The Housing Bubble

Does anyone here know much about Freddie Mac-owned properties? Wife and I like a REO listed by a national RE chain; they say Freddie Mac owns it. Looks never-lived-in. We know it first sold for $560K in 1/08, but records after that diverge. The listing agent told our agent that Countrywide financed it ($417K first, $87K second), Freddie now owns it and along the way, last Fall, someone was under contract to buy it but the sale fell through. I called the house’s builder, who recalled that the buyer re-sold the house almost immediately, which puzzled him; this “flip” is not on RealtyTrac’s or the online tax records.

RealtyTrac shows a sale by the recorded first owner to a buyer (a couple, not an institution) for $282K in 9/08. That’s a suspiciously big drop - half - in less than one year. RealtyTrac also shows a NTS (Notice of Trustee Sale) in 8/08 and the first REO posting is the same date as the supposed sale to the second owner.

Then I went to the online county tax records. Those show the original buyer as the current owner and no transactions after the 1/08 purchase. I asked our agent to find out if Freddie will provide title insurance back to the time of Moses. The lister said Freddie will provide title insurance only if we finance through them or their designee. Sounds like the title ins. described is for the lender’s protection, not mine.

This was so squirrely that I backed away from the property even though I might get it for a very good price per foot, relative to the neighborhood. Does anyone know how such deals usually play out? Can someone pop up later and cloud the title by claiming they bought the house “back when” and Freddie steps back and says, “Beats me - it’s your problem now, chump!” And as for MBSs, is there any way I can know that no other entity believes it currently owns a piece of the original mortgage debt? I would pay cash and don’t want to get screwed because of fraud or other information I don’t know. Freddie is very unhelpful. Has anyone here ever bought a house from them and if yes, do you know if the “ownership” they transfer to you trumps any other potential claim or lien up to the date and time of closing?

Final question, a tin-foil hat one: to prevent a lien/title claim being filed between the time the title company checks the records and the closing of sale being recorded, is there some means of recording something that would alert the records clerks, such as recording the sales contract itself? I assume that title insurance is supposed to protect against such things, but long ago here we heard stories about how rare it is to get a title company to actually pay off - they sounded like a one-way money machine.

Turbo Tax Timmy is bound to run into some head winds in congress. Too many buffoons tripping all over themselves to get their plans ‘in’. He’ll do his best on an end run I’m sure.

Geithner to Seek Power Over Large U.S. Hedge Funds, Derivatives…

March 26 (Bloomberg) — Treasury Secretary Timothy Geithner will ask Congress to bring large hedge funds, private- equity firms and derivatives markets under federal supervision for the first time as part of a revamp of U.S. financial rules.

The Treasury chief will present his proposed framework at a House Financial Services Committee hearing in Washington today. Under the new so-called rules of the road, the government would get powers to seize and wind down any financial company big enough to destabilize the banking system.

The Obama administration is counting on public anger over the taxpayer-financed rescues of American International Group Inc., Bear Stearns Cos. and other firms to help it win approval for the changes, which could be the most sweeping since the 1930s. Policy makers want to improve the oversight of the financial system now rather than wait until the crisis is over, administration officials said on condition of anonymity.

“We have a moment now where there is broad-based will to change things that people did not want to change in the past,” Geithner said yesterday in a speech in New York. “We want to begin the process now of trying to build consensus while people recognize and are feeling so acutely the damage caused by those basic failures in regulation.”

Geithner plans to work with Congress to hammer out more details and legislation, the officials said.

It’s unclear how quickly any bills could move through Congress because lawmakers are likely to have their own proposals.

Roubini Says Stocks Will Drop as Banks Go ‘Belly Up’ (Update1)
By Michael Patterson and Simon Kennedy

March 26 (Bloomberg) — U.S. stocks will fall and the government will nationalize more banks as the economy contracts through the end of 2009, said Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.

“The stock market is a bit ahead of the real macroeconomic and financial news,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, said in an interview with Bloomberg Television in London today. “We’ll have some major banks going belly up that will need to be taken over.”

The global equity rebound in March that sent the Standard & Poor’s 500 Index to its best monthly advance in 17 years is a “bear-market rally” and U.S. Treasury yields will “remain relatively low” as investors flock to the safest assets, Roubini said. Treasury Secretary Timothy Geithner’s new plan to remove toxic debt from financial companies won’t be enough for insolvent banks, he said.

Roubini’s outlook contrasts with predictions this week from Templeton Asset Management Ltd.’s Mark Mobius and Traxis Partners LLC’s Barton Biggs, who said that equities are poised to rally as government efforts to revive the economy and banking system begin to work. Investors are “way too optimistic” about the prospects for a recovery in the economy and earnings, Roubini said.

The S&P 500 surged 7.1 percent on March 23 after Geithner unveiled a plan to finance as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds. The government is conducting stress tests of banks to determine how much more capital each will need.

Stress Tests

Roubini said the stress tests will reveal that some banks need to be taken over and have their good and bad assets separated before being sold to the private sector. He estimates loan and securities losses in the U.S. will reach $3.6 trillion.

Critics of Geithner’s plan including Nobel laureate Paul Krugman, a professor at Princeton University, say the government should take over banks loaded with devalued assets, remove their top management, and dispose of the toxic securities. Sweden adopted the temporary nationalization approach in the 1990s.

“Some banks are going to have to be nationalized,” said Roubini. “It’s going to be bumpy ahead of us.”

And still NO help for people like me trying to keep Con Ed from taking me to court and cutting off my electricity. Good going Timmy boi!

————————————————————–
Roubini said. Treasury Secretary Timothy Geithner’s new plan to remove toxic debt from financial companies won’t be enough for insolvent banks, he said.

Repost from last night. First to make it to the dirty dozen:

http://www.detnews.com/article/20090326/BIZ/903260414/1001/State+jobless+rate+up+to+12+

Unemployment Rate 19.5% in Tunica County, MS
Reported by: Tenikka Smith
Email: tsmith@myeyewitnessnews.com

TUNICA COUNTY, MS — The nation’s money mess continues to put people out of work. It is hitting especially hard in Tunica County, Mississippi. The county one labeled as the poorest in the nation, has a current unemployment rate of 19.5 percent. The national average is just above eight percent.

County leaders say a big reason for the jump is a slump in the casino industry. With less revenue, many casinos were forced to make layoffs and cutbacks.

http://www.myeyewitnessnews.com/news/local/story/Unemployment-Rate-19-5-in-Tunica-County-MS/qPBS3IaAxEikFghdKvf9IA.cspx

U.S. Jobless Rolls Increase to Record 5.56 Million (Update1)
By Bob Willis

March 26 (Bloomberg) — The number of people collecting U.S. jobless benefits rose to a record 5.56 million, indicating more Americans are spending longer periods out of work. Initial claims topped 600,000 for an eighth straight time.

Total benefit rolls jumped by 122,000 in the week ended March 14, from 5.44 million the previous week, the Labor Department said today in Washington. Initial jobless applications last week rose 8,000 to 652,000, in line with forecasts.

Job cuts are spreading from companies to government agencies including the U.S. Postal Service and health-care providers. Rising unemployment means it may be harder for the Obama administration to save or create the 3.5 million jobs targeted in its recovery plan.

“The deterioration in the labor market has been swift and large,” Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “A double-digit unemployment rate now seems unavoidable.”

A Commerce Department report today showed that the economy shrank more than previously estimated in the fourth quarter, at a 6.3 percent annual rate. That compares with the median forecast of economists surveyed by Bloomberg News of a 6.6 percent drop in gross domestic product.

I am no expert on commercial property lending, but I know an ominous sign when I see one. A chart that accompanies this lead WSJ article shows the “delinquency rate on commercial mortgages packaged and sold as bonds” from 1999 to the present.

The rapid ascent of commercial mortgage delinquencies bears a very close resemblance to the rate of increase in residential mortgage foreclosure rates. Perhaps it is time for a commercial property delinquency moratorium akin to the foreclosure moratorium in residential property?

Wall Street Journal
* COMMERCIAL REAL ESTATE
* MARCH 26, 2009, 8:29 A.M. ET

Commercial Property Faces Crisis
Delinquency Rate at 1.8%, Near Peak of Last Recession; Parallels to S&L Debacle
By LINGLING WEI

Commercial real-estate loans are going sour at an accelerating pace, threatening to cause tens of billions of dollars in losses to banks already hurt by the housing downturn.

The delinquency rate on about $700 billion in securitized loans backed by office buildings, hotels, stores and other investment property has more than doubled since September to 1.8% this month, according to data provided to The Wall Street Journal by Deutsche Bank AG. While that’s low compared with the home-mortgage delinquency rate, it’s just short of the highest rate during the last downturn early this decade.

Some experts say it now looks as if the current commercial real-estate slump will rival or even exceed the one in the early 1990s, when bad commercial-property debt played a big role in dragging the economy into a recession. Then, close to 1,000 U.S. banks and savings institutions failed. Lenders took about $48.5 billion in charges on commercial real-estate debt between 1990 and 1995, representing 7.9% of such debt outstanding.

Since late 2007, a total of 47 banks and savings institutions have failed, of which a dozen or so had unusually high commercial-mortgage exposure. Foresight Analytics in Oakland, Calif., estimates the U.S. banking sector could suffer as much as $250 billion in commercial real-estate losses in this downturn. The research firm projects that more than 700 banks could fail as a result of their exposure to commercial real estate.

Norway’s krone: the new safe haven currency?
By Peter Garnham
Published: March 18 2009 18:31 | Last updated: March 18 2009 18:31

The Swiss National Bank’s decision to intervene to weaken the franc has left currency investors with one less haven from the financial crisis.

Its move comes at a time when there are also questions surrounding the future haven status of two other leading currencies: the dollar and the yen.

While the dollar has enjoyed a liquidity premium amid the current financial turmoil, many investors expect it to lose its allure as the full impact of large-scale US fiscal and monetary loosening filters through.

Simon Derrick at Bank of New York Mellon says: “The dollar has clearly been supported by haven flows during the current crisis.

“But, in the longer-term, the sheer scale of US fiscal spending and the lack of international capital available to support it represents a direct threat to the dollar’s strength.”

The other main beneficiaries during the current crisis, the Swiss franc and the yen, have both lost their haven status in recent weeks.

The Swiss franc has been driven lower by the SNB, which last week intervened to sell the currency, saying its recent appreciation represented an unwelcome tightening in monetary conditions.

Meanwhile, the yen has been undermined by a series of data showing a steep downturn in Japan’s export-driven economy.

This has helped stoke expectations that the Bank of Japan will follow the SNB and intervene to weaken its currency.

So where do currency investors turn now? One answer could be Norway.

David Bloom at HSBC says “The ultimate haven currency in our view is the Norwegian krone. “It’s probably the best currency in the world.”

EDITOR’S CHOICE
Dollar in favour as eurozone stutters - Mar-17
Swiss vow to act again if franc rises too high - Mar-16
View of the Day: Seek safety in Norway’s krone - Mar-16
Swiss franc plunges as SNB intervenes - Mar-12
Short View: Cheaper currency - Mar-12

Nice to see California has so much extra dough laying around they can waste on important things like this…

California ‘Cool’ Paints Initiative Ugly, Lazy
By Drew Winter
WardsAuto.com, Mar 24, 2009 11:41 AM

If California regulators get their way, auto makers may soon be forced to rewrite a cliché from the Ford Model T era and start telling customers they can have any color they want as long as it isn’t black.

Some darker hues will be available in place of black, but right now they are indentified internally at paint suppliers with names such as “mud-puddle brown” and are truly ugly substitutes for today’s rich ebony hues.

So buy a black car now, because soon they won’t be available or will look so putrid you won’t want one. And that’s too bad, because paint suppliers say black is the second- or third-most popular vehicle color around the world.

The problem stems from a new “cool paints” initiative from the California Air Resources Board. CARB wants to mandate the phase-in of heat-reflecting paints on vehicle exteriors beginning with the ’12 model year, with all colors meeting a 20% reflectivity requirement by the ’16 model year.

Because about 17 other states tend to follow California’s regulatory lead, as many as 40% of the vehicles sold in the U.S. could be impacted by the proposed directive, suppliers say.

The measure is aimed at reducing carbon-dioxide emissions and improving fuel economy by keeping vehicles cooler on sunny days and decreasing the amount of time drivers use their air conditioners.

The rationale goes like this: Vehicle AC units sap engine power and hurt fuel economy. If vehicle paint and glass reflect more heat, car interiors will be cooler. That means drivers will use their AC units less, the compressors won’t have to work as hard and auto makers will be able to use smaller AC units in the future.

WSJ - Commercial Property Faces Crisis
Delinquency Rate at 1.8%, Near Peak of Last Recession; Parallels to S&L Debacle

‘Worst of Times’
But owners could borrow so much on the expectation of rising property values and cash flows that some are at risk now that rents and occupancy are falling. “In just seven months, we’ve gone from the best of times to the worst of times,” said Richard Parkus, head of commercial mortgage securities research at Deutsche Bank.

Even some performing loans could face trouble because of a fall in values of the properties, making it hard for owners to refinance when loans come due. Currently, many banks are agreeing to grant short-term extensions on loans. But “that’s just kicking the can down the street for awhile,” said William Rudin, an owner of New York City office buildings. “That doesn’t solve the problem.”

Of $154.5 billion of securitized commercial mortgages coming due between now and 2012, about two-thirds likely won’t qualify for refinancing, Deutsche Bank predicts. Its estimate assumes declines in commercial-property values of 35% to 45% from the peak in 2007. That would exceed the price drops in the downturn of the early 1990s.

The bank estimates the default rates on the $700 billion of commercial-mortgage-backed securities could hit at least 30%, and loss rates, which figure in the amounts recovered by lenders, could reach more than 10%, the peak seen in the early 1990s.

Besides securities backed by commercial real-estate loans, about $524.5 billion of whole commercial mortgages held by U.S. banks and thrifts are expected to come due between this year and 2012. Nearly 50% wouldn’t qualify for refinancing in a tight credit environment, as they exceed 90% of the property’s value, estimates Matthew Anderson, partner at Foresight Analytics. Today, lenders generally won’t loan over 65% of a commercial property’s value.

In contrast to home mortgages — the majority of which were made by only 10 or so giant institutions — hundreds of small and regional banks loaded up on commercial real estate. As of Dec. 31, more than 2,900 banks and savings institutions had more than 300% of their risk-based capital in commercial real-estate loans, including both commercial mortgages and construction loans.

At First Bank of Beverly Hills in Calabasas, Calif., the amount of commercial-property debt outstanding was 14 times the bank’s total risk-based capital as of the end of last year. Delinquencies reached 12.9%, compared with the average of 5% among the nation’s banks and thrifts.

“In perfect hindsight, we would have done less commercial real-estate lending,” said Larry B. Faigin, president and CEO. The bank this month announced a deal with a leveraged-buyout and restructuring firm in Chicago, Orchard First Source Asset Management, under which Orchard will provide new capital. Within two years after the deal closes, First Bank will significantly reduce its concentration in commercial real-estate lending and have less than half of its assets in the sector, Mr. Faigin said.

Gary “in the bag” Watts defaults on one of his OC investment properties.

http://tinyurl.com/ct83t5

There will be plenty of howls and whines over this proposal!

States consider drug tests for welfare recipients..
Mar 26, 7:32 AM (ET)
CHARLESTON, W.Va. (AP) - Want government assistance? Just say no to drugs.

Lawmakers in at least eight states want recipients of food stamps, unemployment benefits or welfare to submit to random drug testing.

The effort comes as more Americans turn to these safety nets to ride out the recession. Poverty and civil liberties advocates fear the strategy could backfire, discouraging some people from seeking financial aid and making already desperate situations worse.

Those in favor of the drug tests say they are motivated out of a concern for their constituents’ health and ability to put themselves on more solid financial footing once the economy rebounds. But proponents concede they also want to send a message: you don’t get something for nothing.

“Nobody’s being forced into these assistance programs,” said Craig Blair, a Republican in the West Viginia Legislature who has created a Web site - notwithmytaxdollars.com - that bears a bobble-headed likeness of himself advocating this position. “If so many jobs require random drug tests these days, why not these benefits?”

Blair is proposing the most comprehensive measure in the country, as it would apply to anyone applying for food stamps, unemployment compensation or the federal programs usually known as “welfare”: Temporary Assistance for Needy Families and Women, Infants and Children.

Lawmakers in other states are offering similar, but more modest proposals.

On Wednesday, the Kansas House of Representatives approved a measure mandating drug testing for the 14,000 or so people getting cash assistance from the state, which now goes before the state senate. In February, the Oklahoma Senate unanimously passed a measure that would require drug testing as a condition of receiving TANF benefits, and similar bills have been introduced in Missouri and Hawaii. A Florida senator has proposed a bill linking unemployment compensation to drug testing, and a member of Minnesota’s House of Representatives has a bill requiring drug tests of people who get public assistance under a state program there.

A January attempt in the Arizona Senate to establish such a law failed.

26-Mar-09 07:52 ET In Play

American Intl: Departures of managers in Banque AIG could trigger defaults in $234 bln of derivative transactions - WSJ (1.20 ) -Update :

WSJ reports amid the flap over bonuses at the co, two of the co’s top managers in Paris have resigned. Their moves have left the giant insurer and officials scrambling to replace them to avoid an unlikely but expensive situation in which billions in AIG trading contracts could default.

Representatives of the Federal Reserve, AIG’s lead U.S. overseer, are talking with French regulators and AIG officials to deal with the consequences of a complicated legal scenario in which the departures of the managers in Banque AIG, a subsidiary of AIG’s Financial Products unit, could trigger defaults in $234 billion of derivative transactions, according to people familiar with the situation and a document AIG provided to the U.S. Treasury. Defaults, could not only hurt AIG but also could force European banks involved in the trades to raise billions in capital to cushion potential losses, according to AIG documents…

26-Mar-09 07:20 ET In Play American Intl: Controversial AIG unit sees more departures, according to source - Reuters.com (1.20 ) :

Reuters.com reports several more employees are leaving the controversial financial products unit that brought American International Group to its knees last year, according to a person with knowledge of developments there. The resignations are in addition to the “handful” of senior AIG Financial Products executives who have already given notice, said the person, who could not quantify the total number of departures.

To date, AIG said the situation at the financial products unit remains “manageable,” despite the departures.

But if too many employees quit, Chief Executive Edward Liddy has warned it could be disastrous for AIG and, ultimately, for U.S. taxpayers who are the insurer’s majority owners.

Its Black Thursday at IBM:

http://digitaldaily.allthingsd.com/20090325/ibm-the-i-stands-for-india/

IBM:

The “I” Stands for “India”

Published on March 25, 2009 by John Paczkowski

When IBM CEO Sam Palmisano advised the Obama transition team that $30 billion in information-technology stimulus handouts Big Blue is angling for could create more than 900,000 new jobs, he didn?t say they?d be created in India. Yet, apparently that?s the case.

IBM (IBM) is reportedly planning to sack “a large number” of employees in its Global Business Services division, shifting their duties overseas to workers in India.

The breadth of the reduction isn?t yet known, but chatter on the Alliance@IBM boards suggests it could be brutal. Said one commenter, “I talked to two different Band 10s in IBM Global Business Services yesterday who have both said that tomorrow will be a big day for firing in almost all of the GBS business units. Both of them are expecting that they will be cut because the percentages are going to be higher at the higher levels. Both made reference to this could be called a black Thursday.”

Notes from the Trenches:
Went to a San Diego fiber optics shows yesterday. The show was dead. Many companies traveled from China (Shenzhen?) to sit around and look at a lot of other Chinese. A lot of companies must be hurting. The only give aways were pens with companies’ names on them. When the show give aways get cheap the company is cutting back! The San Diego Expo hall was full of vendors and no attendees.

Driving back from San Diego to Los Angeles on the 15. This is a round about way to get back to LA without going thru the heart of LA. We noticed many new large industrial buildings with signs “Your Name Here”. Many new Home Depot and Lowe’s. Someone in our group commented: How many large building (10,000-50,000 sq. ft.) building have only two to three cars out front! We drove from San Diego to LA at 5:30 without hitting any major traffic jams. On LA freeways at this time is this is unheard of: unemployed people do not need to travel the freeway at 5:30.

Summary: Tech is not going to pull us out of this and the overbuilding is in planin sight to anyone on a major freeway with their eyes open.

Within the tech industry the new saying is: Only 10% down is the new growth model!

This couldent come at a better time. I do disagree about the unemployment benefits drug testing, but the welfare and food stamps testing needed to happen long ago.

States consider drug tests for welfare recipients

http://finance.yahoo.com/news/States-consider-drug-tests-apf-14752539.html

Ex-stripper pleads guilty in mortgage scam.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/25/AR2009032501842.html

$800,000 wedding?!?!?@??@?!?! Holy guacamole.

That is the best piece of news I have read.
Yeah, I don’t live in W.VA but it could be a real boon to the western states.
Jolly good news

Just wanted to say that I dropped a post yesterday and took off ,came back late and saw some very nice thoughts from people ,and I thank you . My life and heart has been altered in a most profound way . I still have to try to save the Universe ,so I’m going to post again (just a joke) .But, I was so blessed to have such a great person as my partner for all those years . No Gold ,no money , no nothing ,was ever greater than that realtionship .

And in spite of different opinions we all express on this blog ,you feel like you know everyone ,and I even enjoy my hecklers .

New Home Sales Fell 41% in February 2009
Barry Ritholtz
Today, 9:30 AM

“A parade of the mathematically innumerate business writers (and even worse headline writers!) continue to misread data. The latest evidence? New Home Sales.

After incorrectly reporting the Existing Home Sales, the mainstream media misread the Census department report of New Homes.

No, New Home Sales data did not improve. In fact, they were not only not positive, they were actually horrific. The year over year number was a terrible down 41%. Sales from this same period a year ago have nearly been halved.

Why did the media report this as positive? If you only read the headline number, you saw a positive datapoint: February was plus 4.7% over January.

To get the the facts, you need to read below the headline. In the present case, it wasn’t the seasonality factor that was confusing, it was the “90-percent confidence intervals” — or as it is more commonly known, the margin of error.

From the Census Bureau:

Sales of new one-family houses in February 2009 were at a seasonally adjusted annual rate of 337,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7 percent (±18.3%)* above the revised January rate of 322,000, but is 41.1 percent (±7.9%) below the February 2008 estimate of 572,000.

The median sales price of new houses sold in February 2009 was $200,900; the average sales price was $251,000. The seasonally adjusted estimate of new houses for sale at the end of February was 330,000. This represents a supply of 12.2 months at the current sales rate.

Note that the month over month data at 4.7% — plus or minus 18.3% — is statistically insignificant. (i.e., meaningless). The reported data does not inform us if sales improved month-over-month or not. It is a range, from down -13.6% to plus 23%. Since “zero” is part of that range, we can draw no conclusion. As the Census Department itself notes, “the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease.”

The data does however, tell us that the year-over-year sales fell 41.1% plus or minus 7.9% gives us a range of -49% to -33.2%. The entire range is negative, therefore we can conclude sales fell year-over-year.

These are facts. This is data. This is how you interpret it. Most of the MSM reports (WSJ, Marketwatch, Bloomberg) were simply wrong.

Not nuanced, not shaded, but 2+2=5 wrong.”

_____

_____ So, what was reported?

_____

WSJ: Sales of new homes rose in February for the first time in seven months, the Commerce Department reported Wednesday, another sign that the housing market is thawing

Bloomberg: Purchases of new homes in the U.S. unexpectedly rose in February from a record low as plummeting prices and cheaper mortgage rates lured some buyers. Sales increased 4.7 percent to an annual pace of 337,000 . . .

Marketwatch: The U.S. housing sector continues to see signs of improvement. The latest government data showed new home sales climbed in February for the first time in seven months, sending shares of home-building companies soaring.

Sacramento, Calif., OKs plan to close `tent city’

SACRAMENTO, Calif. (AP) — Gov. Arnold Schwarzenegger said Wednesday he would try to find state money to help city officials relocate about 150 people from a homeless encampment that put California’s capital in the international spotlight.

The plan includes adding 50 beds to a shelter run by Volunteers of America on the fairgrounds. The shelter, which was supposed to close in the spring, will now stay open through the end of June, and the city also has located places for the 100 other residents at local shelters and in longer-term housing units.

The proposal, which is estimated to cost about $1 million, aims to close the encampment by the end of April.

Portrait of the Treasury Secretary As A Young Man:

http://tinyurl.com/dld6hg

Wonder if he’s worried about the Beaver?

Revised Q4 GDP: -6.3%, the biggest contraction in 26 years.

(Manny: expect more downward statistical revisions, even from chronic number-cookers.)

Will bank CEOs and employees that receive taxpayer money also be required to take drug and alcohol tests? Or are only poor people expected to be morally upright and subjected to humiliating intrusions into their personal lives in order to receive assistance?

“Out of the frying pan — too little oversight of financial firms — and into the fire — government takeovers without limit.”

When I was in the public sector, I called this the principle of oscillating stupidity.

But where you have privilegs for powerful interests you get the opposite — perpetual stagnation.

So either you have a complete lack of consideration of the public interest, or a complete lack of sense.

I really like Obama’s online townhall meeting idea. They know they are never going to get a fair shake from the liars on TV. Just go around them, or go on outlets that are more fair.

Like the Daily Show, which is the best news available. All you really need to know. The rest is BS.

The most truthful thing you see on TV are the commercials.

Law of unintended consequences

Warren Buffet from Bloomberg.

Though Berkshire’s credit is pristine — we are one of only seven AAA corporations in the country — our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing,” Buffett said in his annual letter to shareholders last month. “At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.

My guess is he gets credit for far less than the 10% rate he is getting from Goldman. Sounds like a pretty good gig, borrow a billion dollars at 4% lend it to Goldman at 10% with possible stock gains and knowledge that the Gov will never ever let Goldman fail. ie the Gov is part of Goldman.

Since it’s a slow day so far, this one is totally O/T:

A relative has quite enthusiastically gotten into something called “DubLi,” which sounds to me like a typical pyramid scheme, and wants to recruit everyone they ever met, including family. Anyone know much about it?

Jumbo Loans Could Make a Comeback

http://finance.yahoo.com/loans/article/106802/Jumbo-Loans-Could-Make-a-Comeback

Steve Keen

The most important thing that global financial crisis has done for economic theory is to show that neoclassical economics is not merely wrong, but dangerous.

Neoclassical economics contributed directly to this crisis by promoting a faith in the innate stability of a market economy, in a manner which in fact increased the tendency to instability of the financial system. With its false belief that all instability in the system can be traced to interventions in the market, rather than the market itself, it championed the deregulation of finance and a dramatic increase in income inequality. Its equilibrium vision of the functioning of finance markets led to the development of the very financial products that are now threatening the continued existence of capitalism itself.

What are your opinions on how long this current stock market rally will last?

It’s amazing how psychology shifts so rapidly. Three weeks ago, all economic data was viewed and analyzed with a negative bent but since then it’s just the opposite.

NEW YORK (AP) — Wall Street extended its gains Thursday on relief that a government debt auction drew strong interest.

??? Isn’t this the FED buying our own treasuries??

Go market

No surprise, but he is Barry’s main handler…

From the Chicago Tribune…
Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.

One of those allegedly asleep-at-the-switch board members was Chicago’s Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.

As gatekeeper to Obama, Emanuel now plays a critical role in addressing the nation’s mortgage woes and fulfilling the administration’s pledge to impose responsibility on the financial world.

Emanuel’s Freddie Mac involvement has been a prominent point on his political résumé, and his healthy payday from the firm has been no secret either. What is less known, however, is how little he apparently did for his money and how he benefited from the kind of cozy ties between Washington and Wall Street that have fueled the nation’s current economic mess.

The House Rahm Built

Though just 49, Emanuel is a veteran Democratic strategist and fundraiser who served three terms in the U.S. House after helping elect Mayor Richard Daley and former President Bill Clinton. The Freddie Mac money was a small piece of the $16 million he made in a three-year interlude as an investment banker a decade ago.

In business as in politics, Emanuel has cultivated an aggressive, take-charge reputation that made him rich and propelled his rise to the front of the national stage. But buried deep in corporate and government documents on the Freddie Mac scandal is a little-known and very different story involving Emanuel.

He was named to the Freddie Mac board in February 2000 by Clinton, whom Emanuel had served as White House political director and vocal defender during the Whitewater and Monica Lewinsky scandals.

The board met no more than six times a year. Unlike most fellow directors, Emanuel was not assigned to any of the board’s working committees, according to company proxy statements. Immediately upon joining the board, Emanuel and other new directors qualified for $380,000 in stock and options plus a $20,000 annual fee, records indicate.

On Emanuel’s watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.

The accounting scandal wasn’t the only one that brewed during Emanuel’s tenure.

http://tinyurl.com/ca7mx3

Here’s a warning for the moneychangers, corporatists and wealthy elite.

Thursday, March 26th, 2009

ITEM: Rep. Michele Bachmann (R-MN) has introduced legislation that would “bar the dollar from being replaced by any foreign currency.” This nitwit may be a nice person…even somebody’s loving mother…but Minnesotans should require she take a short course in monetary fundamentals.

The United States does not rule the world. It cannot dictate to other nations the currency they may choose to settle trade accounts. If a majority of countries wish to dump the U.S. dollar as a reserve currency there is little we can do about it, although it would be sensible for Messrs. Geithner and Bernanke to stop inflating the money supply so recklessly. It’s send a very negative signal to our trading partners.

From The Agora 5…

“You mean to tell me that the success of my program and my re-election hinges on the Federal Reserve and a bunch of f*%&ing bond traders?”

That famous outburst belongs to Bill Clinton, when the bond market asserted a veto on his spending plans in the ’90s. We suspect similar slips are being uttered behind closed doors all over the world today… probably with just as much cursing.

The U.S. Treasury auctioned off $34 billion in 5-year notes yesterday — barely. Demand for government debt was so low the Treasury had to adjust the bond yields midauction, from 1.8% to 1.85%. Five basis points might not seem like a big deal, but it certainly turned heads at the Big Board:

Even more notable, this bond fallout happened on the same day the Federal Reserve announced its first series of Treasury bond purchases. Bernanke and company snatched up $7.5 billion of its $300 billion U.S. Treasury purchase program… and investors didn’t seem to care. So much for the trader idiom “Don’t fight the Fed.”

This point by John Mauldin is interesting - -

“On the Fed printing money: there is one small thing to watch. What if they print it, put it in the banks and then the banks instead of lending it to each other at 1.25% in LIBOR decide to deposit it at the Fed for .25% because they are worried about security and counter-party risk, which is a lot of the reason Fed reserves have exploded. They could print $5 trillion and if it all goes back to the Fed then where is the inflation? We need to pay close attention to where the money goes.”

SFBayAreaGal,

I sent you the data you were looking for. Sorry about the delay!

I was doing taxes and I’ve been stuck in Excel-spreadsheet hell for two days. It’s all done now.

And now for some tragi-comic relief

Distinguished ladies and gentlemen of the HBB. Please allow me to present to you a new public currency backed by whatever is left of the full faith and credit of the US Government.

I give you

The fuffle

http://energybulletin.net/node/48421

Please spend as many as you like. I am certain they will print more. In the end though, we’re all fuffed.

Got time on your hands?

Bernie Madoff does, and now his friendly bankers at Chase have “Time” on their case:

As Bernard Madoff passes time as inmate No. 61727-054 in the Metropolitan Correctional Center in lower Manhattan, questions about his giant scheme continue to dog investigators and the public. Among them is the curious relationship Madoff had with his bank, JPMorgan Chase. The Chase account, Madoff said in court in mid-March, was used to shuttle money back and forth between his U.S. and London operations, to make it appear he was executing trades in European markets, as he told federal regulators. Madoff made no trades at all with his Chase account, but rather just collected investor monies, wrote checks to investors, and took money for himself. In court, Madoff pleaded guilty to 11 counts of fraud, from wire transfer to money-laundering.

One puzzler for money chasers in Madoff’s $65 billion Ponzi is why the multibillion-dollar bank account he kept at Chase never came under suspicion by internal bank compliance systems or managers in charge of Madoff’s account.
When it comes to technology that scans for fraud, today’s detection systems are largely focused on identity theft, hackers and account anomalies, according to Don Jackson, director of threat intelligence for Atlanta-based SecureWorks, information-security experts on financial cyberthreat. “The problem with financial-fraud technology is that it’s only as good as how it’s set up,” Jackson says. “If it’s set up for a high-volume and multiple-wire-transfers account, then it won’t reveal anything strange when there’s lots of activity, like Madoff’s account. The only way to stop this kind of fraud is for the bank to know its client better and to report things that might be suspicious. It really comes down to human control.” TIME CNN

A Bailout in Disguise
by Bill Bonner
London, England
Three cheers for Topolanek!

Never heard of him? Neither had we until this morning. But on the front page of today’s Financial Times, we discover two extraordinary things. Topolanek is the Prime Minister of the Czech Republic (and coincidentally, president of the European Union). And, he has a very accurate road map.

“The US is repeating mistakes from the 1930s,” he says, “such as wide- ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign and so on. All these steps, their combination and their permanency, are the road to hell.”

We’ve said so ourselves. Many times. But we are surprised to find the president of the world’s biggest and richest economy - Europe - say so. It made us feel funny…odd…as if we weren’t alone in the world after all…as if we had a friend. And a friend in a high place.

At least, he was in a high place this week. He lost a non-confidence vote in his the Czech parliament on Tuesday…causing a stir in Brussels. No one knows how the European central government functions - certainly not the Europeans.

But as near as we can tell, it’s a healthier system than the United States. The presidency rotates…with each member nation getting a turn. So, when the president of the EU says something, you can ignore him; he’ll be gone before the milk goes bad.

Meanwhile, Europe’s central bank seems to be of the same mind as its president.

While other central banks print up extra currency to help bailout their economies, the European Central Bank hardly seems to notice. Unlike the central banks of Britain, Japan and the United States, it hasn’t cut rates to zero…and it isn’t printing money. The economy will get itself out of the slump faster if the bank remains steadfast in its long term objectives of sound money and stable interest rates, says Trichet.

Well, as we Irish would say, “Tree cheers for Trichet, too!”

In America, the scammy bailouts come faster than European presidents. But each one gets a little cleverer at disguising what is really going on.

The idea behind all the bailout programs is always the same - to stick the losses onto someone who doesn’t deserve them.

Of course, the stickers tell us not to ask questions; it’s a national emergency! But when the stickees - the taxpayers - see what actually is done with the bailout money, they get a little huffy. So, now the stickers have a new plan: a public/private partnership, which makes it sound like Wall Street is helping to bail itself out.

Finally, the feds are going to harness the private sector…and get the people who caused the crisis to help get us out if it. Now, investors and government will be working together, as equals, to solve this problem. But if you believe that…well…you are Tom Friedman. Which is to say, you are a moron.

Inviting investors into the game looks good on paper, but what’s really going on? The losses are the losses. Why would investors want a part of them?

Of course, they wouldn’t…unless they were paid to play along.

The public is fed up with bailouts. So, the feds have disguised this new one as an investment scheme. The lumpen yahoos are invited to imagine that “capitalists are now going to help solve the problem they caused” as it was described in the French press. They delude themselves into believing investors are willingly going to buy into losing positions…and somehow make them winning ones. “Win…win…win…” is what they’d like to believe.

But the game is poker. And for every winner, there’s a loser. And the big fellow who has just entered the game is every poker player’s dream. He is almost infinitely rich and infinitely stupid. Before the night is over, investors are going to clean him out.

Soros Says Commercial Property Values Will Fall 30% (Update1)
By Michael Forsythe

March 26 (Bloomberg) — Billionaire investor George Soros said U.S. commercial real estate will probably drop at least 30 percent in value, causing further strains on banks.

“Commercial real estate has not yet fallen in value,” Soros, speaking at a forum in Washington, said. “It is inevitable, it is written, everybody knows it, there are already some transactions which reflect and anticipate it, so we know, they will drop at least 30 percent.”

U.S. commercial real estate values have fallen 30 percent from the 2007 peak as cheap financing disappeared and the recession reduced occupancies, RREFF, the real estate investment unit of Deutsche Bank AG, said yesterday in its 2009 forecast. Total returns in a commercial property index used by pension funds may decline as much as 11 percent this year, the group said.

Soros, 78, said the risk of further declines in property prices is reason for the administration of President Barack Obama to move quickly to recapitalize banks. Soros said Obama acted too slowly on a banking overhaul and should have moved immediately upon taking office.

“At that moment of enthusiasm, fresh out of the gate, he would have gotten that money, and then we could have recapitalized the banks the right way, which would be to draw a line over the existing past accumulated bad assets and create new banks on top of these old banks,” Soros said.

‘New Bank, Old Bank’

“Instead of good bank, bad bank, have new bank, old bank and keep the old capital to cover the old assets which are still deteriorating and will continue to deteriorate for several years” because of the coming decline of commercial real estate values, Soros said.

Soros also said that the U.S. may face a new round of inflation should the flow of credit recover because of the large increase in the money supply stemming from the Federal Reserve’s purchases of Treasury securities.

U.S. central bankers decided last week to buy as much as $300 billion of long-term Treasuries and more than double mortgage-debt purchases to $1.45 trillion, aiming to lower home-loan and other interest rates.

“In order to make up for the collapse of credit, we are effectively creating money,” Soros said. “If and when credit is restarted, you would then have an incredibly swollen monetary base, which, if it were leveraged, you would have an explosion of inflation.”

“Right now we are in a period of deflation, but it could easily tip over, where you are facing inflation,” Soros said. “You are then faced with the prospect of draining money supply as fast as credit is created.”

Well I’m glad we’ve moved on from AIG bonuses, TARP, TALF and all that to more important matters: Sheesh.

http://www.breitbart.com/article.php?id=D9759GG00&show_article=1

I hope this kid doesn’t get in trouble when he gets back home. It is kinda funny:

http://www.dailymail.co.uk/news/article-1164492/Teenager-paints-giant-phallus-roof-parents-home.html

Dutch bubble update:

the amount of homes for sale in Netherlands has surged to numbers far above the previous all time high. In 1999 inventory was 2.3x monthly sales, now it stands at 16.3x. The market is thought to be balanced between sellers and buyers when the number is around 7.

This saturday there is the National Open House Day, organised by the realtors. Sellers open their home for potential visitors (without a realtor being present, and the visitor does not need to make an appointment). I predict it will be extremely quiet: over 40.000 sellers are participating, but I doubt there are that much potential buyers in the whole country now…

Prices are a few % below the all time high, although in some pockets prices are declining more (difficult to make sense of all the conflicting statistics). More reports, mostly from foreign banks and institutions, are predicting 30-50% price declines for Netherlands over the next few years. Of course the realtors and the government beg to differ, ‘the Netherlands IS different’.

As for mortgages, one of the newer Dutch banks (DSB) is under investigation because it appears they regularly offered 200% mortgages to customers (did they do that in the US??). Just a few weeks ago the president of DSB volunteered on the TV News to take on the job of Finance Minister and quickly solve the Dutch credit crisis.

Another statistic: Dutch mortgage debt soared from 160 billion euros in 1996 to nearly 600 billion euros now, with a majority of the new loans being I/O, 100-125% loans. Many of these laons are officially under water, but nobody cares. Netherlands has the highest mortgage debt to GDP ratio in the world.

Everything is lining up like around the previous (-40%) Dutch housing crash in 1979. Even squatting is back in the news: the government is going to try again to forbid squatting completely. I think they will have to use the army again to protect the RE mob (and banksters, trouble is brewing here as well) from angry civilians. If they read the history books a complete squatting ban is not a good idea. And apart from that, squatting and anti-squatting seems to be an excellent Dutch export industry at the moment

did y’all see southpark’s economic crisis? loved the federal reserve chart…

I was searching for some electrical wire & found this at a supplier’s web site: “The current economic situation has damaged the scheduled manufacturer chain, in that mill after mill has cut back on personnel and work days and extended shipping schedules from 2 to 4 weeks delivery to as many as 10 to 12 weeks. Some major links in the chain have shut down temporarily and some have closed until further notice. We are feeling the effects of this situation on an increasing number of our products, and we are being forced to delay shipping on an increasing number of orders. We are also seeking alternate suppliers for some items where possible. We apologize for any delays.”

Fed’s Fisher sees economic downturn ‘tempering’

DAYTON, Ohio (AP) — The head of the Federal Reserve Bank of Dallas said Thursday that he’s hopeful there will be a “tempering” of the national economic downturn in the second quarter, but he still expects the economy to shrink in 2009.

“Personally, I am concerned about the first quarter of the year and the second quarter of the year,” Richard Fisher told reporters after giving a speech to a student investment forum at the University of Dayton.

“I would hope the effects of the (federal) stimulus (package) and hopefully our initiatives will begin to allow the credit markets to heal and economic growth will begin to drift upwards,” he said. “Overall, I expect negative growth for the year.”

However, Fisher told the students the hard times create an enormous investment opportunity.

“The current economic and financial predicament represents a potential gold mine rather than a minefield,” he said. “There are a lot of dollar bills lying around the streets of these markets that could be picked up for nickels and dimes. So my advice to you is to go out and get them.”

THE INFLUENCE GAME: Lobbying helps turn bonus tide

http://finance.yahoo.com/news/THE-INFLUENCE-GAME-Lobbying-apf-14757976.html

Greetings from Taipei!

The flight from SFO->Narita wasn’t very full–about 10 empty seats in buisness. And on the connection from Narita->Tapiei, it was probably about 50% full–and we got an op-up from Business to First on a non-revenue ticket! (Which is pretty unusual.)

Still, people in Taipei don’t look as gloomy as they do in CA or FL. At least Taipei still manufactures things!

Student-Loan Default Rate Rises

By JOHN HECHINGER and ROBERT TOMSHO

The U.S. Department of Education, demonstrating the toll the sour economy is taking on recent college graduates, reported a jump in the student-loan default rate to 6.9%, from 5.2% a year earlier.

Raising the stakes for consumers and taxpayers, the amount that students are borrowing for their education has been increasing dramatically in recent years, with half a trillion dollars in federal student loan debt now outstanding.

Robert Shireman, a senior adviser to Secretary of Education Arne Duncan, says he expects the default rate, which reflects the early part of the recession, to continue to rise. “When people are facing a job loss, figuring out how to pay their student loan is not No. 1 on their list,” he said.

What a period of 3 weeks! VEIEX and VISGX are up 28 or 29% from their lows! VFINX up 22% from a 2 week low!

The messiah cheerleaders are leading the market index rises. Yes, Mr. Barack, here…I have my head on the chopping block…Not enough neck?…Okay. I will put more neck on the block…how’s this?…Hey…There’s a Joshua Tree at 11:00…Would you care to use one on me? How about a statue of the Virgin Mary?…Use your imagination…please!

voz aka clue,

Any news on the hoz man?

Please let him know he is missed.

Despite recession, Pittsburgh in a building boom

http://finance.yahoo.com/news/Despite-recession-Pittsburgh-apf-14758103.html

The best time to grab power is during a dire and unresolved crisis.

Wall Street Journal
* OPINION
* MARCH 27, 2009

Geithner Is Overreaching on Regulatory Power
We don’t need more politics in our economics.

By FRANCIS X. DIEBOLD and DAVID A. SKEEL JR.

One of the main proposals in the regulatory reforms outlined by Treasury Secretary Timothy Geithner yesterday would give the Treasury, FDIC and the Fed authority to take control when investment banks or other financial institutions (hedge funds, etc.) appear troubled, just as the FDIC presently does with deposit-taking banks.

The proposal is being offered as a clever political solution to the turf war that might have erupted if the Treasury or FDIC alone were given this quasi-nationalization authority, with no input from the Fed. But the real issue is whether this expansion of regulators’ powers is wise. It isn’t.

Geithner Plan II in a 12min. video is it worse than the AIG bonus bailout? http://www.youtube.com/watch?v=n-arbfLTCtI

Still optimistic?

youtube.com/watch?v=n-arbfLTCtI

The AIG bonus twin?

The Fed has published papers suggesting they regard mortgage rates to be a “fundamental factor” underpinning home prices. How can a factor which is susceptible to blatant manipulation from a central bank possibly qualify as a fundamental?

The one question I keep coming back to is that of to what lengths the Fed might go to try to artificially prop up home prices. This will not work over the long run, but in the long run we are all dead.

Wall Street Journal
* HEARD ON THE STREET
* MARCH 27, 2009

Creaking Floor Under House Prices
By PETER EAVIS

Can home buyers trust the floor they are standing on?

In response to gigantic government efforts to support the mortgage market, house prices are showing signs that they mightn’t have much further to fall.

But prices have to be built on more than cheap financing. Indeed, government leverage could set the stage for another downdraft if the wider economy doesn’t recover fast.
…
However, two countervailing forces could thwart a (home price) rally.

First, borrowers mightn’t want to take on more mortgage debt while personal balance sheets are still stressed, something not reflected by the affordability index. At the end of last year, personal disposable income covered 75% of household liabilities. In 1991, it was 114%.

Second, rising unemployment could continue to take a heavy toll. It makes the employed more cautious about large purchases, but unemployment does most damage by driving foreclosures higher — even among borrowers with sounder personal balance sheets.

The delinquency data aren’t encouraging. In particular, defaults are now rising on loans made before 2006 — when lending standards started to deteriorate sharply. In January, Alt-A loans made in 2005 had a cumulative default rate of 4.2%, up from 0.64% a year earlier, according to First American CoreLogic. The default rate on 2005 prime mortgages that didn’t qualify for purchase by Fannie Mae or Freddie Mac was 0.56% in January, up from 0.07% a year earlier.

Even Fannie Mae’s 2005 mortgages, most of which should have been conservatively underwritten, are suffering unusually high default rates.

Given this backdrop, the government will be tempted to keep stepping up mortgage subsidies. The risk: Buyers are lured in by artificially cheap financing, only to find the house-price floor subsequently gives way.

Soo Locks open to empty waterways — The locks opened for the season at 0001 on Wed. 17 hours elapsed before first commercial vessel passed, stoking concerns that season will be unusually slow.

Cleveland thief stealing houses Lenard, 30, of Garfield Heights is behind bars after police arrested him for allegedly stealing a home in Richmond Heights.

“He was apparently getting addresses online of houses that were in foreclosure,” said Cuyahoga County Prosecutor Bill Mason. “And guys like him can just roll in and put up a rent sign and start renting away.”

Richmond Heights detectives said that Lenard broke into a foreclosed home, changed the locks and advertised the home as available for rent. Lenard was sentenced to 4 years, 11 months in jail in 2006 for a similar crime. But he served only one year before a judge granted him an early release from prison in March, 2007.