Some housing bubble news from Wall Street and Washington. CNN Money, "Jerry Howard, CEO of the National Association of Home Builders, told CNNMoney.com that numerous problems caused the sharp slump in the housing and mortgage markets, but he added that overbuilding during the boom years was a contributing factor. 'There were some builders [who] were probably overly aggressive. There's no question about that,' Howard said."

"'Economists were starting to say this is a cyclical business and we are going to get into a downturn. But some guys were chasing the gold and pursing the brass ring, and they didn't heed the market warnings as quickly as they should have,' he said."

"Government figures show that 6.2 million new single-family homes were completed between 2003 and 2006 - hitting record levels year after year during the boom. Howard also said builders underestimated how much speculative investors were pumping up the market."

"'We now find out in hindsight it played an important role and a very dangerous role,' he said. 'For the first time that I can remember, you saw investors coming into the housing markets and trying to play it into almost like a day stock.'"

"Dean Baker, co-director of the Center for Economic and Policy Research, said a boom in building was bound to happen due to the bubble in home values; builders were responding to the market conditions, not creating them."

"'I put them low on the list as villains for the story,' Baker said. 'If there's a high price for houses, people build them.'"

From Realty Check. "I’m hearing some disconcerting rumblings from some builders, anecdotally speaking of course. One mid-sized private builder told a friend of mine that potential customers coming through their model-home doors are openly hostile. They’re not just looking for good deals; they’re looking for payback."

"Apparently some of today’s new homebuyers blame the builders outright for the current housing predicament. They are telling unwitting sales reps that they are to blame for running up prices and foisting untenable loans on clients during the latest housing boom. Buyers are telling the sales people stories of how rudely they were treated during the boom."

"Another builder told someone else I know that buyers today aren’t just low-balling, they are making truly ridiculous offers, like half the asking price."

From CE Pro Magazine. "Some industry prognosticators are predicting that the housing market will not turn around until 2009. Why are some integrators not sad, but downright happy, to hear that news? For some integrators, it’s a matter of having been burned by the shady practices of a large builder in the past."

"'They’re all scumbags!' is how the owner of one large Florida-based security company bluntly characterized large production builders recently when we spoke. He proceeded to tell me several details regarding his dealings with several national builders."

"For instance, long after contracts had been signed, one builder insisted the dealer provide an extra free alarm keypad for every home in the development. When the dealer resisted, he was thrown off the job. 'And the company they ended up using did everything wrong and many of the systems failed, hurting that builder’s reputation,' he recalls."

From Reuters. "The top lobbyist for the U.S. mortgage banking industry said on Wednesday that he is stepping down after five years to head a trade group representing mortgage title insurers."

"Kurt Pfotenhauer, who will leave the Mortgage Bankers Association at the end of January, said the recent housing finance crisis has made the last eighteen months some of the most challenging in his professional life. Pfotenhauer has often had to defend an industry that sold troubled subprime mortgages with built-in cost spike that are helping drive up foreclosures."

"'We had some members that pushed the envelope too far to the cost of families and financial institutions,' he said."

The New York Times. "The Illinois attorney general is investigating the home loan unit of Countrywide Financial as part of the state’s expanding inquiry into dubious lending practices that have trapped borrowers in high-cost mortgages they can no longer afford."

"Lisa Madigan, the attorney general, has subpoenaed documents from Countrywide relating to its loan origination practices, a person briefed on the matter said."

"Countrywide Financial Corp, the No. 1 U.S. mortgage lender, said on Thursday mortgage loan funding tumbled 40 percent to $23 billion in November, sending its shares down as late payments continue to escalate."

"The bulk of the origination decline came from a near-evaporation of Countrywide's subprime lending business and a sharp fall-off in adjustable-rate mortgages."

"Credit Suisse analyst Moshe Orenbuch said Countrywide's delinquency rate was 6.34 percent in November, up from 5.89 percent in October. Subprime mortgage funding fell to $17 million in November from $3.06 billion a year earlier, when lending standards were lax. Adjustable-rate fundings fell to $3.33 billion from $14.3 billion."

The Associated Press. "Lehman Brothers Holdings Inc. had $3.5 billion worth of writedowns during the fourth quarter, with a majority of it coming from investments in mortgage-backed securities, the investment bank's global head of risk said Thursday."

From MarketWatch. "Security Capital Assurance may lose its crucial AAA rating because it insured complex securities that are being hit hard by the subprime-mortgage meltdown, Fitch Ratings warned."

"Fitch said that, after reviewing the CDOs and mortgage-backed securities guaranteed by Security Capital, the insurer's capital adequacy falls $2 billion short of what's needed to keep an AAA rating."

"The main problem centers on Security Capital's $16.1 billion exposure to structured finance CDOs, according to Fitch. A number of those securities, which were originally rated AAA, should now be rated BBB or junk because the underlying subprime mortgages and other assets have deteriorated and are expected to keep getting worse, the agency said."

"Residential mortgage-backed securities that Security Capital guaranteed also have deteriorated, particular those backed by prime, second-lien home loans, Fitch added."

From Spiegel Online. "The much anticipated sale of Landesbank Sachsen went through on Thursday morning. But the state of Saxony is on the hook for €2.75 billion despite promises by the government that tax money was safe."

"The deal was initially agreed to back in August. After Landesbank Sachsen (Sachsen LB) ran into massive difficulties stemming from the subprime collapse in the United States and resulting credit shortages, Landesbank Baden-Württemberg (LBBW) expressed interest in buying it. But the deeper LBBW plunged into the books of Sachsen LB, the less it liked what it saw."

"The eastern German state of Saxony agreed to put up a guarantee of €2.75 billion ($4 billion) to help cover some €43 billion worth of risky investments at Sachsen LB and an affiliate, according to Saxony government spokesman Peter Zimmermann. According to press reports, LBBW had been demanding €4.3 billion, which would have amounted to almost a quarter of Saxony's entire state budget."

"The bank itself, Zimmermann confirmed, changed hands for €328 million in cash."

From Bloomberg. "The Bank of Japan said Thursday that it would act as needed to relieve strains...after several top central banks - the Fed, the European Central Bank, Bank of England, Bank of Canada and Swiss National Bank - announced a new short-term lending facility and other measures Wednesday."

"It was the first such joint action by major central banks since they took steps to help financial markets recover after the attacks on the United States on Sept. 11, 2001."

"Investor delight at a concerted central bank effort to relieve jammed money markets fizzled out on Thursday with experts saying the credit crisis would only end when commercial banks trusted each other again."

"Even the Swiss National Bank said central banks alone could not solve the crisis, as it kept interest rates on hold. 'As long as uncertainty with respect to the scope of the credit problems exists the disruptions on the money market are likely to persist,' the SNB's Thomas Jordan said."

"'Central banks cannot compensate for this lack of confidence simply by injecting additional liquidity,' he said."

From The Age. "'Investors (were) initially buoyed by the action of the central banks then, once the colourful present was opened, they spat the dummy like a petulant child,' said Joseph Palmer & Sons director Alex Moffatt in a note to clients."

"Financial institutions became reluctant to lend to one another during August, when defaults in the US subprime mortgage market hit some banks and set off a period of extreme volatility on equity markets."

"The interest rates banks charge each other for short-term loans in Europe failed to decline from the highest levels in seven years a day after central banks joined forces to break a logjam in money markets."

"The highest short-term rates since December 2000 suggest that the first coordinated central bank action since the Sept. 11, 2001, terrorist attacks may not be enough to revive interbank lending. The cost of borrowing dollars fell 7 basis points to 4.99 percent, about half what was anticipated, based on prices of Libor futures contracts."

"'It's not going to help us find an exit to this crisis,' said Cyril Beuzit, head of interest-rate strategy at BNP Paribas SA in London. 'These measures aren't going to address the root cause of the crisis. Banks are still reluctant to lend money to each other because there are serious concerns about potential further bad news.'"

From Fin Facts. "ECB says the 21 largest Eurozone banks have €244bn in off-balance sheet assets that they may have to take onto their balance sheets which would impact their lending capacity."

"'All in all, it cannot be excluded that the market re-pricing process could become more disorderly, possibly revealing further and, so far hidden, risk exposures. In addition, those LCBGs that rely on funding from non-deposit sources, and those that are particularly active in the securitisation businesses, could see their revenues decline significantly. Forward-looking financial market indicators, such as banks’ CDS spreads and share prices, currently suggest that challenges pertaining to the banking sector are likely to remain in the near future,' concluded Lucas Papademos, Vice-President of the ECB."

"Interest rates on loans in euros stayed at a seven-year high, a day after global central banks teamed up in an attempt to thaw a freeze in money markets."

"The three-month borrowing cost was at 4.95 percent, its highest level since December 2000, according to prices from the European Banking Federation today. That's 95 basis points more than the European Central Bank's benchmark interest rate and up from 4.18 percent at the start of July, before losses related to subprime mortgages contaminated money markets."

"U.K. Prime Minister Gordon Brown said the surge in credit costs should spur increased transparency in the banking industry and change the way credit-rating companies work."

"'It's a wake-up call for the global economy,' Brown told lawmakers in Parliament in London today. 'The existing institutions aren't good enough. I'm going to make it my business to reform those institutions.'"

"Former Federal Reserve Chairman Alan Greenspan ignored warnings about the Fed's low interest rates that fueled real estate speculation and the current housing recession, said Allan Meltzer, professor of political economy at Carnegie Mellon University in Pittsburgh."

"'I think he lets himself off much too easy,' said Meltzer, author of a 2002 book on the early history of the central bank, in an interview. 'He acknowledged maybe his policy had a little bit to do with it. But he found all kinds of other reasons' to blame for the housing and mortgage problems...in a Wall Street Journal commentary."

"Greenspan...said the Fed was worried about deflation. Meltzer said he met then with Greenspan at the former chairman's invitation and disagreed with the concern over deflation."

"'I said, 'Alan, we have had six or seven deflations in the United States in the history of the Federal Reserve, and only one of them ever had terrible consequences, and that was 1929 to 1933,' he said. 'In all the other six, nothing happened.'"

"Greenspan 'continued to believe that deflation was the problem. He was wrong about that, simply out and out wrong,' Meltzer said."