Some housing bubble news from Wall Street and Washington. The Street.com, "Housing prices across the U.S. fell 3.2% in the second quarter from a year earlier -- the largest decline in at least 20 years, according to the S&P/Case-Shiller home price index. The even worse news is that this data measured price activity up until June, which was before the sharp reduction in mortgage lending this summer, stemming from the broader credit crunch."

"The worst-performing market was Detroit, where prices fell 11% in one year. San Diego, Washington D.C., and Tampa, Fla., were the next biggest duds, with housing prices falling about 7% in each market."

From Bloomberg. "'The pullback in the U.S. residential real-estate market is showing no signs of slowing down,' said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, said in a statement."

"Shiller and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s. Shiller's 2000 book 'Irrational Exuberance' predicted the stock market would slump and a second edition, published in 2005, said housing was in the midst of the biggest speculative boom in U.S. history.'"

The Wall Street Journal. "U.S. sales of existing homes fell slightly in July, but a surge in inventories set the stage for a steeper slump and sharper price declines in the months ahead. Sharply rising inventories are a sign of homeowners trying to sell their homes before prices tumble more, said Joseph Brusuelas, chief U.S. economist at consulting firm IDEAglobal."

"'There are going to be no happy endings here,' he added. 'It's the last days of the old order.'"

From MarketWatch. "Shares of a $18 billion Dutch investment fund run by a Carlyle Group affiliate dropped Tuesday after it received its second bailout in a week, prompting an apology from its chief executive, and a warning that the current round of credit-market problems are worse than the problems that brought about the demise of Long-Term Capital Management nine years ago."

"Carlyle Capital Corp. said it's taking a loss of $30 million to $40 million after being forced to sell $900 million in assets."

"John Stomber, CEO of the fund and Merrill Lynch's former treasurer, said conditions are worse than in October 1998, when the Federal Reserve intervened to compel banks to bail out Long-Term Capital Management."

''Unlike 1998, the market for AAA-rated U.S. agency floating-rate capped mortgage-backed securities issued by Fannie Mae or Freddie Mac was materially affected by recent events and the market for repurchase agreements secured by high-quality, agency-issued mortgage- backed securities experienced instability,' Stomber told investors."

"State Street Corp. has exposure to $22 billion of asset-backed commercial paper conduits, the types of assets that have caused problems at European banks, according to a report Tuesday in The Times of London newspaper."

"Separately, the Boston Globe reported Tuesday that an institutional bond fund managed by State Street's investment arm lost about 37% of its value during the first three weeks of August amid credit market woes. The fund may be facing losses from investments in mortgage-related securities which were heightened by leverage, according to the report."

From Reuters. "CIT Group Inc on Tuesday said it has closed its mortgage lending operations. CEO Jeffrey Peek on a conference call that day said the mortgage business had a 'problematic outlook' and CIT was not willing to spend more to add scale and boost returns."

The Washington Post. "For months, securities backed by risky mortgage loans have been in trouble. Now, the credit-rating agencies that once blessed those securities as safe investments are in trouble, too."

"'This is akin to a slow-moving train wreck,' said Sean Egan, managing director of a rating firm, who has been a vocal critic of the three rating firms that dominate the field; Moody's, Standard & Poor's and Fitch Ratings."

"Egan noted that the major rating agencies faced similar criticism when they maintained solid, investment-grade ratings until just weeks before WorldCom collapsed in 2002. 'We've seen this movie before,' he said."

"'The rating agencies themselves for a year were putting out warning signs...significant reports highlighting the risks, and yet they weren't downgrading,' said Joshua Rosner, managing director of a financial research firm for institutional investors. He said the raters, in effect, were 'wearing blinders.'"

"Rosner said that part of the problem is that the raters were acutely aware of their power in the capital markets and hesitated to downgrade securities backed by subprime loans. 'They were afraid their actions themselves could roil already weak markets,' he said."

"The other problem, he said, is that the big three credit raters are paid by the very firms they rate."

"Tom Warrack, managing director in the Standard & Poor's residential mortgage group, said, 'We believe we acted at the appropriate time.'"

"Lawrence J. White, professor of economics at the New York University Leonard N. Stern School of Business, is not persuaded: 'Give me a break,' he said. 'What really matters is the rating...and if they're not willing to change the rating, talk is cheap.'"

"In response to the latest vitriol from investors and Wall Street analysts, the big three raters have moved in recent weeks to restore confidence in their work even as they maintain that they acted appropriately and on time."

The Associated Press. "Credit rating agency Moody's Investors Service said Tuesday it is reviewing IndyMac Bancorp Inc. and its thrift subsidiary IndyMac Bank FSB for a possible downgrade because of the company's exposure to the troubled mortgage market."

"'It is unclear if inventory write-downs would be limited to one quarter,' said Sean Jones, a senior VP at Moody's Financial Institutions Group. 'These potential write-downs, and the significant drop in residential mortgage loan origination and sales volumes, is likely to weigh on the thrift's profitability for a few quarters.'"

"Credit rating agency Moody's Investors Service said Tuesday it downgraded Fremont General Corp.'s senior debt rating, due to low capital levels and increased uncertainty that Fremont can meet its obligations."

"'Fremont...could be subject to a positive inflow of capital, or incremental asset write-downs which would put further pressure on its low capital levels,' Moody's Sean Jones said."

"Lehman Brothers Holdings Inc., Bear Stearns Cos. and Citigroup Inc. were downgraded (by) Merrill Lynch & Co. stock analyst Guy Moszkowski because of looming losses on mortgage bonds and leveraged loans, as well as a slowdown in investment banking."

"Moszkowski, the top-ranked U.S. brokerage analyst in Institutional Investor magazine's survey of money managers, said in a note to clients that New York-based Lehman and Bear Stearns will be hurt because of their dependence on debt markets."

"The worldwide credit crunch triggered by rising defaults on U.S. subprime home loans has undermined some of Wall Street's biggest moneymakers, including mortgage securitization."

"'There has been no good place to hide during the month of August, which must surely go on record as one of the industry's most hair-raising ever,' Moszkowski, said in the report written with Patrick Davitt and entitled 'Differentiation Escalates.'"

"U.S. consumer sentiment took its sharpest plunge in nearly two years during August while home prices swooned in the second quarter, according to reports that show the housing crisis taking its toll."

"'My guess is we're heading for a consumer-led recession beginning in a few quarters,' said Michael Metz, chief investment strategist at Oppenheimer & Co. 'The consumption boom is over.'"

"While not all economists are convinced a recession is inevitable, most agree that the housing downturn will put a serious damper on spending as Americans feel poorer."

From Marketplace. "With 4.5 million unsold homes sitting on the market, could we be looking at a recession? Stacey Vanek-Smith talks to economists and takes a look into the markets. Stacey Vanek-Smith: 'There are 4.5 million unsold homes sitting on the market, according to The National Association of Realtors."

"David Lereah: 'This is starting to look like a typical housing recession.'"

"Housing economist David Lereah says the real problem is that people can't get the home loans they need. Lereah: 'Too many homes and not enough buyers is basically what's happening right now. There may be buyers out there, but they can't obtain a mortgage.'"

"That doesn't worry UCLA economist Edward Leamer. He says banks will adjust quickly and the loan market will loosen up. Leamer says what concerns him is that home sellers are holding out for the high prices of a few months ago."

"Edward Leamer: 'There's sort of a stand-off between buyers and sellers.' Leamer says that stand-off could increase the risk of a recession."