Some housing bubble news from Wall Street and Washington. Bloomberg, "IKB Deutsche Industriebank AG, the German lender bailed out by KfW Group, fell to its lowest in more than a decade on concern about further losses from U.S. subprime mortgage investments. The rescue of IKB may cost the German development bank KfW more than 5 billion euros ($7.2 billion) if market conditions worsen, KfW CEO Ingrid Matthaeus-Maier said in an interview with Sueddeutsche Zeitung newspaper today."

"The bank has also written down the value of its 38 percent stake by 400 million euros, she told the newspaper."

The Associated Press. "Securities in Australian property trusts Centro Properties Group and associate Centro Retail Trust crashed Monday after they cut their earnings forecasts because of increased debt financing costs linked to the U.S. subprime mortgage crisis."

"The losses stripped a total of A$4.78 billion (US$4.12 billion; €2.84 billion) off the market capitalization of the two."

"'We never expected, nor could we reasonably anticipate, that the sources of funding that had been historically available to us and many similar companies would shut for business,' CEO Andrew Scott told reporters in a conference call."

"'Centro has been lax with tying down its debt and is now paying the price,' said Jonathan Kriska, property analyst at Patersons Securities in Sydney."

From The Age. "Five weeks after telling shareholders the US subprime housing crisis has not had any impact on the operation of Centro's US portfolio, Centro Property Group is in turmoil."

"Yesterday, the group announced it had obtained an interim extension until February 15, allowing the group time to negotiate the refinancing of $A1.3 billion in maturing debt, which arose from the group's exposure to the US subprime mortgage market."

The Sydney Morning Herald. "Staring down the barrel of at least $2 billion in expensive short-term debt, Centro is facing its version of the St Valentine's Day massacre. Its financiers have given the tottering property group just eight weeks to put in place new financing to replace borrowings the company sourced from the now-crippled United States commercial credit markets."

"Centro took a gamble in August that ensuing chaos would recede, when it managed to get away a $US300 million 10-year term issue at 'reasonable rates' through a tightening CMBS market, which had been providing about $US80 billion in funding every month."

"Despite all the overwhelming evidence to the contrary, Centro believed a few days ago that it could find a way to replace its crippling debt, including $2 billion due at the end of the month."

"'Up until late last week, we were of the view that our short-term debt obligations could be refinanced on a long-term basis,' chairman, Brian Healey said."

"But, in saying that, it appears the Centro board and its executive team were depending more on luck than judgment."

From Reuters. "National City Corp, the ninth-largest U.S. bank, said on Monday it expects its provision for loan losses for the fourth quarter to be about $700 million. The bank said that home equity loans and non-prime mortgages transferred to its portfolio in the third quarter have shown further deterioration beyond what the company anticipated at the time its September 30 loan loss allowance was established."

"'The areas of elevated risk continue to be in the run-off portfolios of First Franklin non-prime mortgages,' the bank said in its filing."

"National City sold its First Franklin Financial Corp subprime unit to Merrill Lynch last December, for $1.3 billion, but kept several billion dollars of loans and is winding them down."

From CNN Money. "National City said it will take $200 million in charges related to mortgages on its warehouse lines that it either sold to investors or transferred to a portfolio in October and November."

"Total charge-offs, or loans written off as not being repaid, increased to $102 million in November, from $87 million in October. Charge-offs on residential mortgages and home equity products accounted for a combined $51 million during the month, a 13 percent increase from the $45 million in October and more than double the $21 million written off during November 2006."

"U.S. investment bank Lehman Brothers is facing possible legal action by local councils in Australia who bought collateralised debt obligations (CDOs) from its local unit, Grange Securities, the Financial Times newspaper said Monday."

"The FT said one Lehman-originated CDO exposed to the U.S. subprime mortgage market was marked down to just 16 cents in the dollar by the bank last month."

"Mizuho Financial, one of the largest Japanese banks, last week stopped helping create U.S. collateralized debt obligations containing asset-backed securities or high-yield corporate loans. It also stopped trading such securities. Five people were fired."

"'Due to changes in the global market for structured-credit products, Mizuho Securities has decided to suspend U.S. asset-backed CDO and CLO activities,' said Seth Martin, a Mizuho spokesman."

"Mizuho said Dec. 5 that it would invest ¥150 billion, or $1.4 billion, in its investment banking unit to shore up its balance sheet amid losses tied to rising U.S. mortgage defaults. The unit may post a loss of ¥92 billion for its fiscal year because of subprime-related investments, the bank said."

"At Mizuho, the group underwrote $4.4 billion worth of CDO deals before the markets seized, according to an industry newsletter. Mizuho, the 18th-largest underwriter of mortgage-bond CDOs during 2006 and 2007, may have retained about half of the debt, which may produce $700 million in losses, according to JPMorgan Chase CDO analysts."

"Japan's top three banks are expected to resist a request to put up a total of $15 billion for a U.S.-led subprime rescue fund, a move that could further cloud prospects for the bailout plan."

"Executives at Japan's top three megabanks have meanwhile been wondering why they were asked to shoulder such a comparatively large part of the fund, whose size has recently been estimated by media at $30-60 billion."

"'It could prove quite difficult for us to put up funds for this,' said an executive at one of the megabanks, adding that he did not think the fund would be able to sell the commercial paper that would in theory be supported by Japanese credit lines. 'Logically, it just doesn't make sense for us.'"

"Nomura Securities bank analyst Keisuke Moriyama said he expected Japan's top three banks to offer to pay less than the requested amount or even refuse to help altogether."

"The issue could yet become political, the megabank executive said. 'What did America do when we had our non-performing loan problem? They just pushed us into the corner. European banks also ran away. Why should Japan now shoulder this burden?' said the megabank executive. 'But this is a decision made at a high political level and could end up defying logic.'"

From AFP. "It is time for the banks to fully disclose their US home-loan losses to prevent fear from making a tough credit crunch worse since the central banks have done about all they can to restore confidence, analysts say."

"Central banks 'can't do any more' to boost confidence in the financial markets, Commerzbank economist Michael Schubert warned, while Bank of America's Gilles Moec urged the private sector to state clearly 'who lost what and how much.'"

"Clear statements by finance houses about how much damage the US home-loan crisis has done to their accounts 'is really the key to the crisis,' economist Moec stressed."

"A solution depends on confidence because banks have stopped lending to each other since they do not know the extent of potential losses incurred by the banks they trade with."

"'If you are a medium-sized bank trying to borrow for three months in the interbank market you can more or less forget it,' said Investec Securities chief economist Philip Shaw, who is based in London. 'I've heard of institutions that won't lend beyond one week, to anybody, it doesn't matter who the name is.'"

"'When in doubt, people tend to abstain,' Moec said. 'The problem for everyone is they don't know if their counterpart belongs to the winners or the losers.'"

"Only transparent disclosures could convince market players a potential partner was solvent, the economist explained. 'It's beyond the reach of the central bank,' he said."

"The Federal Reserve's plan to provide $20 billion in cash to the world's money markets failed to reduce the cost of borrowing in euros."

"The rate banks charge each other for three-month loans in euros stayed close to a seven-year high, rising 1 basis point to 4.95 percent, the European Banking Federation said today. That's 95 basis points more than the European Central Bank's interest rate. It was 4.58 percent a month ago."

"The Fed will today make funds available to banks and financial institutions in an effort to increase the amount of cash available to the banking system."

"'It's going to take a long time for these problems to go away,' said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. 'These auctions might help stem the pressure until year-end, but the bottom line is until we get a clearer picture of how deep the problems are, the banks are going to hoard cash.'"

"Representatives of five of Wall Street's dominant investment banks gathered around a blonde wood conference table on a February night almost three years ago. Their talks led to the perfect formula for a U.S. housing collapse."

"The host was Greg Lippmann, then 36, a fast-talking Deutsche Bank AG trader who aspired to make mortgage securities as big a cash cow for Wall Street as the $12 trillion corporate credit market."

"Those meetings of the 'group of five,' as the traders called themselves, became a turning point in the history of Wall Street and the global economy."

"The new standardized contracts they created would allow firms to protect themselves from the risks of subprime mortgages, enable speculators to bet against the U.S. housing market, and help meet demand from institutional investors for the high yields of loans to homeowners with poor credit."

"This is the story of how Wall Street transmitted the practices of southern California's go-go lending industry and the inflated U.S. real estate market to the global financial system."

"In Orange County, California, a mortgage lender named Daniel Sadek was among those who took notice of the increase in Wall Street's appetite for subprime loans. He turned the staff at his firm, Quick Loan Funding, into a subprime mortgage factory. 'You can't wait,' said his ads, aimed at high-risk borrowers. 'We won't let you.'"

National Mortgage News. "Alan Greenspan, the former Federal Reserve chairman, has found the roots of the current 'liquidity' crisis (which is really the subprime crisis but with a different name)."

"In an recent op-ed piece Mr. Greenspan – once a big fan of ARMs – wrote: 'The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when the economic ruin of the Soviet Bloc was exposed with the fall of the Berlin Wall.' Huh?"

The Philadelphia Inquirer. "On a recent weekday, stress-management guru Loretta LaRoche delivered her message in Hall A of the Atlantic City Convention Center to a standing-room-only audience of men and women who, of late, seem to be some of the most stressed-out Americans of all. Realtors."

"LaRoche strutted across the stage for 45 minutes wearing feathered boas and silly hats. She cajoled her audience into grinning, laughing, shouting 'Whoop! Whoop!' as loudly as possible, then joining hands as she led in a sing-along of 'That's Amore,' with Dean Martin crooning in the background."

"The Internet is defining seller attitudes, said Roger Turcotte, a New Hampshire real estate broker and educator."

"'You meet with a seller and he wants to list at $390,000, even though your market analysis says to start at $345,000? That's the Internet talking,' Turcotte said. 'Before they call you, [sellers] spend hours looking at Web sites, collecting information from sources that aren't necessarily reliable. You show them the data, and they counter that they are not desperate and they are not going to lower the price.'"

"What should a listing agent do? 'Walk away,' Turcotte said. 'You don't need the listing that badly, and you know what's going to happen. Someone else who tells the seller what he or she wants to hear will get the listing, and then the property will stay on the market until the price drops to what the market will bear.'"

"Turcotte blamed a lot of the current market downturn on an overwhelming emphasis on home purchase as an investment, even though the industry's own rhetoric over the last several years also has focused on it."

"In fact, the NAR's 2007 Profile of Buyers and Sellers says the 'motivation for home ownership often includes an investment component,' which most of those surveyed believed to offer a better return than stocks."

"'We are trapped in a media mess,' Turcotte said. 'Eighty to 90 percent of buyers are looking for a lifestyle asset, not a financial one.'"