Some housing bubble news from Wall Street and Washington. CNN Money, "Home prices continued their plunge during the last three months of 2007, setting a real estate trade group's record for the biggest-ever quarterly drop. The national median price drop of 5.8%, to $206,200 from $219,300, was the steepest ever recorded by the National Association of Realtors (NAR), which has been compiling the report since 1979."

"'The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges,' said Lawrence Yun, NAR's chief economist, in a statement."

"Each of the four U.S. regions recorded losses compared with the fourth quarter of 2006. The West took the worst hit, at 8.7%. Prices dropped 4.8% in the Northeast, 5.4% in the South and 3.2% in the Midwest."

"In Lansing, Mich., square in the Midwest Rust Belt, prices plunged 18.8% to $109,600. In Sacramento, Calif., prices fell 18.5% to $197,600, and in both Jackson, Miss and Riverside, Calif. prices dropped 16.8%."

"Cape Coral, Fla., condo prices were down 26% compared with the last three months of 2006 to $202,300, and Tucson, Ariz., prices dropped 19.8% to $128,000. Atlanta prices fell 12% to $141,100, and Las Vegas was off 10.3% to $178,500."

The Orlando Sentinel. "The International Builders' Show in Orlando opened with leading economists warning that the nationwide plunge in residential construction and sales will continue at least until early 2009."

"'There are a lot of downside risks,' David Seiders, chief economist for the National Association of Home Builders, told reporters at the opening of the trade group's annual conference. He said falling home prices 'are part of the solution' for getting sales and construction moving again because they will help balance of supply and demand."

The Herald Tribune. "There is something different this year: The mood of the builders. It is not good. Seiders acknowledged that after his unusually bleak market forecasts for 2008. Builders are concerned, he said. Gravely concerned. His forecast last year was for a mild decline in the housing market, but still a solid year. The same cannot be said for 2008, Seiders said."

"It's 'a good time to buy a home ... just not good enough' in the eyes of a lot of potential home buyers, said Seiders."

"In the category titled 'vacant year-round single-family homes for sale,' the numbers will soar from 950,000 in 2005 to 1.65 million in 2008."

"'The biggest problem for the economy is in the financial markets,' Seiders said. 'This easily could spiral downward as this thing feeds on itself.'"

The Palm Beach Post. "'This really does look like something out of a Warner Bros. cartoon, where Wile E. Coyote has fallen off that cliff and still hasn't hit bottom,' said Seiders. 'It's pretty clear that the housing contraction is not yet over.'"

"The hard-hit areas all share a common characteristic: a glut of homes for sale. 'Before prices can turn up, we have to get rid of the oversupply problems,' Berson said."

The Dallas Morning News. "'It's absolutely essential to get this thing moving in the other direction and get home sales going,' Seiders said. He said the housing market must improve 'so this doesn't degenerate into an absolute debacle.'"

"'Home prices have fallen significantly in some parts of the country, and they are going to fall some more,' said said David Berson, economist with mortgage insurance giant PMI Group."

"Some recent studies have warned that the housing slump could drag on for several years. And educational programs offered to builders at their convention mirror the dour mood of the market. Seminar topics include 'Unique Opportunities in Bankruptcy,' 'Selling in a Slower Market' and 'How to Compete With Resales and Foreclosures.'"

"Despite well-intentioned government programs and promises of forbearance by lenders, don't look for any relief on the foreclosure front, economists said. 'Sadly, I think the news is going to get worse before it gets better,' said Frank Nothaft, top economist at Freddie Mac, the big mortgage company."

"Mr. Nothaft estimates that 1.25 million U.S. homes wound up in foreclosure in 2007. 'And we are going to see a higher number in 2008,' he said. 'It's going to be a tough year to get through with further declines. We expect house values to continue to weaken nationwide over the year and into 2009.'"

"Mr. Nothaft said that if borrowers have good credit and employment and can make a down payment, it's a great time to finance a house. 'But certainly there are a lot of people who can't do that,' he said."

The Chicago Tribune. "'Home prices are going to fall more,' said Berson. 'From mid-2006, the peak, to the trough in mid-2009, the national average price will have fallen 15 percent, maybe more,' he said. 'California, Florida and Las Vegas will fall significantly more than that.'"

"The builders themselves appear to be getting more aggressive in pushing for relief: Association President Brian Catalde announced Wednesday that the trade group had voted to cut off further funding for congressional candidates 'until further notice.'"

"'Over the past six months, Congress and the administration have not adequately addressed the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward,' Catalde said in a statement."

The Washington Post. "The National Association of Home Builders, one of the top 10 corporate donors to politicians, has stopped contributing to congressional candidates after it failed to get what it wanted in recent anti-recession legislation."

"The association had unsuccessfully pressed lawmakers to adopt a provision to reduce the tax liability of home builders by allowing them to offset their past profits with future losses. The lobby had also pushed to expand a program that allows states and localities to issue tax-exempt bonds that finance low-rate mortgages."

"Election experts said the lobby's move illustrated how closely interest groups tie their donations to the decisions they hope lawmakers will take on their behalf -- a connection that usually goes unspoken."

"'This demonstrates in a starker fashion than we're used to seeing how groups use political contributions to promote their positions in Congress,' said Kenneth A. Gross, a campaign finance lawyer."

"'Lobbies like to pretend that congressional action and their donations aren't tied,' said Melanie Sloan of Citizens for Responsibility and Ethics in Washington. 'But the home builders just confirmed that they are. What the home builders have done is expose the underbelly of the connection between money and politics.'"

"But lawmakers do not like to be reminded in public that lobbyists offer them money in hopes of receiving favorable treatment. 'Many PACs use a carrot-and-a-stick approach,' Gross said. 'But just a stick can boomerang.'"

"One long-time association head said via e-mail that the home builders' statement showed the 'political instincts of spoiled children.' The e-mail continued: 'One would think that a savvy staff would have kept them from something that will make them the laughing stock of Washington.'"

"Others cheered the association's choice. 'This is what more industries should do,' said Cleta Mitchell, an ethics lawyer. 'Stop supporting officeholders who don't support their views.'"

From Bloomberg. "UBS AG fell to a four-year low in Swiss trading after the U.S. subprime mortgage crash led to a record loss. Europe's largest bank by assets fell 8.3 percent, the most in 5 1/2 years, after reporting a fourth-quarter loss of 12.5 billion Swiss francs ($11.3 billion). Zurich-based UBS took $13.7 billion in writedowns on assets infected by subprime mortgages."

"CEO Marcel Rohner, speaking on a conference call with journalists, described the results as 'unacceptable' and said this will be 'another difficult year.'"

From Reuters. "The Securities and Exchange Commission aims to increase the transparency of Wall Street's disclosures and has more than 3 dozen investigations underway amid the fallout from the subprime mortgage crisis, Chairman Christopher Cox said on Thursday."

"Investors have been 'deeply affected' by market chaos unleashed by subprime lending and securitization practices, Cox told a Senate Banking Committee hearing."

"The SEC has set up an agency-wide subprime task force and is reviewing the role of the credit rating agencies, which have been accused of assigning top ratings to structured finance products like mortgage-backed securities without conducting due diligence."

"The SEC is trying to determine whether the credit raters' role in bringing residential mortgage-backed securities and collateralized debt obligations to market impaired their ability to be impartial in their ratings."

"Separately, the FBI said on Thursday it had recently opened two more investigations for a total of 16 corporations now being probed as part of its crackdown on subprime mortgage industry fraud."

"Treasury Secretary Henry Paulson said U.S. regulators plan to alter rules for packaging loans into bonds in the aftermath of the subprime-credit collapse."

"Paulson, and Federal Reserve Chairman Ben S. Bernanke, and their counterparts at the Securities & Exchange Commission and Commodity Futures Trading Commission are 'carefully' reviewing loan securitizations, the Treasury chief said yesterday. The process magnified losses on subprime mortgage-linked securities because it reduced the incentive for lenders to ensure that borrowers could repay their debts."

"'You can't have gone through the process we've gone through without knowing there needs to be some changes,' Paulson said in an interview with Bloomberg Television yesterday. 'First, we need to get through this period with as little impact as possible on our economy. And then secondly, we need a strong policy response.'"

From MarketWatch. "The months-long deafening silence in Washington about the causes and lessons of the on-going financial market meltdown won't end Thursday when the principal members of the President's Working Group on Financial Markets appear before the Senate Banking panel."

"Paulson said the White House is still in the 'first phase' of minimizing the impact of the financial market turmoil on the economy and hasn't moved to the 'second phase' of a strong regulatory response. As a result, large and small questions about the ramifications for the regulatory sector as a result of the crisis aren't being asked or answered, in public anyway."

"The savvy practitioners of securitization that chopped up mortgage loans and sold them to other financial institutions went over, around, under, and through the regulatory structure. And the whole time Congress was cheering the financial industry on to increase homeownership to all Americans."

"'There is enough blame all around,' said Burt Ely, a consultant on banking regulation. He saw some of the roots of the crisis going back to the rescue of the savings and loan industry when experts said that banks should ship risks to other financial institutions."

"So, although a number of considerations have created what could only be described as a conspiracy of silence among the executive branch, the legislative branch and the independent regulators about the crisis, the principal reason is that no one wants to bring up something where everyone is at fault."

"Washington 'has been so far behind the curve in the last 10-15 years,' said Joseph Mason, a professor at Drexel University. 'There ought to be an investigation about where they have been,' he said."

"But what is becoming increasingly clear to experts is that the emperor has no clothes. In other words, the regulatory system in place is riddled with holes, long-standing assumptions have proved incorrect. It is like the bedrock has shifted under the philosophy underpinning the U.S. financial regulatory system."

National Public Radio. "Foreclosure, we're told, is a last resort, an option that no responsible homeowner would ever choose. But some distressed homeowners, no one knows exactly how many, are...voluntarily walking away from their mortgages, engaging in a practice the mortgage industry calls 'ruthless default.'"

"But is it really ruthless — or just good businesses sense? Some economists argue it's definitely the latter."

"Sometimes, they say, walking away from your mortgage makes economic sense, especially for homeowners who find themselves 'upside down' — that is, they owe more on their mortgage than their house is worth. In those cases, 'voluntary foreclosures are not by themselves evidence of a newfound irresponsibility on Americans' part,' says Nicole Gelinas, writing in The Wall Street Journal."

"Separating the economics of foreclosure from the morality (and the stigma) is not easy, though."

"'We need a culture of responsible consumers and homeowners,' says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, echoing a deep-seated American belief that one should always honor financial obligations."

"The current housing crisis is different, argue some economists: Since some financial institutions sold these loans in a deceptive manner — for example, by approving people for loans they couldn't really afford — then why should homeowners feel obliged to honor their commitments?"

"'Walking away from one's home should be the absolute last resort,' says Gail Cunningham of the National Foundation for Credit Counseling."

"But there is one category of homeowner, she says, where foreclosure does make sense: people who bought their homes 'with their hearts and not their heads.'"

"'For people who may never be able to afford their home, then walking away is a viable option,' she says. 'If long term, you're not going to be able to sustain the mortgage payment, then you're fooling yourself and should get out of that situation and move on to life after foreclosure.'"