The Housing Bubble

I’m refinancing our house right now and got the appraisal back this week. The value is down 2% from 2 years ago when it was last appraised and I’M ECSTATIC!

Hey you guys, I need some reinforcements over at mises dot org and organizationsandmarkets dot com. Everybody there is going on about how megacorps are such great capitalist icons, and if we just continue to let the free market set CEO pay then everything will be fine.

Senate approves restriction on foreign hires

The Senate voted Friday to restrict the hiring of foreign workers by banks that are receiving government bailout funds while undergoing vast layoffs.

http://www.boston.com/news/nation/washington/articles/2009/02/06/senate_approves_restriction_on_foreign_hires/

Bill Clinton: Don’t ruin victory with partisanship

RICHMOND, Va.—Former President Bill Clinton told Virginia Democrats Saturday that the party has won America’s long-running culture war but has to make sure not to squander it with partisanship.

http://www.boston.com/news/nation/washington/articles/2009/02/07/bill_clinton_dont_ruin_victory_with_partisanship/

Definition of a debt slave?

Nate Parrish, 43, sat with counselors at cafe tables, scrutinizing his finances line by line. When his wife lost her job as a hospice nurse, the truck driver took a second job.

So far, he said, they have not missed a payment on the house they bought for $160,000 in 2000 in Springfield, Mass., but Parrish says each month is a balancing act.

“I’m not behind, but I’m trying to be ahead,” he said. “You can put your head down and do it, but you’re almost at a point where you can’t really make any progress anymore. All you can do is exist.”

http://www.boston.com/news/nation/articles/2009/02/07/mortgage_assistance_draws_crowds_to_conn_forum/

Washington Post
Sunday, February 8, 2009; Page A01

The nation’s top economic policymakers were putting the finishing touches yesterday on a financial rescue plan that will deploy hundreds of billions of dollars to spur the flow of credit to consumers and businesses.

The Obama administration aims to ease the financial crisis through a series of steps — including a program to insure banks against extreme losses on mortgages and other loans, a new round of investments in banks, help for homeowners at risk of foreclosure and the broadening of a Federal Reserve program to prop up lending. It could also purchase toxic assets from banks, possibly with financing from the private sector.

The plan amounts to an overhaul of the financial rescue undertaken by the Bush administration. It was scheduled to be announced Monday, though yesterday the administration was considering delaying it until Tuesday to maintain focus on the stimulus. No decision had been made, a source said.

The dynamics of the financial markets as well as the global nature of the current downturn both have similarities to the depression of the 1930s says Janet Yellen, president of the San Francisco Federal Reserve Bank.

“The economy is in the midst of a downward spiral, and that calls for strong policy responses. Government policies to restore confidence, create jobs by boosting the demand for goods and services, and improve the functioning of our financial system represent our main hope of avoiding a very severe economic contraction.”

Scary stuff, Ms. Yellen! You are trusting politicians to “boost demand for goods and services and fix the banking industry?” A recession is a cure for an economy gone awry. And you want government to cure the cure?

We did good at court on Friday. The nutbag railed on for almost 2 hours in front of the judge, calling on the Constitution, her newfound expertise as a ” fraud investigator”, called my husband a perjeror ( he gave extensive testimony at the Attorney Ethics Board that was part of the reason she got her license to practice yanked. Four other attorneys also testified against her ), and all sort of other shenanigans. She did everything but a dance to the Real Estate gods with purple smoke coming out of her ears. She did have some steam coming out, though. She also lied about living in the office condo. Turns out she has her own condo in a very swanky area. She needs the office park condo, it seems, to act as a base for her newly-minted “multi-state fraud investigation company” and for her retirement portfolio. Uh huh. What about OUR retirement portfolio and the money she still owes on the illegal loan she took from my husband while acting as his attorney. The judge led her through her digressions back to the point, and finally, the temporary restraining order was lifted. Hopefully, we can hold the sale in the next couple of weeks, once our “big-time” county sheriff starts holding them again. (He pulled a media ploy a few weeks ago and is refusing to hold sheriff sales on foreclosed homes for awhile to give the evictees a chance to “redeem” their homes. They can’t - they’re jobless, but “f” the lenders evidently. He’ll be running for county commissioner soon and this ploy will play well with voters’ sympathies ). This is not a home, though. So, the sale will probably go ahead.

This is an off topic question for OlyGal….

Kings and queens have crowns. Princesses have tiaras. What do you call the simple metal circle that princes wear? A princely circlet? Is there a proper term for this thing?

Now the MSM is doom and gloom all the time. A couple of years ago the troll brigade labeled those who post here “gloomsters.” I personally could never hold a candle to what I now read in the daily news.

Labels for downturns lack a clear definition
By Dean Calbreath
Union-Tribune Staff Writer

2:00 a.m. February 8, 2009
On Sept. 20, 1873, as the Great Panic was erupting, the stock exchange closed the doors on its members (top left). On Nov. 24, 1933, four years into the Great Depression, about 5,000 lined up for federal jobs relief in New York City (bottom). And on Oct. 9, 2008, specialist Justin Bohan watched as the Dow plunged 675 points. (Library of Congress and Associated Press images) -

With unemployment soaring to 7.6 percent and economic growth drooping by its greatest level in three decades, there’s no question that the United States is in a severe recession.

But how much worse do things have to get before we’re in a depression?

In recent days, business leaders ranging from real estate mogul Donald Trump to General Electric Chairman Jeffrey Immelt have used the “D-word” to describe where they fear the economy is headed.

Yet nobody knows for certain because there is no clear definition of what separates a recession from a depression. In fact, there’s no clear definition of either word.

The National Bureau of Economic Research, the semiofficial voice for determining the nation’s business cycles, defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months.”

That description is so vague that it takes months for the bureau to determine whether a recession has started. For instance, it waited until December 2008 to announce that the current recession began in December 2007.

The bureau, a private organization founded in 1920, defines a depression as “a particularly severe period of economic weakness,” which is even more vague than its definition of recession.

Before 1929, nearly all economic contractions were referred to as depressions. Severe depressions were usually called “panics,” such as the Great Panic of 1873 or the Bankers’ Panic of 1907. The reason President Herbert Hoover insisted on calling the downturn of the 1930s a “great depression” is that it sounded milder than “panic.”

But the Great Depression was so dire that after it ended, nobody wanted to use the word again. They adopted “recession” to describe the downturns of the past 60 years.

The antipathy toward the word was so severe that President Jimmy Carter banned economic adviser Alfred Kahn from using it as the economy soured in the late 1970s. Kahn jokingly replaced the word with “banana,” warning the president that “we’re in danger of having the worst banana in 45 years.”

What makes a forecast defensible? Is it predictive accuracy? Apparently not; rather it is whether your forecast is no worse than the next economist’s.

SD Union-Tribune
Builders say dim forecast is not nearly dim enough
By Lew Sichelman
2:00 a.m. February 8, 2009

LAS VEGAS – Contrary to popular belief, the country’s residential construction business is not at a complete standstill.

But it’s close. According to the latest Commerce Department figures, sales in December were running at a seasonally adjusted rate of 331,000, the slowest pace on record.

The new home market is particularly slow in California, where the state’s builders sold a few more than 3,500 houses in November, the latest month for which statewide figures are available. In normal times, Golden State builders account for about one in every eight new home sales nationally.

Looked at another way, sales in November were 63 percent below the number of sales logged in November 2007, which in and of itself “was an extremely bad month,” according to Robert Rivinius, president of the California Building Industry Association.

And it’s going to get worse before it gets better, industry leaders said recently at the National Association of Home Builders’ annual convention and trade show.

NAHB Chief Economist David Crowe said the last time housing was in a recession this severe was in the early ’80s.

Crowe is forecasting a gradual increase in sales beginning in the second quarter and a more “modest” uptick in housing production some months later. But he warned that the recovery will be a “rolling” one in which those markets where prices were not out of line and inventories of completed but unsold houses are not out of kilter will be the first to show improvement.

The recovery won’t reach the “headline states” – California, Nevada, Florida and Arizona – for some time, the economist said.

While some NAHB members believe his forecast is too optimistic, the economist defended it, saying it is “not out of line” with what others are predicting. “If anything, I try to be more pessimistic so I don’t get builders to do something they shouldn’t.”

Community News
Obama will tour Lehigh Acres sometime Tuesday
Nobody from Lehigh expected to be on Obama tour of community

By MEL TOADVINE and KEVIN SHEA, mtoadvine@breezenewspapers.com
POSTED: February 7, 2009

At least one area businessman wants to show President Barack Obama how well his firm does with vacant homes in Lehigh Acres that have been foreclosed. Obama is coming to Fort Myers on Tuesday in an effort to push his economic stimulus package and then he is expected to take a tour of Lehigh Acres. How that tour will proceed, by caravan or helicopter, was to be decided today.

Jack Lee of Equity Properties Asset Management Inc, in Cape Coral said Saturday that his firm manages more than 800 of the vacant homes in Lehigh.

“Our homes, unlike many others all have the yards maintained, etc. We would enjoy becoming part of the Lehigh presentation to Obama by showing him how some lenders maintain their homes, how we help people buy homes and how now is the best time to move to Lehigh,” Lee said.

Lee was seeking ways Saturday to tell his story to the President who will appear Tuesday morning at the Harborside Event Center in downtown Fort Myers. It is the first time in memory for many for a Democrat President to visit Southwest Florida. Bush made two visits here over the past few years and President Gerald Ford came to Southwest Florida.

The Fort Myers Cape Coral areas and Lehigh, in particular, have been cited as areas in the country where there are large inventories of foreclosed homes and high unemployment rates.

The latest information from Realty Trac, an Internet service, shows 8,935 homes in foreclosed or default status including 4,270 current default, 2,648 bank owned, and 2,017 listed in sheriff sales in Lehigh Acres.

For the period 2007-2009 almost 50 percent of the homes will have been in foreclosure, are in foreclosure, or in pre-foreclosure.

Dark clouds loom for Valley’s commercial real estate
Commercial buildings will be hard to refinance
by J. Craig Anderson - Feb. 8, 2009 12:00 AM
The Arizona Republic

About $4.5 billion in securitized commercial mortgages is set to mature in the Phoenix area this year, with little hope of refinancing for commercial-property owners whose equity has slipped away.

“The commercial market really hasn’t taken its hit - yet,” said Beth Jo Zeitzer, president of R.O.I. Properties in Phoenix. “We’ll see a similar pattern to what’s happening in residential real estate.”

US bail-out faces radical overhaul due to poor public image

The US government is considering renaming the $700bn (£474bn) Troubled Asset Relief Programme (TARP) and spinning it off into a separate body in an attempt to improve the poor public image of America’s banking bail-out.

http://www.telegraph.co.uk/finance/financetopics/recession/4550646/US-bail-out-faces-radical-overhaul-due-to-poor-public-image.html

42 years ago today, I was hatched. I spent the first couple waking hours listening to politicians flapping their pie holes, proving they don’t get it. Happy flippin’ b-day to me.

I’m definately in a grumpy mood today.

TEL AVIV (MarketWatch) — AT&T and its wireless-service workers agreed to continue bargaining over a new labor contract after their previous agreement expired just after midnight Sunday….
The contract covers 20,000 of AT&T’s 300,000 employees…

Media reports say AT&T Mobility workers voted 85% (!!!) on Friday to authorize a strike if the two sides couldn’t come to terms….

20,000 jobs openings… this is good news.

Can anyone direct me to a site that shows what people bought their houses for in Chester County PA?

It will be OK now because the Senators are coming!

Lots of doom in the NY Times today. If Sam Zell the famed “grave dancer” isselling all his commerical real estate, and Blackstone is turning around and dumpting what it bought, why are you buying?

http://www.nytimes.com/2009/02/07/business/07properties.html?em

“The list of Equity Office buyers reads like a Who’s Who in American real estate…Today, the wreckage of those purchases is strewn across the country, from Southern California to Austin, Tex., to Chicago to New York. Many of the 16 companies that bought Equity Office buildings are now stuck with punishing debt, properties whose values are plummeting and millions of feet of office space they cannot fill.”

“The impact could ripple beyond the companies that bought Equity Office buildings and the investment banks that financed them. If the owners cannot make their loan payments, it could create a financial crisis for the pension funds, hedge funds and insurance companies that hold securities based on Equity Office mortgages.”

Also, condominiums getting stuck by delinquent owners, in part because laws make them second fiddle to mortgage holders.

http://www.nytimes.com/2009/02/08/realestate/08COV.html?ref=realestate

“While lawyers are reporting a similar rash of defaults among co-op owners, the risk to the building (and by extension to the defaulter’s neighbors) is slight by comparison. That’s because a co-op building is entitled to its share before the bank can claim anything in the event of foreclosure (the ultimate consequence of nonpayment of maintenance charges).”

“But in condo foreclosures, the debt priorities are reversed. After a foreclosure process that these days can take two years — during which unpaid common charges proliferate — the building gets its due only after the bank is paid in full. And many condo owners have little equity in their apartments.”

Not that it would make any difference, but this should have been the lead story in the media day after day.

CBO: Obama stimulus harmful over long haul…

President Obama’s economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday.

CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.

CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. [The House bill] would have similar long-run effects, CBO said in a letter to Sen. Judd Gregg, New Hampshire Republican, who was tapped by Mr. Obama on Tuesday to be Commerce Secretary.

15 top JPM executives awarded themselves 111 million, two weeks ago (what executive paycut?). …”received very large bonuses in the form of Stock Appreciation Rights (SARs) and Restricted Stock Units. These equity compensation securities are not easy to understand or value by other than experts in the field.”
Google Jesse’s Cafe Americain.

Yesterday, a friend of who is retired stopped by to discuss a mechanical problem with his water suppy. After solving the problem, he started to just talk about his financial condition. He mentioned the condo he bought in Port St. Lucie in 2006…he was lettting it go into forclosure, couldn’t get a tenant to rent it out, also stated he has never even seen the condo. Then he cosigned on a condo for his son…that is in forclosure. He just can’t afford to keep up the payments and taxes.
Whats troubling here, is that I have to believe, that no matter what the government does, people like this, are still going to walk away.
He could’nt afford them even if he got a loan clawdown or an interst rate reduction….Catch 22.
With that in mind, yes, we have a long way to go to the bottom.
In the spirit of things, i wrote Senator Fiengold yesterday, basically stating the same situation and making the point, that no matter what Congess does, this depression now has a life of its own, and until people start taking personal responsibility for their financial actions and realize, that money made on the backs of others losing, is wrong. Life is a risk, whether it be your health, your job, or your finances, its a risk. So, if you feel the ned to sue someone, because you took a risk and it failed, sue yourself!

Question: The $15k tax credit to buy a new house that’s in the Senates new Porkulus bill, will that just
raise home prices by that amount, or will home
prices continue to fall regardless?

Profesor Bear,

BTW, I think maybe I cyphered your riddle from yesterday. It is all about Census speak. According to data released by the Census in Dec08, the “Homeowner Vacancy Rate” for 3Q2008 was 2.8%. Considering that as of the end of 2007 we had 75M owner occupied units one would conclude that there are 2M vacant houses. Not so; there were 17.5M unoccupied housing units including 13.1M “Vacant” units at the end of 2007.

It’s all a matter of definition. “Homeowner Vacancy Rate” is only the % Homeowner Homes for sale. “Vacant” units includes seasonal homes, empty rentals, but not seasonal houses. I didn’t want to dig into this any further, it’s obvious there are a lot of freaking houses for sale, and even more that could soon be.

I think “This Week with Stephenopilies” had an interest exchange…

Topic: Bipartisanship dead.
Ging-grinch says that the Dems wrote a bill that is highly partisan, then just expected the Reps to support it because of the crisis mode. (like the Dems did with TARP)

Reich throws out my position. This is smart of the Reps since at best the stimulus will just slow the rate are which thinds are getting worse, so the Reps will be able to argue the Dems messed up and the Rep plan would have been better. Hard to prove ifs, but they don’t have to prove the ifs, just that the Dem plan didn’t work.

Then Will jumps in with the bottom line. Partisanship exists for a reason and you can’t just “make it go away”.

Then… in my opinion, it got interesting. Why not just cut payroll taxes and the Reps want? Helps people, helps business…. creates deficits and that is what stimulates…..

Ohhhhhhh….. So why not turn that around on the Republicans? So, it wasn’t more important to cut taxes on the rich than on the poor as you claimed back in 2002? So, we COULD raise capital gains tax to 50%, and cut income tax in half, and it WOULD stimulate the economy, assuming the cuts were larger than the increases?

Many, many times Bernanke has said that a NET tax increase would be bad. And everytime, the Reps say… SEE we need to keep the capital gains tax rate low! WRONG!!! IF we increase the capital gains tax, then we need to offset it with something!

You Try to Live on 500K in This Town

“…Five hundred thousand dollars — the amount President Obama wants to set as the top pay for banking executives whose firms accept government bailout money — seems like a lot, and it is a lot. To many people in many places, it is a princely sum to live on. But in the neighborhoods of New York City and its suburban enclaves where successful bankers live, half a million a year can go very fast.

“As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, “The Manny,” and the daughter of Peter G. Peterson, a founder of the equity firm the Blackstone Group. “Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.”
…
http://www.nytimes.com/2009/02/08/fashion/08halfmill.html?_r=1&ref=business

Here in rural upstate S.C. we are further along in the ‘Depression” then many areas are.Our local Unemployment rate is 13% now.A Bent & Dent food Store that opened last week is Swamped,and they are cash only.Food Stamps are used by 1 in 6 folk here.This is Small town America,so folks do maintain their dignity and help each other out.
Most private House sales are dead in the water.About The only closings are Bank sales.You must put the money in escrow to bid.Here are a few recent deals locally.
A 1.5 acre country lot with nice 10 year old 28 by 70 DW.It sold to my friend for 13K.(the bank morgage on it was 54K).
A nice brick house on 1 acre.Asking price was 78K.Selling price was 28K.Another friend is even now offering a local bank 2K on an older restorable (Barely) house on 2 acres.The banker privately told him he’s good.
also ,our local regional Bank,Whom all were so proud of,and most have Shares in,is getting gutted,the Share prices dropped 85% recently.So much for listing on the big board up in N.Y..They would have been better off unlisted.
So,Cheer up, these prices are coming to your area soon.Depressions last for years,not months.

Repost:

I am going to patch quotes together and make a bubble song for Ben. Please email me sound bites of you, or links to your favorite youtube NAr videos or whatever. Ben, I still need to know what your fav genre is, if you default, it will be noisy indie guitar/bass over an electronic beat (like CSI Miami music).

My email is x110y110 at gmail.

Send me anything, like NAR talking heads and stuff

Friday, February 06, 2009
Who’s Messing with Wikipedia?

The back-and-forth behind controversial entries could help reveal their true value.

“…WikiDashboard shows which users have contributed most edits to a page, what percentage of the edits each person is responsible for, and when editors have been most active. A WikiDashboard user can explore further by clicking on a particular editor’s name to see, for example, how involved he or she has been with other articles. Chi says that the goal is to show the social interaction going on around the entry. For instance, the chart should make it clear when a single user has been dominating a page, or when a flurry of activity has exploded around a particularly contentious article. The timeline on the chart can also show how long a page has been neglected.

The page on Hillary Clinton, for example, shows that the main contributor has put in about 20 percent of the edits. Chi says this suggests that this individual has guided a lot of the article’s direction. In contrast, an entry on windburn shows a much less heated scene: more even collaboration among the contributors. …”

http://www.technologyreview.com/web/22076/page2/

As the government opts to be the editor of an entry then the government controls the direction of the slant. Now it can be traced. Since former President Bush’s page was the most edited, it will be interesting to see how much was done by the White House.

Worst decade yet for stocks

graph New York Times

http://www.nytimes.com/imagepages/2009/02/06/business/20090207_CHARTS_graphic.html

http://emlab.berkeley.edu/users/webfac/eichengreen/e210b_sp06/210b_syl_1-22-09.pdf

This semester’s class

Financial Crises in Historical Perspective
Economics 210B
Barry Eichengreen
Spring 2009
Department of Economics
Monday 12:00-2:00 p.m.
University of California, Berkeley
39 Evans Hall

Topic 1: Financial Crises–Overview
Topic 2: Bank Runs
Topic 3: Asset Prices and Financial Crises
Topic 4: Globalization and Financial Crises
Topic 5: International Contagion
Topic 6: The East Asian Crisis of 1997-98
Topic 7: The 2008 Credit Crisis
Topic 8: Crisis Resolution

Never to old to audit, I love the internet.

April 16, 2008
This Time is Different: A Panoramic View of Eight Centuries of
Financial Crises*
Carmen M. Reinhart, University of Maryland and NBER
Kenneth S. Rogoff, Harvard University and NBER
Abstract
This paper offers a “panoramic” analysis of the history of financial crises datingfrom England’s fourteenth-century default to the current United States sub-prime financial crisis. Our study is based on a new dataset that spans all regions. It incorporates a number of important credit episodes seldom covered in the literature, including for example,
defaults and restructurings in India and China. As the first paper employing this data, our aim is to illustrate some of the broad insights that can be gleaned from such a sweeping historical database. We find that serial default is a nearly universal phenomenon as countries struggle to transform themselves from emerging markets to advanced economies. Major default episodes are typically spaced some years (or decades) apart, creating an illusion that “this time is different” among policymakers and investors. A recent example of the “this time is different” syndrome is the false belief that domestic debt is a novel
feature of the modern financial landscape. We also confirm that crises frequently emanate from the financial centers with transmission through interest rate shocks and commodity price collapses. Thus, the recent US sub-prime financial crisis is hardly unique. Our data
also documents other crises that often accompany default: including inflation, exchange rate crashes, banking crises, and currency debasements.”

http://www.economics.harvard.edu/faculty/rogoff/files/This_Time_Is_Different.pdf

caution 124 pg pdf

http://www.safehaven.com/article-12539.htm

Mauldin on the post bubble economy and how it looks like a summer 2009 market crash becasue of bad earnings and more write downs.

looks like he cahnged his mind about “Muddle through” and yes he is still pimping hedge Funds to high net worth individuals although I bet there are less of them to go around these days

WASHINGTON (MarketWatch) - Senators dug in Saturday to tidy up a sprawling $780 billion economic stimulus package that they hope to bring to a final vote in both the House and Senate by early next week.
[snip]
The Senate is now slated to vote Monday evening on a motion to limit debate, or “invoke cloture,” on the amendment containing the compromise version of the stimulus..

When threatened with WED (Weapons of Economic Destruction), it’s always best to spend first and ask questions later.

Has anyone else read Steve Keen’s Roving Cavaliers of Credit?

I can just see it now. The next job bubble will be in government jobs with an emphasis on realtors who work in a post office. It’s cold in those old buildings.

“HUD Secretary: We must limit foreclosures”

http://money.cnn.com/2009/02/07/news/economy/willis_donovan/index.htm?postversion=2009020808

Checkout the poll next to the article.23% are looking to purchase.

Fannie, Freddie to channel mortgage rescue: sourcesFebruary 8, 2009 1:50 PM ET

All Thomson Reuters newsWASHINGTON (Reuters) - The Obama administration is crafting a mortgage-rescue program that would see Fannie Mae and Freddie Mac ease payments for hundreds of thousands of borrowers and offer a model for Wall Street to do the same, sources familiar with the plan said.

In the February 9, 2009 issue of The New Yorker, there is a story that is the most depressing read I’ve had in a long time. It covers the peak and aftermath of the bubble on Florida’s Gulf coast.

“The Ponzi State: Florida’s foreclosure disaster”

I did a quick check of homes for sale in my Phoenix neighborhood (Ahwatukee area of Mountain Park Ranch). Prices these days are 33% down from their peak in late 2006 / early 2007. Assumption: Incomes for the last 8 years have not gone up more than 2 and a half percent. One house in particular was zillowed in the $120s in 2000. So I figure it should be fairly valued at $155,000. It’s a 3 bedroom, 2 bath model over 1400 square feet far enough west of the I-10 and it seems to be a quiet area. Currently it’s for sale for $200,000 so I anticipate it needs to drop 25% more or incomes should go up 6% per year for seven years to catch up to the proper price of $200,000.

It’s good to see that there is progress in the bubble popping in a quiet area. I’ll have to check it out on http://www.rottenneighbor.com sometime.

Mr. Geithner met with U.S. House Democrats Saturday at their three-day policy retreat in Williamsburg, Va., and told them the U.S. financial system remains “badly damaged,” said Rep. Brad Miller, a Democrat from North Carolina and a member of the House Financial Services Committee. “He said it’s clearly going to get worse but we have to act to prevent it from getting much worse,” Mr. Miller said.
…
The speech made it clear, Mr. Miller said, that the financial system remains fragile. “If we had regulators go in an examine the books like we did at Fannie Mae and Freddie Mac a great number of our systemically important financial institutions could be insolvent.”

WSJ: Bailout Plan May Use Private Bank for Bad Assets

Since January 13 the rate on standard long-term mortgages charged by lenders to prospective home owners has jumped from 5.04 per cent to reach 5.51 per cent on Friday, according to mortgage market analysts HSH Associates. The jump represents an almost 10 per cent rise in borrowing costs.
…
The rise was sparked by fears about the growing budget deficit and the continued appetite of foreign investors for US government debt. This has driven up the cost of debt in the form of mortgage-backed securities, raised by Fannie Mae and Freddie Mac.

FT: US plan to curb mortgage rates falters

The yield on 10-year US Treasury bonds – the world’s benchmark cost of capital – has jumped from 2pc to 3pc since Christmas despite efforts to talk the rate down.
…
Readers have berated me for a piece last week – “Glimmers of Hope” – that hinted at recovery. Let me stress, I was wearing my reporter’s hat, not expressing an opinion. My own view, sadly, is that there is no hope at all of stabilizing the world economy on current policies.

Telegraph: Bond market calls Fed’s bluff as global economy falls apart

http://cosprings.craigslist.org/wan/1023978498.html

I’m seeing more and more craigslist ads like this one, from a family trying to “get back on their feet,” then begging for a sectional couch and working TV.

Seems to me that sitting on your backside in front of an idiot box isn’t real helpful in terms of bettering your situation.

http://www.nytimes.com/2009/02/08/realestate/08COV.html?em

Condo vs co op..
nyc is eyeing beginning of major defaults and co ops are now in better situation than condos.

Republican after Republican (except perhaps Ron Paul) keep saying the alternative to the Messiah’s pork barrel spending plan is to “shore up housing.” Price supports on houses are a nullification of contract law. How many other situations have you seen mainstream Republicans prescribe breaking contract law? They don’t have the cajones to say what Ron Paul is saying. I’m sure they know better but the cure is politically unfeasible. We know the cure is for government to get out of the way and not create any more bubbles by (loosening credit).

If we had a 20% savings rate per family, there would be no idiotic push for consumption and credit.

Personally I don’t know my credit score and I don’t give a darn. I wish most people would be able to say the same thing. We would not be this far into socialism.

I’m scared to go to sleep tonight.
I hate being on the wrong side of the spending bill.
What if they announce that anybody with infestments must liquidate and donate?

Oh pissy cat do you have your money overseas?

Part of the problem is that many companies built stockpiles last year in the face of surging prices for items such as steel and plastics. That goes against the principles of just-in-time production, which dictates holding minimum stocks of raw materials. But such hoarding makes sense when prices are rising.
…
That’s what happened at Smeal Fire Apparatus Co. in Snyder, Neb. Inventories at the fire truck manufacturer jumped 12% in the second half of last year, in part because the value of its inventories grew with inflation, but also because the company decided to buy a nine-month supply of paints and related chemicals in order to avoid a 10% price increase that came in October.

WSJ: Firms Race To Regain Control Over Inventories

Family grapevine report says SIL will file for BK and unload Wasatch Front McMansion on to extant glut. Not sure how the unloading will proceed, but she is deeply underwater. Within the span of 12 mos, she is out of a husband and out of a home. It is truly sad.

Administration officials said the plan to be announced Tuesday was likely to depend in part on the willingness of private investors other than banks — like hedge funds, private equity funds and perhaps even insurance companies — to purchase the toxic assets that wiped out the capital of many banks.

The officials say they are counting on the profit motive to now create a market for those assets. The government would guarantee a floor value, officials say, as a way to overcome investors’ reluctance to buy them.

NYT: In Bank Aid Plan, a Wall Street Focus

Riots in Greenwich!

Financial Times
US plan to curb mortgage rates falters
By Michael Mackenzie and Nicole Bullock in New York
Published: February 8 2009 23:35 | Last updated: February 8 2009 23:35

The US Federal Reserve’s efforts to drive mortgage rates lower by purchasing home loans have faltered and rates have risen over the past month.

The rise in rates is a disappointment to government officials, who had hoped that a steep fall in house prices and low financing costs would lure new buyers into the nation’s depressed housing market.

Since January 13 the rate on standard long-term mortgages charged by lenders to prospective home owners has jumped from 5.04 per cent to reach 5.51 per cent on Friday, according to mortgage market analysts HSH Associates. The jump represents an almost 10 per cent rise in borrowing costs.

The Fed has bought $92bn of mortgage securities since the start of the year under a plan that could see it purchase up to $500bn. The move is part of the US government’s efforts to stabilise the housing market, which include taking control of mortgage groups Fannie Mae and Freddie Mac last year, slashing interest rates to nearly zero and proposing modifications to existing loans that would prevent foreclosures.

The rise in mortgage rates follows an increase in interest rates, known as yields, that are paid on US Treasuries. In the US, 30-year mortgages are closely linked to the price of Treasuries.

Plans by the Treasury to raise $2,000bn in new debt over the 2009 financial year are driving yields on government bonds higher and complicating the Fed’s efforts to push mortgage rates lower.

Rental Cramdowns just announced!

Economies of bail cloud corporate decision making:

Wall Street Journal
GM in Talks to Take Back Part of Delphi

GM is in talks to take back large portions of Delphi as part of the auto maker’s strategy to line up more U.S. bailout funds.

New York Times
Op-Ed Columnist
Slumdogs Unite!
by FRANK RICH
Published: February 7, 2009

SOMEDAY historians may look back at Tom Daschle’s flameout as a minor one-car (and chauffeur) accident. But that will depend on whether or not it’s followed by a multi-vehicle pileup that still could come. Even as President Obama refreshingly took responsibility for having “screwed up,” it’s not clear that he fully understands the huge forces that hit his young administration last week.

The tsunami of populist rage coursing through America is bigger than Daschle’s overdue tax bill, bigger than John Thain’s trash can, bigger than any bailed-out C.E.O.’s bonus. It’s even bigger than the Obama phenomenon itself. It could maim the president’s best-laid plans and what remains of our economy if he doesn’t get in front of the mounting public anger.

Like nearly everyone else in Washington, Obama was blindsided by the savagery and speed of Daschle’s demise. Conventional wisdom had him surviving the storm. Such is the city’s culture that not a single Republican or Democratic senator called for his withdrawal until the morning of his exit.
…
In New York, editorial pages on both ends of the political spectrum, The Wall Street Journal and The Times, called for Daschle to step down. But not The Washington Post. In a frank expression of the capital’s isolation from the country, it thought Daschle could still soldier on even though “ordinary Americans who pay their taxes may well wonder why Mr. Obama can’t find cabinet secretaries who do the same.”

As Jon Stewart might say, oh those pesky ordinary Americans!

So what about Geithner then? How come the guy who oversees the IRS gets a pass on not paying his taxes?

Support for a hair-of-the-dog housing bubble hangover cure is swelling into a raging political torrent. Beware the law of unintended (and unpredictable) consequences.

P.S. Hint to financial wizards: It is hard to simultaneously subsidize both homebuyers and homeowners at the same time, as lower home prices favor would-be buyers and higher home prices favor current owners. However, if the main goal is to shovel more money into the bottomless REIC money pit, I am sure our Congress will find a way.

The New York Times
Both Parties Move to Aid Homeowners
By EDMUND L. ANDREWS
Published: February 3, 2009

WASHINGTON — Four months after Congress tried to rescue the economy with a $700 billion bailout for the financial industry, Republicans and Democrats are suddenly competing to bail out financially struggling homeowners.

Having spent hundreds of billions of dollars rescuing financial institutions, only to see the economy spiral even deeper into crisis, liberal and conservative economists and lawmakers are pushing to redirect the economic stimulus bill to what they say is the core problem: the housing market.

Senate Republicans are seeking new tax breaks and up to $300 billion in mortgage subsidies to attract homebuyers. Democrats want to spend at least $50 billion on federal programs aimed at reducing mortgage foreclosures.

The Obama administration is hammering out its own plan to spend $50 billion to $100 billion to prevent home foreclosures. And later this month, Democrats hope to pass a measure that would give bankruptcy judges the power to reduce monthly mortgage payments for homeowners who are in default.

There is a growing consensus among lawmakers in both parties that the deepening collapse of the housing market is at the heart of the country’s acute economic downturn.

But beneath the consensus over helping the housing market, there are huge differences over who should benefit under the competing plans. Democrats want to aim money directly at people in the greatest distress; Republicans want to aim money at almost all homebuyers, on the theory that a rising tide will eventually lift all boats.

“Most people recognize that housing itself is at the root of the current economic downturn,” said Mitch McConnell of Kentucky, the Senate Republican leader. “We should fix this problem before we fix anything else.”