Some housing bubble news from Wall Street to Washington. "Golden West Financial Corp., one of the last major savings and loans in California, agreed Sunday to be acquired by North Carolina-based Wachovia Corp., the nation's fourth-largest bank, for $25.5 billion in cash and stock."

"'The mortgage business is weakening across the country. I think the California housing market is due for a crash, prices could drop at least 20% and housing starts fall by 30%. And their mortgage portfolio is characterized by these untraditional loans, these payment-option ARMs, and interest-only mortgages,' Richard X. Bove, an analyst for Punk, Ziegel & Co. said. The risk to Wachovia comes if the housing market suffers a crash. That may be why the Sandlers chose to sell their thrift now, he said."

"Golden West is a heavy borrower from the San Francisco Home Loan Bank. Bove said that bank was likely to curtail lending because of proposals that would restrict the federal housing-finance system. 'So the deal could be problematic, and we'll just have to wait and see if in fact the housing market in California does blow up before we know if Wachovia is overpaying,' he said."

From Paul Muolo, "This past week was one of the ugliest in recent memory for the industry. Ameriquest Mortgage, once the nation's largest subprime lender, laid off 3,800 workers, and closed its traditional retail network; all of it. Washington Mutual shut its traditional correspondent division, and late this past week Merit Financial of Washington State was on the verge of going bust. Meanwhile, sources tell us that two publicly traded mortgage REITs are on the auction block."

"Lennar Corp. has cancelled a contract to buy a full city block in Oakland for between 500 and 850 units of housing, raising questions over whether the city's downtown development boom is losing steam."

"Real estate players widely acknowledge that the Bay Area condominium market is cooling. 'It's no secret the market has slowed and there seem to be fewer buyers,' said Adam Lubow with a Pleasanton firm that helps developers set prices and otherwise market their properties. 'A lot of product has gotten priced out of the realm of affordability.'"

From Bloomberg. "Federal Reserve Chairman Ben S. Bernanke is trying to do something the central bank has never accomplished: engineer a perfect three-point landing for the high-flying U.S. economy."

"'If he pulls it off, it will be a first for the Fed,' says David Jones, a former New York Fed economist, author of four books on the central bank."

"There's reason for skepticism. Even under Chairman Alan Greenspan, who came the closest to avoiding the mistake of over- tightening, the Fed almost brought the economy to a standstill in 1995. The bank's rate increases helped set the stage for the 1994-95 Mexican currency crisis, followed by a slowdown in U.S. growth to 0.7 percent in the second quarter of 1995."

"'Right now, I'm not as concerned about the Fed overshooting on interest rates,' says Susan Phillips, a former Fed governor. 'The key risk is inflation.' John Ryding, chief economist at Bear Stearns, says the declining dollar and rising prices for gold and other commodities underscore that the Fed is running the risk of having too easy a policy. 'The Fed is still providing too much high-powered liquidity to the economy,' Ryding said."

"'The committee has gotten very nervous about overshooting,' says Laurence Meyer, a former Fed governor. 'They want a slowdown in housing, but they worry that it may get out of control.'"