Some housing bubble news from Wall Street and Washington. USA Today, "The end of the real estate recession seems nowhere in sight, in light of a slew of bleak news Tuesday of falling sales and prices, a severe decline in construction and deep losses and layoffs at one of the nation's largest builders. The NAR says it expects more dismal figures for September as the housing market reels from the crisis in the mortgage industry."

"But the September figures might be much worse. Re/Max International, which analyzed existing-home sales in five major cities for USA TODAY, says September totals so far are down sharply from last year. In Baltimore, Tucson and Seattle, for example, sales in the first three weeks this month are off more than 40%."

"'I've given up forecasting how low housing sales will go,' says Joel Naroff, president of Naroff Economic Advisors."

"And Stuart Miller, CEO of Lennar, has given up forecasting the builder's profits after reporting a record loss of $514 million in the third fiscal quarter, as it laid off 35 percent of its employees and wrote down the value of real estate."

"Lennar warned that more pink slips are on the way. The company began construction on 60 percent fewer homes in the June-through-August period compared with the same fiscal quarter last year. At the same time, nearly one-third of buyers canceled their contracts."

"'August seemed to be a melting pot of all things negative,' Miller says. The declines were felt in every region of the country, he says."

The Australian. "Lennar, the second-largest US home builder, yesterday warned that sellers of existing homes were starting to accept lower prices in a move that could force the industry to accelerate its own discounting strategy."

"CEO Stuart Miller said existing home owners had 'sat on the sidelines' during a downturn driven by oversupply and the difficulties in securing mortgage finance caused by the sub-prime crisis."

"Mr Miller said market conditions had continued to deteriorate as a lack of consumer confidence spread to the far larger existing-home sector. 'The existing-home market is now moving much more rapidly to adjust (prices) downwards,' he told analysts."

The Globe & Mail. "Bank of Canada Governor David Dodge is raising a red flag about housing prices in Canada, saying that increasingly loose lending rules may be helping overheat the country's real estate market."

"'One worries about the structure of the mortgage market, that we may be actually aiding, facilitating a rise in the price of houses that is really not warranted,' he told reporters after a speech in Vancouver."

"In his comments to reporters yesterday, Mr. Dodge further warned that housing prices outside of the fast-growing cities of Western Canada may be rising too quickly."

From The Age. "Six weeks ago, the newly listed RAMS Home Loans went into crisis mode. Credit markets were frozen and, due to increasing defaults in the US subprime mortgage market, mortgage-backed securities had become almost toxic."

"RAMS was unable to refinance its short-term loans, forcing it to pay a premium for a big portion of its $14 billion-plus loan book. Today the situation is little changed."

"Moody's Investors Service has assigned provisional ratings to the notes while RAMS hunts for buyers. Moody's analyst Ryan Lu said RAMS was looking for the most cost-effective way of refinancing."

From Dow Jones. "Securities regulators are investigating whether credit-rating agencies such as Moody's Corp. and McGraw-Hill Cos. unit Standard & Poor's followed standard procedures for rating mortgage-backed securities, Securities and Exchange Commission Chairman Christopher Cox told the Senate Banking Committee Wednesday."

"Vickie Tillman, executive VP of Standard & Poor's Credit Market Services, told senators that some data used by the company in its ratings 'has proved no longer to be as useful or reliable as it has historically been.'"

"'Additionally, the collapse of the housing market itself has been both more severe and more precipitous than we had anticipated,' Tillman said in testimony."

From CNN Money. "Critics have claimed that the agencies were blinded by cozy relationships with underwriters and didn't do enough to sound the alarm for investors. The agencies contend that they only issue opinions, and that their ratings aren't investment recommendations."

"Credit ratings are 'not a promise of performance but an evaluation of the risk of default....Credit ratings speak to one topic and one topic only - the likelihood that rated securities will default,' VP Vickie Tillman said in prepared remarks."

From Bloomberg. "The SEC is examining whether the firms were 'unduly influenced' by issuers and underwriters that paid for the credit ratings, Cox said in testimony prepared for a hearing by the Senate Banking Committee in Washington today."

"Senator Jim Bunning described the process as 'like a movie studio paying a critic to review a movie and then using a quote from his review in the commercials.'"

"Speaking at a conference in New York last week, Moody's Chief Executive Officer Raymond McDaniel Jr. said the firm 'directionally got it right. What we missed was the magnitude and the speed of the deterioration of mortgage product in 2006.'"

"Moody's said it receives no fees for helping clients structure their securities. 'Moody's does not structure, create, design or market securitization products,' said Michael Kanef, group managing director, asset finance group, of Moody's Financial Services. 'We do not have the expertise to recommend one proposed structure over another, and we do not do so.'"

From Reuters. "Tillman defended S&P's practice of working with companies when rating their transactions and securities. The dialogue does not amount to 'structuring' securities, even in cases where the discussion is about the effect different structures may have on ratings, she said."

"'S&P does not tell issuers what they should or should not do,' Tillman said."

"S&P said it warned as early as January 2006 that there were risks in the mortgage-backed securities market, including securities backed by subprime mortgage loans."

The Wall Street Journal. "In a recent interview with a German newspaper, former Federal Reserve Chairman Alan Greenspan said people believed rating firms 'knew what they were doing' in complex mortgage products, but that in fact it wasn't feasible for them to rate some of these bonds correctly."

"'We're very nervous right now,' says Richard Metcalf, director of corporate affairs for the Laborers' International Union of North America, which advises pension funds. 'We'll be much less likely to invest in these types of products if we're not assured we're getting an honest and independent rating.'"

"Investors and their fiduciaries must do a better job of evaluating the risks of increasingly complex securitized derivatives products, a senior U.S. Treasury official said on Wednesday."

"Anthony Ryan, the Treasury's assistant secretary for financial markets, said complexity may well be a reason not to invest in a security, but it should not be an excuse for a buyer to justify a loss."

"'Insufficient understanding or failure to perform an independent and adequate due diligence prior to making an investment decision is simply unacceptable. That's not investing -- that's gambling,' he told an International Swaps and Derivatives Association conference in New York."

"Ryan also said rapid ratings downgrades for many derivatives products may suggest the need for stronger market discipline."

This is Money. "The Bank of England todaywarned that the credit squeeze which engulfed Northern Rock will get worse before it gets better."

"However, today's unprecedented auction by the Bank of an extra £10bn of liquidity for the money markets found absolutely no takers."

"The Bank of England ran the first auction of extra three month loans for banks who have refused to lend to each other for the last few weeks as they took fright at the level of risk involved."

"Today's auction saw no bids for the extra £10bn the bank had offered. However, the Bank acknowledged that potential borrowers will have been put off by the minimum interest rate, set at a punitive 6.75% - 1% above base rate."

"A major attraction of today's auction was that the Bank would accept mortgages as collateral, which commercial banks have ceased doing since the US subprime crisis broke."

"According to the Bank's survey of lenders, the proportion planning to cut the supply of credit to companies shot up from 20% in mid June to 49% by the middle of September. Alan Castle, economist at Lehman Brothers, said: 'This raises questions about the health of the corporate sector which had been assumed to be in quite a strong position.'"

From Sky News. "The £10bn...offer was announced by the Bank's Governor, Mervyn King, a week ago to relieve three-month lending markets between banks, which have been hit by fears of exposure to losses on high-risk US mortgages."

"Only two weeks ago, the Governor had said that providing short-term liquidity to markets in trouble 'encourages excessive risk-taking and sows the seeds of a future financial crisis.'"

"Mr King defended the decision to hold the auction in a hearing with MPs on the Treasury Select Committee last week. The penalty lending rate for the £10bn fund - a minimum of 6.75% - reflected 'the realisation of the risks that the banks themselves have taken with the full knowledge of what the consequences would be.'"