energy contracts for producers and users of oil. Long way from $147

But if prices may creep higher over the next several months, no one is calling for a return to last summer’s record prices anytime soon. First off, when OPEC decided to hold off on another production cut at its meeting last weekend, analysts took it as a sign that the cartel is keen to keep prices low to protect the economy.

“Leading OPEC members, particularly Saudi Arabia, do not want to risk – even if a low probability – a potential over-tightening of production which could send prices quickly back above $60 per barrel,” Greg Priddy, global oil analyst at the consultancy Eurasia Group, wrote in a research report earlier this week.

But more important is the amount of capacity the world now has. When oil passed $147 last summer, the difference between what the world could produce and what it consumed had narrowed to 1 or 2 million barrels a day. That narrow margin brought geopolitics into play, as a supply disruption from one part of the world would mean there may suddenly be a shortage of oil.

The specter of an actual shortage – and the surge in prices that would surely follow – attracted investors, who at the time could borrow vast sums of money and push prices even higher. A return to all those conditions is needed before anyone thinks crude will test those old highs. Most importantly, that margin of production must return to the 1 or 2 million barrels a day range from its current fluffy cushion of 4 or 5 million barrels a day.

For that to happen, the world’s economy needs to start humming again.

China Concerned About US Debt

BEIJING (Reuters) — Premier Wen Jiabao held out the prospect of extra stimulus spending if needed to hit China’s 8% growth goal this year and called on Washington to ease worries Beijing has about the safety of its vast U.S. assets. In his annual news conference ending the nine-day session of China’s ceremonial parliament, Wen on Friday reaffirmed China’s commitment to keeping the yuan broadly steady and noted that the currency, far from having depreciated, had been rising in value. Wen, who fielded questions for well over two hours, said the 8% growth target was a measure of his government’s confidence and a reflection of its commitment to keep raising living standards. But he said the task was not easy.

“I believe that there is indeed some difficulty in reaching this goal. But with effort it is possible,” Wen said. “Only when we have confidence can we have courage and strength, and only when we have courage and strength can we overcome difficulties,” the avuncular Wen, 67, said.

The premier said Beijing expected to see results from President Barack Obama’s economic recovery plan but expressed concern that massive U.S. deficit spending and near-zero interest rates would erode the value of China’s huge U.S. bond holdings. China is the biggest holder of U.S. government debt and has invested an estimated 70% of its $2 trillion stockpile of foreign exchange reserves, the world’s largest, in dollar assets.

“We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries. “I would like, through you, to once again request America to maintain their creditworthiness, keep their promise and guarantee the safety of Chinese assets,” Wen said.

U.S. Secretary of State Hillary Clinton voiced her appreciation during a visit to Beijing last month of China’s continuing “well-grounded confidence” in U.S. Treasuries. Any big switch by Beijing out of U.S. Treasury bonds would drive prices lower, inflicting the very losses Wen fears. Still, his remarks, along with the lure of surging share prices, helped depress U.S. Treasuries in Asia.

China’s central bank weighed in later with criticism of America’s “inappropriate” economic policies, including low savings and high consumption, and said the global crisis had its roots in what it called an unchecked issuance of dollars.
Keeping some powder dry Wen was speaking at the end of a week in which China has reported a record decline in exports in February and record-low industrial production growth in the first two months of the year.

The weakness was partly offset by a surge in bank lending and strength in fixed-asset investment in response to the 4 trillion yuan ($585 billion) stimulus package that the government unveiled on Nov. 9 in a bid to secure 8% growth this year. Wen disappointed investors a week ago, in his annual report to parliament, by failing to announce an increase in the size of the package, which aims to boost domestic demand and so take up the slack left by a free-fall in exports. But he said markets had failed to grasp that the government was already providing relief over and above the stimulus: taxes would be cut by at least 500 billion yuan this year, pensions were going up and teachers’ salaries would rise. What’s more, the government had kept some powder dry in case the global economic crisis, already the deepest since the 1930s, got even worse.

“We have prepared enough ammunition and we can launch new economic stimulus policies at any time,” he said.

A tightly managed budget and years of rising tax revenues powered by strong economic growth meant the government could now afford to borrow to support the economy.

“We now have more leeway to run a larger fiscal deficit and take on more debt,” Wen said. “The most direct, powerful and effective way to deal with the current financial crisis is to increase fiscal spending — the quicker the better.”
Steady as she goes

Some officials and economists believe China should also try to quicken its economic recovery by pushing down the yuan, also known as the renminbi, to make the country’s exports more competitive on global markets. Switzerland’s central bank on Thursday fanned speculation that a global round of competitive devaluations could be at hand by intervening to weaken the Swiss franc to help fight deflation. Asked whether China would let its currency depreciate, Wen said this did not accord with the facts: because European and Asian currencies had fallen hard in the past year, the yuan had been gaining in value, putting pressure on China’s exports.

Wen restated China’s long-standing determination to keep the yuan basically steady and said Beijing alone would set the course of the currency. “No other country can put pressure on our country to depreciate or appreciate the renminbi.” Attaining 8% growth is the absolute priority of China’s ruling Communist Party, which has staked its claim to legitimacy on ensuring ever-rising living standards and fears social unrest if growth slips below that threshold. Twenty million migrant workers have already lost their jobs due to a collapse in exports and a slump in construction.

“The problem of unemployment is a very serious one,” Wen said. The country was still stable, but he added: “Our government will take this a hundred times more seriously and never become complacent.”

Madoff Sent To Jail

NEW YORK — Saying he was “deeply sorry,” Bernard Madoff pleaded guilty Thursday in federal court to operating a massive Ponzi scheme, then was handcuffed and whisked away to jail as some of his angry victims applauded. U.S. District Court Judge Denny Chin rejected defense arguments to allow Madoff to remain under house arrest on $10 million bail, saying that the 70-year-old disgraced financier’s age and wealth gave him the incentive and means to flee the maximum 150-year prison sentence he now faces. Chin set sentencing for June 16. Besides prison, Madoff faces billions of dollars in restitution, fines and forfeitures. Ira Lee Sorkin, Madoff’s lead defense lawyer, said he would immediately appeal the remand order.

Dressed in a gray suit and lighter gray tie, Madoff stood and firmly repeated “guilty” 11 times as Chin ran through each count of securities fraud, mail fraud, wire fraud, perjury and other charges against him. The plea came after Madoff, whose arrest on Dec. 11 set off a wave of financial pain and even ruin for charities, celebrities, hedge funds, trusts and ordinary investors, spoke out about his criminal scam in detail for the first time.

“I am actually grateful for this first opportunity to publicly speak about my crimes, for which I am so deeply sorry and ashamed,” he said inside the packed 24th-floor federal courthouse in lower Manhattan.

Speaking quietly yet firmly, Madoff told the hushed courtroom he initially believed he would be able to end the scam quickly, but “this proved difficult and ultimately impossible.”

“As the years went by, I realized my arrest and this day would inevitably come,” said Madoff. “I am painfully aware that I have deeply hurt many, many people, including the members of my family, my closest friends, business associates and the thousands of clients who gave me their money.”

“I cannot adequately express how sorry I am for what I have done,” he added.

Although prosecutors charge that the scam began at least as far back as the 1980s, Madoff in court pegged its origin to the early 1990s. Instead of investing clients’ funds in securities as he promised, Madoff said he put the money into a Chase Manhattan Bank account. He said he also used that account to repay individuals, charitable organizations, pension funds, trusts and hedge funds as they periodically requested withdrawals. Madoff insisted his two other Manhattan-based firms — one for proprietary trading and one for matching stock buyers and sellers — were not connected to the fraud and were “legitimate and profitable.”

At the conclusion of Madoff’s allocution, an in-your-own-words recitation of the crimes, Chin accepted his guilty plea and asked whether any of the approximately 25 victims in the courtroom wanted to object. Ronnie Sue Ambrosino, who with her husband, Dominic, lost $1.6 million in life savings to Madoff, said Chin should not accept the plea at this time.

“You have the opportunity today to find out where the money is, and who else is involved in this crime,” said Ambrosino.

Maureen Ebel also urged Chin to reject the plea, arguing, “If we go to trial, we will show our people and the world … that we hold all people accountable.”

“If we go to trial we have more of a chance to comprehend the global scope of this horrible crime,” added Ebel.

Madoff did not turn look at either woman as they stood at the courtroom podium and spoke.

Nor did he turn when George Nierenberg, the only other victimized investor who addressed the court, glared in Madoff’s direction and said, “I don’t know if you had a chance to turn around and look at the victims.”

Addressing the victims’ objections, Assistant U.S. Attorney Marc Litt said federal investigators are continuing an intensive effort to find Madoff’s assets to repay investors and bring potential charges against “anyone else involved in this crime.”

After accepting the plea, Chin heard arguments from Sorkin, who asked the judge to continue Madoff’s $10 million bail and allow the disgraced money manager to remain under house arrest until sentencing.

Sorkin said Madoff “didn’t run, he didn’t attempt to flee,” at any time since confessing his crimes to his sons on Dec. 10 and making a separate confession to arresting FBI agents the following day.

Several victims erupted in derisive laughter, drawing a warning from Chin, when Sorkin said Madoff’s wife, Ruth, had used “her own assets” to hire a 24-hour security detail, ensuring that Madoff didn’t leave the $7 million Manhattan apartment where he’s been under house arrest since late December. Any risk of flight “is virtually nil,” said Sorkin, noting that all of Madoff’s assets have been frozen. Litt moved to object but Chin waved him off, saying, “I don’t need to hear from the government. It is my intention to remand Mr. Madoff.” At that, the victims joined in light applause.

Immediately afterward, Chin set Madoff’s sentencing date, authorities moved in, cuffed Madoff’s hands behind his back, and led him away.

“I’m happy he’s in jail,” a smiling Ambrosino afterward. “It’s a first step.”

Millions Are No Longer Millionaires

NEW YORK (CNNMoney.com) — The financial crisis has weighed heavily on American households, and millionaires are no exception, according to a report released Wednesday.

The number of American households with a net worth of $1 million or more, excluding the value of their primary residence, fell 27% to 6.7 million in 2008 from an all-time high of 9.2 million the year before, according to a report from market research firm Spectrem Group.

“America has a lot fewer millionaires than when this economic crisis began,” said George Walper, president of Spectrem Group, in a written statement.

But don’t weep only for the 2.5 million fewer millionaires. The report, which is based on surveys of 3,000 affluent households, also showed the number of both multi-millionaires and aspiring millionaires plummeted last year.

Affluent households, defined as those with a net worth of $500,000 or more, declined 28% to 11.3 million from 15.7 million.

Even the very rich have not been immune. Households worth $5 million or more, excluding primary residence, fell 28% to 840,000 last year from 1.16 million households in 2007.

“The culprit is not just the stock market, which we all know has dropped precipitously, but broad declines in the asset classes available to the nation’s wealthiest investors,” Walper said.

Respondents said the average value of investments in their principal residence, mutual funds, managed accounts and IRAs all fell in 2008 versus 2007, according to the report.

Millionaire households estimated that the financial crisis dented their net worth by between 30% and 40%. And the survey’s measure of investor attitude fell to an all-time low.

With such a grim economic outlook, about 45% of respondents said they have made changes to their investment portfolios.

A majority of respondents said they are shifting capital into safer assets such as cash. But about 30% of those surveyed, mostly younger households, indicated that they are still buying stocks.

The report did not bode well for financial advisers. Only 36% of those surveyed said they have a satisfactory relationship with their primary financial adviser. That’s down from 85% last year. To top of page

Obama Foreclosure Fix Ready

NEW YORK (CNNMoney.com) — The Obama administration’s foreclosure prevention program is open for business.

The multipronged fix calls for companies to help as many 4 million struggling borrowers by modifying loans so monthly payments are no more than 31% of monthly gross income. Separately, homeowners who haven’t missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.

The $75 billion loan modification plan will provide incentives to borrowers and loan servicers and investors to spur mortgage modifications. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.

“This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans,” said Housing Secretary Shaun Donovan.

Borrowers can now contact their servicers to see whether they are eligible for assistance. Federal officials will promote the program at homeownership events nationwide.

The administration Wednesday released additional eligibility criteria and program guidelines.

The loan modification plan focuses on people who are behind in their payments or are at risk of default.

Federal officials clarified the definition of who is “at risk,” defining it as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.

To participate in the loan modification plan, borrowers must:

* have obtained their mortgage before Jan. 1, 2009;
* have a primary mortgage of less than $729,500;
* live in the property;
* fully document their income by providing tax returns and pay stubs;
* sign a statement of financial hardship; and
* go for counseling if their total household debt — including auto loans, credit cards and alimony — totals more than 55% of their income.

The modification program will be in effect until the end of 2012, but loans can only be adjusted once.

Jobless Claims At 26-Year High

NEW YORK (CNNMoney.com) — The number of Americans filing initial claims for unemployment insurance spiked, and those living on unemployment benefits hit a record high, according to a government report released Thursday. For the week ended Feb. 21, 667,000 Americans filed initial jobless claims, up 36,000 from a revised 631,000 the previous week. That’s the highest figure since October 1982. Economists polled by Briefing.com were expecting claims to drop to 625,000.

In a sign that more jobless Americans are having trouble finding work, 5,112,000 continued on unemployment for the week ended Feb. 14, the most recent data available. That’s the highest number since the Labor Department began keeping records since 1967. Initial claims are expected to sharply increase, and it’s likely they will reach 750,000 per week in the upcoming months, according to Ian Shepherdson, economist at High Frequency Economics in New York. He noted that weekly filings, adjusted for population growth, would have to exceed the 1 million mark in order to break the jobless claims reported from the mid-1970s and early 1980s.

“We fervently hope that does not happen but we are not confident. Companies are throwing in the towel as they recognize that no sector is safe,” Shepherdson wrote in a note.

The 4-week moving average of initial claims was 639,000, an increase of 19,000 from the preceding week. The average is used to smooth fluctuations in data. The 4-week moving average for people continuing on unemployment was 4,932,250, an increase of 89,250 from 4,843,000 in the previous week. The insured unemployment rate is 3.8%, nearly double the 2.1% rate from a year ago.

Stimulus: The stimulus bill that President Obama signed into law has several provisions that help those living on unemployment benefits.

The weekly unemployment benefit will temporarily increase by $25 on top of the roughly $300 jobless workers currently receive. In addition, the first $2,400 of benefits in 2009 would be exempt from federal income taxes. The stimulus also provides jobless workers with an additional 20 weeks in unemployment benefits, and 13 weeks on top of that if they live in what’s deemed a high unemployment state

Stimulus Bill Agreement Reached

WASHINGTON (CNN) — Two key senators involved in talks over the economic stimulus plan emerged from closed-door talks in the Capitol to say negotiators have essentially reached an agreement on a $789 billion package but still need to resolve minor issues before calling it a done deal.

Aides notified reporters a deal could be announced by Democratic leaders at a Capitol news conference in the 2 p.m. hour. Anticipating a deal is within reach, a conference committee was scheduled to meet publicly at 3 p.m. to formalize the agreement.

“Very, very close. We’ll have a conference at 3,” Senate Finance Committee Chairman Max Baucus, D-Montana, told reporters. “The votes are there for passage, that is clear.”

Sen. Ben Nelson, D-Nebraska – a key centrist in the talks – echoed Baucus’ assessment, saying there are no “deal breaker” issues still to be resolved.

Multiple Democratic sources gave some details of what they’re working out:

- Tax breaks for workers of $800 per family and $400 per individual, down from $1,000 per family or $500 per individual.

- $44 billion in aid to states, including money for education and other services.

- $6 billion to $9 billion for modernizing and repairing schools, a step intended to assuage House Democrats who are upset the Senate cut $20 billion for school construction. The emphasis on “modernizing and repairing” is meant to appease Senate centrists who believe school “construction” takes too long and therefore won’t stimulate the economy, and that state governments, not the federal government, should be responsible for building schools.

- More money to help people buy health insurance through the federal COBRA program

The sources said 35% of the bill will deal with tax cuts, 65% with spending. Baucus said it is possible the House could take up the compromise bill as early as Thursday and the Senate, possibly Friday.

Job Openings Fall To New Low

NEW YORK (CNNMoney.com) — Job openings fell to a new low and layoffs accelerated rapidly during a downward trend in employment that continues to spiral, according to a government report released Tuesday.

December 2008 saw 2.7 million job openings, down 35% from July 2007, the starting point of the downward trend, according to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey. The report also showed that layoffs are up 58% from a year ago, and the percentage of workers quitting jobs dropped to only 40% of total separations in December.

That’s a record-low number: a sign that people are nervous about changing jobs in the current labor market. The report included a job openings rate, an indicator that compares the nation’s job openings to the total number of jobs plus the number of openings. In December it fell to 1.9%, the first time it has been below the 2% mark since the report began in 2000. That’s a sharp decline from the opening rate of 2.8% the previous year.

The retail trade sector was particularly hard-hit, as job openings fell to 305,000 in December from 386,000 in November. Education and health services openings fell to 553,000, down from 604,000 the previous month.

Hiring rate: New hires were down 900,000, or 19%, from the previous year. The report said no industry or region experienced a significant change in the hires rate in December, as the grim economic outlook continues to weigh on the job market.

Worst Auto Sales Since 1981

NEW YORK (CNNMoney.com) — Auto sales tumbled even more than expected in January to their worst levels since at least 1982, as a pullback in purchases by rental car companies became the latest problem for the troubled industry.

General Motors (GM, Fortune 500) reported that its sales plunged 49% from a year ago. Ford Motor (F, Fortune 500) said sales fell 39% at its Ford, Lincoln and Mercury brands, and 40% overall when including sales at Volvo, which Ford is trying to sell.

But it wasn’t just the U.S. automakers reporting sharply lower sales. Toyota Motor (TM) reported a 32% decrease in its U.S. sales, while sales at Honda Motor (HMC) tumbled 28%.

“We are facing unprecedented times in the industry, and no auto company is immune from current market conditions,” said Dick Colliver, executive vice president of sales for American Honda, in a statement.

Those sales results were all worse than forecasts from sales tracker Edmunds.com, which had predicted that GM’s sales would tumble 38%, along with a 30% drop at Ford. It had also forecast a 25% decline at Toyota and 23% drop at Honda. These sharp drops are likely to be the rule, not the exception, as other major automakers report their sales results later in the day.

The heads of sales analysis for both GM and Ford said that the total industry will end with seasonally-adjusted annual sales rate, or SAAR, below the 10 million mark for the first time in more than 26 years. GM’s Mike DiGiovanni said that January will mark the first month on record that auto sales in the United States trailed sales in China.

DiGiovanni and George Pipas, Ford’s director of sales analysis, said the drop will be due primarily to significantly lower fleet sales to large business customers, such as rental car companies. The plunge in demand for travel and rental cars caused leading companies such as Enterprise and former Ford unit Hertz (HTZ, Fortune 500) to pull back on their purchases last month.

As recently as December, fleet sales made up 22% of total industry sales, Pipas said. But he added that industrywide fleet sales plunged 65% to 70% in January from year-ago levels, and that they would account for no more than 12% of total industry sales in January. GM said its fleet sales fell 80% in the month, and that only 1,000 cars were sold to rental companies. Ford’s fleet sales were off 65% in January, following a 42% drop in December.

Chrysler LLC, which essentially shut its North American assembly lines during January, is expected to report even a bigger hit in sales to rental car companies during January.

The pain wasn’t just in fleet sales though. GM reported a 38% drop in retail sales, while Ford reported that retail sales were down 27% from a year earlier. GM’s sales’ woes were widespread; out of nearly 100 models, virtually all posted double-digit percentage declines in sales.

Still, GM said its retail market share was unchanged from December levels, while Ford said it still expected to post a narrow gain in retail market share for the fourth straight month due to steeper sales declines by many of its rivals.

Pipas added that industrywide retail sales are expected to be flat or only slightly higher from the December and November sales levels, despite a new round of incentives geared toward getting consumers back into dealerships