The Housing Bubble

O.k., I opened a trade account last night and just placed my first orders. This should be really funny.

My wife is so pissed.

Goldman Pays to End State Inquiry Into Loans.
By LESLIE WAYNE
Published: May 11, 2009

In the first major settlement involving Wall Street’s role in the subprime mortgage business, the Goldman Sachs Group agreed on Monday to pay up to $60 million to end an investigation by the Massachusetts attorney general’s office into whether the firm helped promote unfair home loans in the state.

The money will be used for a loan modification program that would allow Massachusetts homeowners with mortgages from Goldman entities to write down their principal balances by as much as 50 percent.

The settlement resulted from a continuing investigation by Attorney General Martha Coakley into subprime lending practices and the role of investment banks that acted as middlemen in loans that have resulted in foreclosure or contained terms so onerous that they were destined to fail.

At a news conference, she said that the problem was industrywide and that the Goldman settlement would provide “much needed relief for many in Massachusetts.” Even so, she also criticized what she called predatory lending that was encouraged by Wall Street firms that bought individual subprime mortgages and repackaged them into securitized loans for investors.

“Our office has sought accountability at all levels of the subprime lending crisis,” Ms. Coakley said in a statement. “We will continue to investigate the deceptive marketing of unfair loans and the companies that facilitated the sale of those loans to consumers in the Commonwealth.”

Is Anyone Minding the Store at the Federal Reserve?
[video] Fed’s Inspector General has no idea where the $9 trillion went?

http://www.youtube.com/watch?v=PXlxBeAvsB8

President Obama may dismantle Fannie and Freddie.

http://tinyurl.com/q9zca5

The public debt has increased more than a trillion dollars since September 30th! $11,258,693,795,457.10 was our debt status last Friday, barely six months into the present fiscal year. The stupendous debt obligation has doubled in less than a decade. The mainstream media pay scant attention to this time bomb, which accounts for average citizens not being alarmed. They should be. It’s their debt!

“The force of a correction is equal and opposite to the deception that preceded it”.

B.Bonner

Gary North asks the question politicians avoid. “Who will redeem all those non-marketable IOUs from the U.S. government that sit in the computerized accounts of the Social Security Trust Fund and the Medicare Trust Fund? No one in authority dares to ask this question in public view.

How the Social Security con game works: “The government borrows money from the Social Security Trust Fund, issuing non-marketable IOUs as receipts. This is a swap. It then tells the government’s accountants to count the borrowed money as net revenue in the government’s on-budget account, thereby reducing the deficit. It also tells the accountants not to count the IOUs as liabilities.

“This is how Enron shoved its liabilities off its books: dummy corporations taking the liabilities. This is also how hedge funds did it. Substitute ‘Social Security Trust Fund’ and ‘Medicare Trust Fund’ for ‘dummy corporations,’ and you have the government’s program to reduce the deficit.

WASHINGTON – The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink — increasing it to more than four times last year’s all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.

The unprecedented deficit figures flow from the deep recession, the Wall Street bailout and the cost of President Barack Obama’s economic stimulus bill — as well as a seemingly embedded structural imbalance between what the government spends and what it takes in.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

Just a few days ago, Obama touted an administration plan to cut $17 billion in wasteful or duplicative programs from the budget next year. The erosion in the deficit announced Monday is five times the size of those savings.

For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration’s plan. In 2010, it would borrow 35 cents for every dollar spent.

“In 2010, it would borrow 35 cents for every dollar spent.”

Don’t be surprised when that becomes an impossible goal and the real number is closer to 50 per cent.

So far as I can tell, the lender’s elephant (massive shadow inventory held off the market for strategic purposes, with many more foreclosures to come) is still thriving under the living room rug.

Wall Street Journal

* REAL ESTATE
* MAY 12, 2009

April Drop in Listings for Homes
By JAMES R. HAGERTY

The number of homes listed for sale in many U.S. cities continued to fall in April in what some analysts see as a sign that the market may be nearing a bottom. But the picture is clouded by uncertainty over how many foreclosed properties will hit the market.

The supply of homes for sale in 29 major metropolitan areas at the end of April was down 3.6% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The ZipRealty data cover all single-family homes, condominiums and town houses listed on local multiple-listing services in metro areas where the firm operates.
Home Supply Continues to Fall

View Interactive

On a national basis, inventories typically increase in April as for-sale signs bloom for the spring home-shopping season. Since 1982, the average increase in April from the prior month has been 4.8%, according to Zelman & Associates, a research firm.

Compared with the year-earlier month, the April inventory in the 29 metro areas was down 21%.

The National Association of Realtors says about 3.7 million homes were listed for sale nationwide at the end of March, down 10% from a year earlier. But that number doesn’t include all of the foreclosed homes that banks aim to sell.

Fannie Mae and Freddie Mac, among the biggest owners of foreclosed homes, typically have only about 35% to 50% of those homes listed for sale at any given time, according to industry estimates. At one of the nation’s largest banks, about 60% of the foreclosed homes are listed, according to a person familiar with the situation. Some foreclosed homes aren’t listed because they are being offered for rental; others are awaiting repairs or are subject to litigation or other delays.

Never heard of Advanta, but apparently a million or so people have…

Advanta Shuts Down Credit-Card Lending Amid Surging Charge-Offs
By Hugh Son

May 12 (Bloomberg) — Advanta Corp., the issuer of credit cards for small businesses, will halt new lending for its 1 million customers next month as the recession causes a surge in loan defaults.

Lending ceases June 10. Advanta will use as much as $1.4 billion to pay investors of its securitized credit-card loans part of the debt’s face value, the Spring House, Pennsylvania- based company said yesterday in a statement. Advanta said it’s preserving capital after charge-offs, or uncollectible debt, reached 20 percent on some cards as of March 31.

“This is a Hail Mary pass: They’re hoping they can stay alive barely until the environment changes,” said David Robertson, president of the Nilson Report, the Carpinteria, California-based industry newsletter.

Advanta has reported three consecutive quarterly losses and has seen its shares plunge from about $30 in June 2007 to $1.13 at the close of New York trading yesterday. The U.S. jobless rate reached 8.5 percent in March, a 25-year high, squeezing sales for small business owners. The economic slowdown affected Advanta’s customers across the country, Chief Financial Officer Philip Browne has said.

“We’ll be shutting down accounts for future transaction activities, but many of the customers will maintain balances and pay us off over time,” Browne said yesterday in a telephone interview. “We’ll have to service and collect on that, and that will be the first order of business for the company.”

Looks like the affluent and would-be affluent might decide to leave Brooklyn to the Brooklynites.

http://www.nytimes.com/2009/05/10/realestate/10cov.html?_r=1&hpw

“Great Recession prices are drawing even the most loyal outer-borough dwellers back to Manhattan. The migrants hail from Hoboken, Astoria and the brownstone blocks off Prospect Park, as New Yorkers who found themselves priced out of the gilded isle in the boom years are bidding farewell to long commutes and skinny-jean chic.”

“Among the lures: $1,600 one-bedrooms on the Lower East Side. Lenient landlords who no longer require security deposits. And an overriding sense that an obscenely overpriced borough is now, well, slightly more reasonably overpriced.’

Local landlords have yet to catch on that the game is up.

“Numbers on the New York rental market are notoriously unreliable, but recent reports suggest that rents are falling faster in Manhattan than in neighboring boroughs.”

“I always assumed that Manhattan was way too expensive for me and out of my reach,” said Mr. Schenkel, who moved to the city in 2006. But when his landlord threatened a $100 rent increase, he decided to shop around.”

Perhaps the landlord just purchased that three-family and had a mortgage payment to make. I pity the poor family that did a gut rehab and was featured on “This Old House” this season.

My sister owns a piece of GMAC — she and GM assembly line worker hubby bought GMAC bonds a few years ago. I don’t want to own any of GMAC. Why should I have to own GMAC? Owning GMAC is not good for America.

I like the writer’s school comparison in this article; while my kids’ schools are figuring out which teachers to ax, I can rest satisfied that our tax dollars are getting funded into low-interest loans to purchase more automobiles to clog the nation’s freeways.

Wall Street Journal

* THE GAME
* MAY 12, 2009

Get Ready: You Will Own GMAC, Too

By DENNIS K. BERMAN

Congratulations, taxpayers. Soon GMAC LLC, the money-burning auto and mortgage lender, will likely join Fannie Mae, Freddie Mac, American International Group and Citigroup in your investment portfolio. By the time all the checks have cleared, you may have sunk upward of $20 billion into this former ward of General Motors, an amount equivalent to $210,000 for each of the nation’s public schools.

GMAC differs from other companies under the government thumb because it isn’t too big to fail. So the government doesn’t need to save GMAC to safeguard the financial system.

Instead, GMAC must be saved, the argument goes, to revive the auto industry and consumer economy. The details of that approach are strikingly scarce. In fact, nearly everything about GMAC — its mission, board, and future ties to government — is unknown. As Winston Churchill might put it, GMAC is a financial black hole stuffed into a governance black box.

These details matter. The Treasury is in the middle of a plan to turn privately held GMAC into a new über auto-lender, financed with taxpayer dollars and likely falling under taxpayer control. This has the potential to spark unintended consequences across the auto and banking markets, similar to the quasigovernmental meddlings of Fannie and Freddie.

Would this government-sanctioned company have an unfair funding advantage against Ford Motor’s Ford Motor Credit, for instance? Would it be willing to do the politically unpalatable work of cutting credit to certain car dealers? What happens if Congress starts mandating low-cost auto loans?

Oddly, Congress and the rest of the country seem to have grown numb to the bailouts. Not once has GMAC been discussed substantively in a congressional hearing.

Does this qualify as a “green shoot”?

U.S. Trade Deficit Widens First Time in Eight Months (Update1)
By Bob Willis

May 12 (Bloomberg) — The U.S. trade deficit widened in March for the first time in eight months as the global economic slump pushed exports to the lowest level in more than two years.

The gap expanded 5.5 percent to $27.6 billion, smaller than forecast, from a nine-year low of $26.1 billion in February, Commerce Department figures showed today in Washington. Imports also decreased as a drop in demand for industrial supplies such as natural gas and steel offset an increase in oil.

Heh heh heh…

Paul B. Farrell

May 11, 2009, 7:14 p.m. EST
Five reasons ‘neuroeconomics’ is a big, fat hoax
Why? They’re mercenaries-for-hire working for Wall Street’s highest bidders

By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) — Yes, neuroeconomics is a hoax. And I’m “mad as hell” about it. Call it whatever name you want, they’re all the same: Behavioral finance, psychology of investing, behavioral economics, the “new science of irrationality.” Let’s call it “neuroeconomics.” And yes, it’s a scam, a con job, propaganda, a big fat hoax.

Neuroeconomists sell themselves as guardians of the little guy. Wrong. Just the opposite. They are your enemy, working for Wall Street and Washington, developing data, tools and technologies to secretly manipulate investors, savers, voters and taxpayers.

Don’t believe me? I didn’t believe it at first. Back in 2002 when Princeton psychologist Daniel Kahneman won the Nobel Economics Prize I was ecstatic. He exposed Wall Street’s two-century-old myth of the “rational investor.” We cheered. Yes, investors are irrational, but we can change. Right? Maybe Wall Street will even help.

Fat chance. Since then, neuroeconomists chased the almighty buck too, doing whatever it takes to get research grants, speaking fees, university tenure and juicy consulting contracts with Wall Street, Washington and Corporate America. They are obsessed with pretty-colored MRI brain scans, misusing the scientific method, exaggerating, misinterpreting research.

The result? In recent years many of their publications resemble high school level self-help “Psych 101″ books with cute titles like “Freakonomics,” “Nudge,” “Sway,” “Animal Spirits,” “Blink,” “Blunder” and other pulp nonfiction packaged for mass-market consumption.

HD,

You are really pushing it these days buddy. Get your act together or else.

You’re allowed to get $650,000 behind on your mortgage before you get foreclosed on if your father was a member of the Gambino crime family:

http://www.nypost.com/seven/05112009/news/regionalnews/bank_forecloses_on_victoria_gottis_estat_168711.htm

(CNN) — Postal authorities say a Michigan postal worker has admitted to stealing some $20,000 worth of first-class stamps since September and trying to sell them to online auction-site customers to help pay his mortgage.

http://www.cnn.com/2009/CRIME/05/12/michigan.stamp.theft/index.html

Econwatch CBS
May 12, 2009 3:06 AM
It’s A Good Time To Work For Uncle Sam

President Obama’s call last year for “shared sacrifice” doesn’t extend to federal employees, at least based on the details of his administration’s 2010 budget released this week.

At a time when the official unemployment rate is nearing double digits, and 6.35 million people are receiving unemployment benefits, the U.S. government is on a hiring binge.

Executive branch employment — 1.98 million in 2009, excluding the Postal Service and the Defense Department — is set to increase by 15.6 percent for the 2010 fiscal year. Most of that is thanks to the Census Bureau hiring 102,000 temporary workers, but not counting them still yields a net increase of 2 percent in one year.

There’s little belt-tightening in evidence in Washington, D.C.: Counting benefits, the average pay per federal worker will leap from $72,800 in 2008 to $75,419 next year.

Meanwhile, according to Forbes’ layoff tracker, there have been 558,087 layoffs since November 2008 at large public companies; even local school districts aren’t immune. That’s just a sliver of the total unemployed, which government data estimate to be 8.6 percent of the workforce, or an alternate method of reckoning that counts discouraged workers puts at 20 percent.

Some of the Feds’ hiring increases have been stunning. If you look at the four-year period from 2006 to 2010, the number of Homeland Security employees has grown by 22 percent, the Justice Department has increased by 15 percent, and the Nuclear Regulatory Commission can claim 25 percent more employees. (These figures assume that Congress adopts Mr. Obama’s 2010 budget without significant changes.)

A 39-page “dimensions” document accompanying the White House’s 1,380-page appendix offers justifications for each new hire. Homeland Security says its new employees will “increase border security.” The Agency for International Development wants to improve “the management and stewardship of foreign assistance programs.” The Smithsonian Institution wants “additional security guards.” And so on.

The final evidence that it’s a good time to have a .gov e-mail address? Civilian government employees are set to enjoy a 2 percent raise. Not only are private sector workers are struggling to keep their jobs, but their earnings are stagnating and pay cuts are no longer uncommon.

Postal worker accused of stealing, selling stamps
16 hours ago

DETROIT (AP) — Authorities say a rural postal carrier in suburban Detroit stole and sold stamps worth nearly $20,000 because he was behind on his mortgage. Postal agents confronted John Auito on April 30 outside his home in Macomb. He told agents that he typically sold the stamps at a 15 percent discount. Auito contacted people who had participated in stamp auctions on eBay.

The 42-year-old Auito is charged with stealing stamps that were being shipped to retailers in his delivery area. A message seeking comment was left at his home Monday.

Auito told agents that he began taking stamps in September because he feared foreclosure.

Copyright © 2009 The Associated Press. All rights reserved.

Oh dear!
Leigh

From behind “The O.C.” Curtain:

Filed under: “Welcome to…”The New Century!”

“The O.C.” housing & commercial “real estate-always-goes-up” corn kernel seeds are really starting to…POP!

“Without any major tenant, and a sinking local economy, Maguire is now close to selling the half-million-square-foot tower — which has a $165 million mortgage on it — in a horrible market for commercial real estate . All told, LA-based Maguire lost $54 million in the first quarter vs. $49 million loss a year earlier.”

“It appears that Maguire Properties is losing $73 million on its gleaming, signature, 19-story 3161 Michelson office tower overlooking the I-405 at near John Wayne Airport”

Irvine office tower costs builder $73 million in losses:

May 12th, 2009, OC Register Jon Lansner

Strange happenings -

Advertising
As Storefronts Become Vacant, Ads Arrive

Almost every category of advertising is declining precipitously in this economy, but there is one that is thriving.

Taking advantage of all the abandoned retail spaces in urban areas, marketers are leasing them at cut-rate prices and filling them with their ads.

At first, advertisers saw storefront advertising as a poor man’s billboard — that is, a bad thing. Now, they see it as a poor man’s billboard — that is, brilliantly frugal.
(cont’d)

NYTimes

The article is a hoot!
Leigh

Lost in Utah –

Picking up from yesterday’s thread about junction. I thought oil/gas was still going strong. What else do you know about what’s going on up there? Lots of family of people from town live up there in oil/gas, I’m wondering how they might be faring.

On another note, I’m reading “the bottom billion,” a book about the poorest of the poor countries. It talks about the devastating effect natural resources can have on a country’s economy. Essentially, abundant natural resources and the extraction industry retards any other economic development that might occur. I certainly don’t see that Junction has anything else to fall back on…

In “Democracy in America,” Alexis de Tocqueville anticipated people being governed by “an immense, tutelary power” determined to take “sole charge of assuring their enjoyment and of watching over their fate.” It would be a power “absolute, attentive to detail, regular, provident and gentle,” aiming for our happiness but wanting “to be the only agent and the sole arbiter of that happiness.” It would, Tocqueville said, provide people security, anticipate their needs, direct their industries and divide their inheritances. It would envelop society in “a network of petty regulations — complicated, minute and uniform.” But softly: “It does not break wills; it softens them, bends them, and directs them” until people resemble “a herd of timid and industrious animals, of which the government is the shepherd.”

NAR numbers are out. Yowza.

Chicago down 26% yoy

In Saginaw, the median price for a home sold in the 1st Q was 30K.

It’s a bloodbath. Economics wins again.

More green shoots?

Median home prices fell in 88 percent of US metropolitan areas in first quarter of 2009

“I think we’re near a bottom, but we’re not there yet,” said David Resler, chief economist at Nomura Securities. While prices could hit bottom as soon as this summer, he said, they are likely to remain stable and start edging higher slowly.

But the nascent signs of recovery in the housing market could be short-lived if employers continue to lay off workers in bulk.

Home sales fell in all but six states — Nevada, California, Arizona, Florida, Virginia and Minnesota — where buyers have been able to snap up foreclosures at a deep discount. Sales more than doubled in Nevada, rose 81 percent in California and grew 50 percent in Arizona — signaling that the worst may be over for those distressed states.

Still, the median sales price nationwide was $169,900, down 13.8 percent from a year ago. The median price is the midpoint, which means half of the homes sold for more and half for less.

http://finance.yahoo.com/news/Median-home-prices-fell-apf-15216041.html?sec=topStories&pos=main&asset=&ccode=

Yesterday evening, PB wrote:

Comment by Professor Bear
2009-05-11 23:41:09
Secrets of the Temple:

“I have been thinking about the green shoots the world’s central bankers keep claiming to see. I am thinking it is quite a bit like religious faith — if we all believe in those green shoots, they will magically appear before our very eyes. And if we ignore those 19.1 million vacant homes that dot the American landscape, perhaps they will magically disappear as well.”

Don’t worry, PB—those homes are magically disappearing! At least, their appliances, copper plumbing, wiring, fixtures, etc are…

I think your primary point about the similarity between central banking and religion is well made. They are definitely hoping to inspire “faith”, e.g. the belief in things unseen.

Dumb AP headline of the day: (the MSM is feeding the public’s thrist for instant recovery - this can only end badly)

Job openings scarce even as layoffs slow

Even as layoffs slow, job openings remain scarce as companies reluctant to take on new workers

Christopher S. Rugaber, AP Economics Writer

WASHINGTON (AP) — Companies may be laying off workers at a slower pace, but that doesn’t mean more businesses are hiring.

There were 2.7 million jobs available nationwide in March, according to a government report released Tuesday, down from 3 million in February and 4 million a year ago. It’s also the lowest number in the eight years the Labor Department has tracked job openings.

Opinion (WSJ): Geithner showing signs of intellectual progress The revelation came from Timothy Geithner last Wednesday with PBS’s Charlie Rose, who asked the Treasury Secretary: “Looking back, what are the mistakes and what should you have done more of? Where were your instincts right, but you didn’t go far enough?”..Geithner: “monetary policy around the world was too loose too long. And that created this just huge boom in asset prices, money chasing risk”
The role of Fed policy should also be at the heart of the hearings that Speaker Nancy Pelosi is planning on the causes of the financial meltdown. We won’t begin to understand the credit mania and panic until we acknowledge their monetary roots.

Well the NAR data is out, and prices are falling. The U.S. figure is down nearly 25% from the 2006 average, even though data from markets such as Detroit is no longer included.

NY is finally showing some decent drops, but there is a long way to go to catch up with SF.

When you factor in the interest rates, some places are starting to look cheap. If this keeps up another year, we may be looking at historic affordability after its reverse.

In the “This is not going to end well” dept: Sheila Bair asked taxpayers to subsidize funds to purchase CMBS at 80-90 cents of par using PPIP, but Apr auction of CMBS brought prices of only 47-51 cents of par. Guess who gets to pay for this? Yeap.

“The facts: in April, the average auction clearing price on the 331 loans the FDIC sold in January and February was 49.3%. In March, the number of loans FDIC sold in various auctions increased almost four-fold to 1,328, for a total of $470 million in book values of sales, with the average price dropping even more: the latest being at 46.4%. So much for a stabilization in the commercial real estate market.

And for those who claim that this price is distorted because it includes several non-performing loans, well - we have a control for that too. Compiling just the data from performing loans gives a great auction clearing price boost to… 51%.

Yes, the same FDIC which is advocating using taxpayer money to endorse and guarantee legacy loan sales as part of the PPIP in the 80/90 cents on the dollar range, continues selling performing commercial loans at about 50% off their book value. Ms. Bair’s hypocrisy continues to amaze. “

Haven’t seen this one posted : CNN is running this headline :
Home prices slide 14%
National median home price falls to $169,000 in first quarter, due to market flooded with lower-priced foreclosures and short sales.

My links never show up for hours, but it’s on cnn’s money page.

Opinion (WSJ): SEC fails to deliver reforms, has meetings instead. “Give the financial crisis credit for at least one good thing: it exposed the Securities and Exchange Commission. From systemic risk to Bernie Madoff, the failure of the SEC is now an accepted truth on Wall Street. The commission not only whiffed on its duty to protect investors, it allowed the speculation-addicted culture of Wall Street to put the nation and its taxpayers at risk…The House Financial Services Committee is more occupied with credit card rates, Internet gambling and executive compensation than with remaking Wall Street’s rules…There is no overhaul of the commission’s enforcement arm. There are no unconventional hires. Group-think and adherence to busywork is still the standard operating procedure, judging by the lack of new voices and new approaches employed by the commission.”

Just ignore the dead shoots in California, from sco DOT ca DOT gov, see May 2009 summary analysis: “Sales taxes were $452 million lower (-50.9%) than last April, and personal income taxes were
down $5.7 billion (-43.6%). Corporate taxes were $142 million below (-8.6%) April of 2008.”

Wow, so I’ve doubled what I make per day, in one day of trading. This feels good. I look forward to getting greedy and losing it all!

New reality show for “The O.C.”:

Real desperate real estate CEO’s of Orange County

“Ken Campbell, who became the firm’s third CEO in 14 months in December, didn’t specify which executives he had in mind while referring to “the old guys.”

“Company Chairman and CEO Stephen J. Scarborough was ousted in March 2008 after the homebuilder announced a $787 million loss for the previous year. His replacement, Jeffrey V. Peterson, stepped down from that position in December, although he remained on the board.”

“Chief Financial Officer Andrew Parnes and General Counsel Clay A. Halvorsen also both resigned from the troubled homebuilder in February. Scarborough sued Standard Pacific, saying the company owed him $23 million in severance benefits.”

Big Irvine builder was close to bankruptcy:
May 8th, 2009, OC Register Jeff Collins

Congress Pushes Cap and Trade, But Just 24% Know What It Is!

Monday, May 11, 2009
Rasmussen Reports

The gap between Capitol Hill and Main Street is huge when it comes to the so-called “cap-and-trade” legislation being considered in Congress. So wide, in fact, that few voters even know what the proposed legislation is all about.

Given a choice of three options, just 24% of voters can correctly identify the cap-and-trade proposal as something that deals with environmental issues. A slightly higher number (29%) believe the proposal has something to do with regulating Wall Street while 17% think the term applies to health care reform. A plurality (30%) have no idea.

Democrats are pushing the legislation on Capitol Hill, but Democrats around the country are a bit less likely than Republicans and voters not affiliated with either party to know that the concept has something to do with the environment. This helps explain why some Democratic pollsters have advised the president to back away from the term cap-and-trade to describe what he wants to accomplish.

There is always political danger when major legislation is enacted without engaging the public in the debate. The New York Times reports that Rep. Henry Waxman, the California Democrat who is pushing cap-and-trade legislation, is now facing challenges from within his own party on the issue and that many want to “turn the Energy and Commerce Committee’s attention over to health care.”

That is clearly the direction most American voters would like to go. Sixty-nine percent (69%) say health care issues are more important while just 15% say global warming is a higher priority.

While the public view is clear, opinion among the Political Class is more evenly divided: 45% say health care is more important while 38% name global warming. Seven percent (7%) of Americans belong to the Political Class, and another seven percent (7%) lean in that direction.

Earlier surveys have shown a steady decline in the number who believe that human activity is the primary cause of global warming.

Broadly speaking, cap-and-trade proposals involve having the government set limits on what pollutants can be emitted. Then it auctions off permits for certain emissions and allows companies to trade the permits as needed.

Hey, gang. Slim checking in from Tucson.

As the sun set yesterday evening, my plumbing crew finished installing my new copper water line. Dang, can that Micheal (the crew leader) solder. No runs, no drips, no errors. (That was the slogan in the soldering and brazing class I took at the local community college.)

As for my recalcitrant neighbors, they sent an ambassador over to talk with me and the plumbers about what *we* were going to do to get their electricity back on. This question came as a bit of a surprise to me, and after spending a day dealing with the plumbers and with the neighbors’ BS, I lost it.

Praise Michael the master plumber for saving the day. He took the lady (who’s one of the daughters of the lady who lives next door) on a tour of my excavation. I went along, just to be a witness.

Along the entire excavation, there were exactly zero electric lines. Yes, there were gas lines and other people’s water lines, but nothing active in the electrical realm.

And the plumbing company got a licensed electrician to come out and look at the excavation and the neighbors’ electrical panel. To put it politely, their panel isn’t long for this world. It probably emitted that loud boom I heard on Saturday afternoon while I was waiting for my plumbing crew to show up.

The electrician signed a statement saying that my water line project excavation doesn’t relate to the neighbors’ power outage.

So, as we were walking back to my house, Michael told the lady-ambassador that it’s time to call an electrician and get that panel looked at. I still think that something blew, and it may be a fuse blocker or a breaker. I don’t know. The lady-ambassador’s comment, “Gee, I hope that won’t be expensive.”

I don’t know what the price will be. Probably more than their beer budget, but that’s their problem.

What I do know is that the neighbors to the west have been quiet as mice this morning. I’ll bet that they’re nursing some major-mondo hangovers. The two brothers who verbally abused me and my plumbers had started drinking yesterday morning.

“Top General Motors executives dump their shares at knockdown prices”

http://www.guardian.co.uk/business/2009/may/12/generalmotors-automotive-industry

Like rats deserting the sinking ship…

Interesing that a British paper carried the story?

Fannie and Freddie Will Need Almost $100 Billion in 2010
Posted May 12, 2009 12:42pm EDT by John Carney in Investing, Media, Recession, Banking
From The Business Insider, May 12, 2009:

The Office of Management and Budget released a report yesterday on the budgets and proposed overhauls of Fannie Mae and Freddie Mac that included the possibility of liquidating their assets. But don’t get your hopes up.

The two government run mortgage finance companies have been scandalously costly for tax-payers, costing Americans far more in bailout money than they ever saved in cheaper mortgages. The OMB says that the two companies will need at least $92.2 billion more in fiscal 2010. This is on top of the $78.2 billion in aid they’ve received since they were taken over by the government in September.

The entire point of having Fannie and Freddie operate as government sponsored entities was that they could borrow at lower rates than purely private companies. This savings enabled them to make mortgage loans at lower rates, and allowed them to buy up or guarantee mortgages from private lenders at rates that would otherwise have been uneconomical. Over the years, Fannie and Freddie may have saved Americans as much as $100 billion in mortgage payments. Now the OMB says they’ll need that much just to get through next year.

Unfortunately, shutting down these money pits is just one of the options being considered, and not the most likely one. From Bloomberg:

Alternatives range from “a gradual wind-down of their operations and liquidation of their assets,” to returning the two companies to their previous status as government-sponsored enterprises that seek to maximize shareholder returns while pursuing public-policy goals, according to OMB’s analysis of President Barack Obama’s proposed federal budget.

In a less corrupt political system, we’d have a chance of liquidating Fannie and Freddie. But these two companies are too well-connected to ever get shut down, and our political system too thoroughly corrupted to stand up to them.

Update - parents accepted the $375K offer without countering (good move IMO). Now they’re waiting on inspection (which should be fine) and financing approval for the buyers (FHA).

My question is - this couple just sold their house and are now buying a $375K house. Why would they be going FHA?…

Speaking of Tucson…

Bills may help consumers caught in credit card crunch

LOL! Old Arlen Sphincter, AKA water boy!

Reid sends Specter to Democrat farm team.

By: Scott Ott
Examiner Columnist | 5/8/09 10:02 AM
News Fairly Unbalance. We Report. You Decipher.

Just days after Senate Majority Leader Harry Reid broke his promise to newly-Democrat Sen. Arlen Specter, stripping the Pennsylvania lawmaker of his rank on five committees, Reid announced today that he would send Specter to one of the party’s minor league franchises.

“He’s got to earn a spot on the team in the big league,” said Reid. “Arlen’s got talent, but it wouldn’t be fair to our starters to bump one of them before he’s proven his ability to play our game.”

A spokesman for Specter said the former Republican “has spent 29 years in the Senate working to get his big break”, and he challenged Reid to “just look at the stats. He’s paid his dues.”

Reid wouldn’t say which Democrat farm team would get Specter, but leading contenders include MoveOn.org, Code Pink, The Huffington Post, MSNBC, The New York Times, or one of many academic institutions.

“Of course, some of our best and brightest came up through the Cuban farm system,” said Reid, “If you learn the Castro playbook, then you’ve got what it takes to run with big boys here in the Senate Democrat caucus. With that kind of training, Arlen would be able to write his own committee assignments.”

Specter said he’s hopeful that his Democrat colleagues will soon see his value to the team, but he understands that it takes time to build trust.

“If I might use a coarse analogy,” Specter said, “If you marry a man who cheated on his wife, then dumped her for you, you’ll always wonder what really keeps him so late at the office.”

Would this news be considered a green shoot?

Home Prices in U.S. Drop Most on Record in Quarter (Update3)
By Kathleen M. Howley

May 12 (Bloomberg) — Home prices in the U.S. dropped the most on record in the first quarter from a year earlier, led by California and Florida, as banks sold foreclosed properties.

The median price fell 14 percent to $169,000, the National Association of Realtors said today. Prices dropped in 134 of 152 metropolitan areas, with the deepest declines in Cape Coral and Ft. Myers, Florida, followed by San Francisco and San Jose.

Distressed sales increased transactions in 17 states from the fourth quarter as speculators and first-time buyers purchased bank-owned properties. Such homes typically sold for 20 percent less than others, the NAR said today. The inventory of previously owned homes on the market dropped to 3.7 million in March from 3.8 million a month earlier, according to NAR data. The number of new homes for sale fell to 311,000, the lowest since January 2002, according to the Commerce Department.

“There are a lot of forces pushing the market in different directions,” said Brian Bethune, economist at IHS Global Insight in Lexington, Massachusetts. “We’ve seen huge improvements in affordability, not only in prices but also in terms of mortgage rates below 5 percent, but what’s pushing down those prices is foreclosures and job losses.”

Large price declines = huge improvements in affordability. It’s all good!

Homeowners Turn to Renting, Waiting for Market to Recover

“Even with housing prices coming down, they are still too high for some people.” says Keenan. “They’d rather rent then buy.”

so its cheaper to rent than buy

“Renting isn’t always a perfect solution, however. While Smith says she’s avoided a loss from selling her Massachusetts condo, she’s still losing money as a landlord.

“The rent I get covers about 80 percent of the condo mortgage,” she says. “And I have to pay the mortgage taxes and the condo fee”

I see the owner is helping keep the rent low how nice

“The economy is driving many homeowners, particularly second homeowners to rent out,” says Denise Fraser, a spokesperson for HomeAway, an online vacation rental marketplace. “That’s because they can’t sell it at the price they want or are facing foreclosure. They need income so they rent.”

http://finance.yahoo.com/news/Homeowners-Turn-to-Renting-cnbc-15216285.html?sec=topStories&pos=1&asset=&ccode=

From Agora 5.

“Probably the single biggest drag on the economy over the next several years will be a massive write-down in perceived wealth,” writes famous fund manager Jeremy Grantham. “In the U.S., the total market value of housing, commercial real estate and stocks was about $50 trillion at the peak and fell below $30 trillion at the low. This loss of $20-23 trillion of perceived wealth in the U.S. alone (although it is not a drop in real wealth, which is comprised of a stock of educated workers and modern plants, etc.) is still enough to deliver a life-changing shock for hundreds of millions of people.

“No longer as rich as we thought — undersaved, underpensioned and realizing it — we will enter a less indulgent world, if a more realistic one, in which life is to be lived more frugally. Collectively, we will save more, spend less and waste less. It may not even be a less pleasant world when we get used to it, but for several years, it will cause a lot of readjustment problems.

“Not the least of these will be downward pressure on profit margins that for 20 years had benefited from rising asset prices sneaking through into margins.”

The recession has been over since April. They ring bells at tops and bottoms?

Are false-hope agricultural analogies the new black?

Greenspan Sees ‘Seeds of a Bottoming’ in U.S. Housing (Update1)

By Vivien Lou Chen and Dawn Kopecki

May 12 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said that the U.S. housing market may be on the verge of recovery and that it’s “very easy to see” financial markets continuing to improve.

“We are finally beginning to see the seeds of a bottoming” in the housing industry, Greenspan said today during a conference of the National Association of Realtors in Washington. The U.S. is “at the edge of a major liquidation” in the stock of unsold properties, which may help to stabilize prices, Greenspan said.

Home-sales figures in recent weeks have shown a slower pace of decline, and the slide in property prices has eased, according to gauges including the S&P/Case-Shiller index.

The former Fed chief, who was among the first prominent economists to warn about the risk of a recession in 2007, said housing prices could fall another 5 percent without putting too much strain on the economy.

“We run into trouble if it’s very significantly more than that,” Greenspan said. While the housing bottom may not be obvious in prices, it is becoming clear in “significant regional differences,” where some of the hardest-hit areas are starting to show signs of improvement, he said.

I am helping a client (naval officer) with relocating to San Diego. Anyone have suggestions on where to search for rentals (houses only). Thanks for the help.

Well gang, I think I am pulling the trigger on a home. Here me out, and yes, I know my timing isn’t great.

We found a home we really like. I’d say it is probably $50k overvalued. Could be a little more. I also know for the next 3 years this puppy isn’t going anywhere but down. But…we have waited years for a place like this to come on the market (unique location, views, etc.), so if we pass this one up we might have to wait a long time to get another one. The area is not subdivision tract houses. These are pretty custom homes built in the 1970’s.

In any case, I started thinking. Right now we rent. Let’s say the economy gets a lot worse, and we end up getting behind on our rent. Let’s just say it won’t be long before we are evicted. But if we buy and get behind, it would take 6 months before they even started foreclosure proceedings. And then we would have no limit of workouts and the like to help us. I know this is total bullshit to even factor this in, but we are basically naked without a home. Nobody is trying to figure out how to help renters that cannot make their rent on time. So it is partially a defensive move.

Interest rates are also low (4.75%) and because of the crappy market we can make a deal on our terms. But I know my timing is lousy. I know I won’t be making any money on this deal for A LONG TIME, if ever. But we can afford the payments, we will have good reserves, and it is in a location we want to retire to. So this is the last home we will buy.

Okay, flame away.

things that make you go hmmmmmmmmmm

“We are finally beginning to see the seeds of a bottoming” in housing, former Federal Reserve Chairman Alan Greenspan said at the Realtors’ midyear conference in Washington, though he cited the massive inventory of unsold properties as a big concern.

At the conference, discussion focused of how to turn around the beleaguered market. Real estate agents hope the $8,000 tax credit for first-time buyers included in the economic stimulus package signed by President Barack Obama earlier this year will boost sales.

But in high-priced areas such as New York City, it doesn’t make much of a difference for buyers. “It’s not really a major motivator for people,” said Robert Oppenheimer, a Re/Max broker in nearby Englewood Cliffs, N.J. “It’s almost an afterthought.”

Many in the real estate industry say that Congress should do more to stimulate housing demand.

“They need to go further,” said Robert Sibcy, president of Sibcy Cline Inc., a Cincinnati real estate agency, drawing applause from a crowd of real estate agents. “They need to do it for all buyers.”

Housing and Urban Development Secretary Shaun Donovan said the Federal Housing Administration soon will allow its borrowers to get short-term loans and turn the $8,000 tax credit into a down payment.

The tax credit, “is not only a tremendous opportunity for first-time home buyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing,” Donovan said, according to prepared remarks.

WASHINGTON (AP) — Mortgage giant Freddie Mac is looking for $6.1 billion in additional government aid as the cost to taxpayers from the housing market bust keeps growing.

The McLean, Virginia-based company, seized by federal regulators in September, on Tuesday posted a loss of $9.9 billion, or $3.14 per share, for the quarter ending March 31. That compared with a loss of $149 million, or 66 cents a share, in the year-ago period.

The results were driven by $8.8 billion in credit losses due to soaring delinquency rates and falling home prices, and $7.1 billion in writedowns of the value of its mortgage-backed securities. More than $63 billion of Freddie Mac’s loans were either 90 days overdue or in foreclosure at the end of March, nearly triple year-ago levels.

Muggy!!!

congrats!

(I’m taking forever to read all the posts so decided to post here, if you’re celebrating, that’s ok too)

RE: GM death watch

The comparison of the current share price to its April 27, 1933 level is bogus unless they took inflation into consideration. I am guessing the share price is somewhere in the neighborhood of $0.01 in 1933 dollars?

May 12, 2009, 4:30 p.m. EST
US Stocks Bounce Late; Oil Helps Dow, Hurts Nasdaq
By Rob Curran

NEW YORK (MarketWatch) — The financial sector and General Motors weighed down U.S. stocks again as Bank of New York Mellon, U.S. Bancorp and Bank of America raised capital.

The Dow Jones Industrial Average finished in positive territory as hopes for an economic recovery buoyed Exxon Mobil and Chevron and a broker issued a bullish note on Pfizer.

General Motors fell 29 cents, or 20%, to 1.15, its lowest close since April 27, 1933, according to the Center for Research on Securities Prices at the University of Chicago. As the auto giant lurched closer to bankruptcy, six executives dumped shares.

Why would GM execs be dumping shares now that the stock is depressed to 1933 levels, unless they believed the company was going to go BK?

This has been out there for a while; what do y’all think?

The G-20’s Secret Debt Solution
by Larry Edelson 11-13-08

If you think this weekend’s G-20 meetings in Washington are only about designing short-term fixes to the financial system and regulatory reforms for banks, hedge funds, brokers, mortgage companies and investment banks … think again.

Behind the scenes, a far more fundamental fix is being discussed — the possible revaluation of gold and the birth of an entirely new monetary system.

I’ve been studying this issue in great depth, all my life. And given the speed at which the financial crisis is unfolding, I would be very surprised if what I’m about to tell you now is not on the G-20 table this weekend.

Furthermore, I believe the end result will make my $2,270 price target for gold look conservative, to say the least. You’ll see why in a minute.

First, the G-20’s motive for a new monetary system: It’s driven by and based upon this very simple proposition …

“If we can’t print money fast enough to fend off another deflationary Great Depression, then let’s change the value of the money.”

I call it …“The G-20’s Secret Debt Solution”
The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.
The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.

Bloomburg - Oil Companies May Wait for Hedges to End to Go Bargain Shopping

And thus I wait with cash, if Exxon and these Hedge Funds are waiting so am I. When I see them start to make large purchases than I’ll start buying.

29 Detroit schools to be closed in the fallMay 12, 2009 9:32 PM ET

All Associated Press news DETROIT (AP) - The Detroit Public Schools will open next fall with 29 fewer schools as part of efforts by the district’s state-appointed emergency financial manager to cut into a budget deficit.

In addition, 40 other schools Robert Bobb said were “miserably failing” the troubled district’s students face restructuring.

Housing post.
‘Just saw an Indian Wells home, circa ‘63, 2,700′ estate sale. family lived in for over 40 yrs. Smoking home. ugh. Unless there is miracle paint, this home needs to be stripped down to studs to get out smell. Priced to sell? $499k. Just cause it is in the Indian Wells town.
I wouldn’t buy for 200k as the entire thing is wonky, but well built, however needs serious upgrading. Livable but …I say, down to studs, rework floor plan, get rid of half of concrete in backyard, re do pool, raise roof, add 400′ to make flow better.
So, with all that…we are talking at least 200k to redo outdated home, minimum. Like I said, livable but seriously outdated. Pink tile everywhere, as well as deep pink carpeting. “master Bath is in hallway, with sunken shower/bath with window to ….wait wait… large large utility room with giant Skylight.

Any flippers reading tonight? just as tempting as SKF and SRS? and whatchamacallits earlier in posts.

Is now the time to invest in Cape Corral RE???

Wall Street Journal

* REAL ESTATE
* MAY 13, 2009

U.S. Median House Price Declines 14%
…
The lowest median price among the metro areas was $30,300 in Saginaw, Mich., and the highest was $570,000 in Honolulu. Most of the areas with the lowest prices are in troubled parts of the industrial Midwest. But a glut of homes in Cape Coral-Fort Myers, Fla., pushed the median down 59% from a year earlier to $87,300 — ranking it just below Gary, Ind., which, at $92,000, was down 26%.

Sales of single-family homes and condominiums declined 6.8% from a year earlier to a seasonally adjusted annual rate of 4.6 million units. But sales were up sharply in some areas hardest hit by the housing bust, largely because bargain hunters were out in force. States with big sales increases from the depressed levels of a year before included Nevada (up 117%), California (81%) and Arizona (50%) and Florida (25%).

Rising unemployment and fears of more job losses are deterring many potential buyers. But others are encouraged by the lowest mortgage rates since the 1950s. In addition, the U.S. government is offering tax credits for certain home buyers before Dec. 1.

Must add to unread book list…

Wall Street Journal

* BOOKS
* MAY 13, 2009

Business Bookshelf
The Credit Crisis and Its Creation
An out-of-control free market or one distorted by regulation?

By JAMES FREEMAN

Gillian Tett’s “Fool’s Gold” concerns the financial meltdown of 2008, but it has the feel of a United Nations climate report in which the scientists gather the facts and the politicians write the executive summary. The book’s subtitle blames “Wall Street greed” for the credit disaster. The preface begins by asking: “Were the bankers mad? Were they evil? Or were they simply grotesquely greedy?” At the end, Ms. Tett sums up the history that led to the crisis: “For five long decades, American finance had worshiped at the altar of free-market ideals.”
…

Wall Street Journal

* REVIEW & OUTLOOK
* MAY 13, 2009

Geithner’s Revelation
He concedes that monetary policy was ‘too loose too long.’
…
Mr. Geithner: “But I would say there were three types of broad errors of policy and policy both here and around the world. One was that monetary policy around the world was too loose too long. And that created this just huge boom in asset prices, money chasing risk. People trying to get a higher return. That was just overwhelmingly powerful.”

Mr. Rose: “It was too easy.”

Mr. Geithner: “It was too easy, yes. In some ways less so here in the United States, but it was true globally. Real interest rates were very low for a long period of time.”

Mr. Rose: “Now, that’s an observation. The mistake was that monetary policy was not by the Fed, was not . . .”

Mr. Geithner: “Globally is what matters.”

Mr. Rose: “By central bankers around the world.”

Mr. Geithner: “Remember as the Fed started — the Fed started tightening earlier, but our long rates in the United States started to come down — even were coming down even as the Fed was tightening over that period of time, and partly because monetary policy around the world was too loose, and that kind of overwhelmed the efforts of the Fed to initially tighten. Now, but you know, we all bear a responsibility for that. I’m not trying to put it on the world.”

Mr. Geithner went on to cite a lack of supervision over bank risk-taking and the slow pace of government response to the problem — both of which are now conventional wisdom. But the real news here is Mr. Geithner’s concession that monetary policy was “too loose too long.” The Washington crowd has tried to place all of the blame for the panic on bankers, the better to absolve themselves. But as Mr. Geithner notes, Fed policy flooded the world with dollars that created a boom in asset prices and inspired the credit mania. Bankers made mistakes, but in part they were responding rationally to the subsidy for credit created by central bankers.

We disagree with Mr. Geithner on one point. He’s right that monetary policy needs to be considered in global terms, but he’s still too quick to pass the buck from the Fed to other central banks. The European Central Bank was much tighter than the Fed throughout this period. The Fed was by far the major monetary player because much of the world was on a dollar standard, with its monetary policy linked to the Fed’s. That was true of China, most of Asia and the Middle East.