Some housing bubble news from Wall Street and Washington. Bloomberg, "Housing starts in the U.S. dropped in February and building permits fell to the lowest level in more than 16 years. Builders broke ground on homes at an annual rate of 1.065 million, the Commerce Department said today. WCI Communities Inc., a Florida homebuilder, reported its fifth straight quarterly loss on March 17. The company's cancellation rate was 110 percent in the period and new orders dropped more than 300 percent because of 'defaults' on sales contracts."

Las Vegas Now. "Kyle Canyon Gateway in the northwest, the Cosmopolitan Resort right on the Strip and Inspirada in Henderson are all facing the same problem, empty pockets and too much debt."

"No one from Inspirada or the Cosmopolitan Resort would comment about the financial troubles. A representative from Toll Brothers, one of the builders in Inspirada said no comment and that they wanted to keep it quiet."

"Bank of China Ltd., the nation's biggest subprime mortgage investor, tumbled below its initial public offer price for the first time in Hong Kong, capping a five-month slide that's wiped out $88 billion in market value."

"Investors including Goldman Sachs Group Inc. and Bank of America Corp. have seen their investments in China's banking industry erode as rivals including Industrial & Commercial Bank of China Ltd. followed Bank of China lower. ICBC, the world's largest bank by market value, has fallen 33 percent in Hong Kong since Nov. 1. Goldman owns 4.9 percent of ICBC."

"Goldman Sachs Group Inc., the world's biggest securities firm by market value, reported first- quarter profit dropped the most since 1999, reduced by $1 billion of writedowns for high-yield loans and a $135 million decline in the value of its stake in Beijing-based Industrial & Commercial Bank of China Ltd. Losses on mortgage loans and related securities were about $1 billion."

"Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm, reported earnings were depressed by a $1.8 billion writedown caused by the slump in the mortgage market. Reducing the value of those assets pushed fixed-income revenue 88 percent lower."

From Reuters. "After Lehman Brothers announced a fall in revenue but beat fearful expectations, its credit default swaps traded at 360 basis points. That makes protecting its debt pricier than protecting that of Turkey or Nigeria, traders say."

"'You could say Lehman is riskier than Nigeria,' one trader said, asking not to be named. 'But it's not a trade or a comparison people often try to make.'"

"In credit derivative swaps markets, Turkey was trading at the same level as British bank HBOS, while healthy Brazil...was roughly level with Royal Bank of Scotland, BB Securities said."

"Liquidity in global debt markets remains poor with the world's largest banks suspecting each other of not coming entirely clean on losses in the U.S. mortgage market, and many analysts saying more bad news is to come."

"'I think with Africa people feel they know what they are dealing with,' said Razia Khan, head of Africa economics at Standard Chartered in London. 'In contrast, everything else is a great unknown.'"

The New York Times. "The shouts, hoarse and high-pitched, rang out in the cavernous boardroom late Sunday at Bear Stearns’s headquarters on Madison Avenue. Just like that, some people’s stakes of $100 million or more in Bear were ravaged, and senior executives...were furious."

"For James E. Cayne, the firm’s chairman and former chief executive, holding on to his Bear stock was a point of pride, and he rarely, if ever, sold. A billionaire just over a year ago when Bear’s stock soared past $160, his 5.8 million shares are now worth about $28 million at Monday’s closing price of $4.81."

"Across the firm, executives and employees declined to speak publicly, a reflection of the fluid events as well as a reluctance to anger their prospective bosses from JPMorgan who were already on the premises Monday, appraising their new investment.. Privately they expressed raw dismay, their voices heavy with sadness and shock."

"'My life has been flushed down the drain,' said one person. There was talk Monday that with their life savings nearly depleted, some executives had moved quickly, putting their weekend homes on the market."

"'Basically we’re all wondering first, if we’ll keep our jobs, second, if we’ll get severance if we don’t,' said an investment banker outside Bear’s headquarters, declining to give his name. 'And then we’re hoping that Lehman won’t go under because then there will be way too many bankers looking for jobs.'"

The Globe and Mail. "Shortly before markets closed on Friday, traders at Bear Stearns Cos. Inc.'s New York headquarters did something that had never happened in the Wall Street firm's 85-year history: They left."

"Hundreds drifted away from their trading desks on the 8th floor of the firm's Madison Avenue office tower and walked out of the building. Why? Because there was nothing for them to do."

"A firm that had survived the Depression, the Second World War and numerous stock market collapses faced the humiliation of a government-assisted takeover by rival investment bank JPMorgan Chase & Co. that will likely vaporize most of the personal wealth of the firm's executives and cost the jobs of more than half of its 14,000 employees."

"'It's a tragedy,' said Christopher Whalen, a former Bear Stearns banker. 'There are thousands of people who are going to lose their jobs and their financial security because of this idiocy.'"

"How did one of Wall Street's toughest firms, with a prized reputation for betting on the right side of risk, become synonymous with idiocy? The simple answer is that Bear Stearns placed a bigger bet than any competitors on subprime mortgage loans."

The Staten Island Advance. "For the average Staten Islander, the bargain-basement sell-off of Bear Stearns to JPMorgan Chase & Co. means it's time to reassess investment portfolios, tighten belts and take some heart that interest rates will fall again, experts said yesterday."

"'I'm afraid I'm going to lose my house,' said a Staten Island woman, who called the Advance to say her husband works at Bear Stearns and she feared for her economic survival."

"John Coffee, a business law professor from Columbia University, said that less mortgage money would be available with the market for mortgage-backed securities discredited."

"Bear Stearns is largely believed to have failed when the value of its mortgage-backed securities, which included an unknown number of problematic subprime loans, plunged."

"'Less credit to borrowers means lower prices to sellers and some decline in home prices,' Coffee said. 'No one can quantify the magnitude of these changes and the market is likely to be volatile for some time.'"

From USA Today. "'The market is at least reassured that there won't be another run on a primary dealer,' says David Rosenberg, chief North American economist for Merrill Lynch."

"But the Fed did nothing Sunday that would alleviate the cause of the financial crisis: an economy that had binged on debt. 'Nothing the Fed did Sunday will prevent residential real estate prices from falling further,' Rosenberg says."

The Wall Street Journal. "The best thing about Sunday night's Federal Reserve-inspired sale of Bear Stearns to J.P. Morgan Chase is the price. At $2 a share for a total of $236 million, this was less a 'bailout' than a Fed-mediated liquidation sale. Bear wasn't too big to fail after all."

"The hard capitalist truth is that Bear's most senior managers have mainly themselves to blame. They bought their second or third homes with fabulous bonuses during the good times, and they must now endure the losses from Bear's errant investment bets."

"Bear...let its standards slide in the hunt for higher returns during the mortgage mania earlier this decade. There's no joy in seeing a venerable firm expire, but it has to happen if financial markets are going to have any discipline going forward."

"Bear Stearns' forced sale days after the SEC chief's reassurances is raising questions about the vigilance of the top U.S. securities regulator, which is charged with making sure Wall Street firms have enough cash to survive a crisis."

"U.S. Securities and Exchange Commission Chairman Christopher Cox was asked on March 11 if he was concerned about the financial condition of Bear Stearns Cos. 'We have a good deal of comfort about the capital cushions at these firms at the moment,' Cox told reporters."

"'It's really speaking to the lack of good supervision by the SEC,' said David Hendler, an analyst at CreditSights Inc. in New York. 'They're not really a real regulator staying on top of things.'"

"The SEC, as part of its supervision of Bear Stearns and its rivals, tries to ensure that the industry has adequate funds to meet expected obligations for at least one year during periods of 'stress,' according to the agency's Web site."

"Cox said on March 11 the SEC was monitoring firms' capital levels on a 'constant' basis and sometimes daily in response to the subprime-loan meltdown that triggered the crisis. The agency's oversight abilities were overwhelmed by the speed of events in the Bear Stearns collapse, said Christopher Whalen, managing director of financial consulting firm Institutional Risk Analytics."

"'None of the SEC's stress testing began to anticipate' what happened, Whalen said. 'This is a systemic breakdown where people are running away from banks,' he said."

"In a statement on March 14, after the Fed announced it would provide funding to Bear Stearns, the SEC reiterated that the firm had 'a substantial capital cushion' on March 11, citing information the company provided to the agency."

"'Beginning on that day, however, and increasingly throughout the week, lenders and customers of Bear Stearns began to remove funds from the firm,' the SEC said. 'As a result, Bear Stearns' excess liquidity rapidly eroded.'"

"The SEC and the Fed 'are both equally guilty on regulatory blame for being asleep at the switch,' said Anthony Sabino, a business-law professor at St. John's University in New York and head of a securities litigation firm."

"'The smart move would have been two years ago to tell these firms to shape up, you're not telling the market enough, you're gambling too much,' Sabino said, citing the firms' investment in securities tied to subprime mortgages."

Dow Jones Newswires. "The Bear Stearns deal highlights the need for faster action on legislation to enable the widespread modification of bad loans, consumer advocates say, and the importance of improving related asset quality."

"'It's almost stunning to witness the shoring up of a major financial institution, but not addressing the problem that the quality of housing assets is deteriorating with each minute we wait,' said said Jim Carr, chief operating officer of the National Community Reinvestment Coalition."

"'There has to be a plan that addresses the loans that are increasingly upside down,' Carr said. 'Every day that we wait more and more people's home loans become upside down because housing prices continue to fall.'"

"Danilo Pelletiere, research director at the National Low Income Housing Coalition, said there has not been enough attention and action on helping low- income homeowners in trouble."

"'The folks that are very likely to need to be bailed out are those that were brought into homeownership and invested all their wealth,' Pelletiere said."

"In his Saturday radio address, President Bush said the government can help 'responsible homeowners weather this rough patch,' but that some actions could have unintended consequences and hurt some homeowners."

"'For example, one proposal would give bankruptcy courts the authority to reduce mortgage debts by judicial decree,' Bush said. 'This would make it harder to afford a home in the future, because banks would charge higher interest rates to cover this risk.'"

"The president also opposes proposals that would 'artificially prop up home prices,' reasoning that delaying a correction would prolong problems."

"'We are focused on helping a targeted group of homeowners -- those who have made responsible buying decisions and could avoid foreclosure with a little help,' Bush said."

"Dean Baker, co-director of the Center for Economic and Policy Research, said a number of proposals that are geared toward helping homeowners facing foreclosure will actually benefit banks and other holders of bad mortgage debt, institutions that could 'earn tens of billions of dollars at taxpayer expense.' He added that owning can be much more expensive than renting."

"'It's really infuriating for me that we pushed low- and moderate-income people to buy overpriced houses with really bad mortgages,' he said. 'And even now, after it's proven so disastrous, you have politicians that still can't take two minutes and think for a second that maybe it's not a good idea for everyone to be homeowner regardless of what price they're buying at.'"