The Housing Bubble

Having coffee and heading to the gym. No posts showing yet but I know you east coasters are up and stirring. Weather here turned cool again, all is good for the summer.

Freddie Mac Says Its Loss From Taylor Bean May Be ‘Significant’.

Aug. 10 (Bloomberg) — Freddie Mac, the mortgage-finance company under government control being supported by taxpayers, said the collapse of lender Taylor, Bean & Whitaker Mortgage Corp. may cause it “significant” losses.

Taylor Bean, the 12th-largest U.S. mortgage originator, shuttered its lending business last week after being suspended by U.S. agencies and Freddie Mac. The Federal Housing Administration cited possible financial-statement fraud.

The Ocala, Florida-based lender accounted for about 5.2 percent of Freddie Mac’s single-family mortgage purchases last year, according to a Securities and Exchange Commission filing by the McLean, Virginia-based company on Aug. 7. Freddie Mac can force lenders to repurchase defaulted loans that weren’t of the credit quality they represented, a use of its contracts already made harder by the collapses of IndyMac Bancorp., Washington Mutual Inc. and Lehman Brothers Holdings Inc., the company said.

“We are in the process of determining our total exposure to TBW in the event it cannot perform its contractual obligations to us,” Freddie Mac said in the filing. “The amount of our losses in such event could be significant.”

Lenders bought back $1.7 billion of home loans from Freddie Mac during the first six months of this year, up from $737 million during the same period of 2008, according to the filing. Lenders also can promise to cover Freddie Mac’s losses on bad mortgages without repurchasing the debt, the company said.

Also on Aug. 7, Freddie Mac, which has taken $50.7 billion of capital under a U.S. lifeline since being seized by regulators in September, reported its first profit in two years and said that it wouldn’t seek more U.S. Treasury aid.

Here’s how former hedge fund manager Andy Kessler summed it up last week in the Wall Street Journal:

“By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn’t put money directly into the stock market but he didn’t have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn’t go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.” (Andy Kessler, “The Bernanke Market” Wall Street Journal)

Only a small portion of the money that has gone into the stock market in the last 6 months (since the March lows) has come from money markets. The fed’s loans are being laundered into stocks via financial institutions that are rolling the dice for their own survival. The uptick in the markets has helped insolvent banks raise equity in the capital markets so they don’t have to grovel to Congress for another TARP bailout. Everybody’s elated with Bernanke’s latest bubble except working people who have seen their wages slashed by 4.5%, their credit lines cut, the home values plunge, and their living standards sink to third world levels. And the Fed’s spending-spree is not over yet; not by a long shot. The next wave of home foreclosures (already 1.9 million in the first half of 2009) is just around the corner–the Alt-As, option arms, prime loans. The $3.5 trillion commercial real estate market is capsizing. The under-capitalized banking system will need assistance. And there will have to be another round of fiscal stimulus for ailing consumers. Otherwise, foreign holders of US Treasurys will see that the US can no longer provide 25% of global demand and head for the exits.

Bernanke’s back is against the wall. The only thing he can do is print more money, shove it though the back door of the stock exchange and keep his fingers crossed. The rest is up to CNBC and the small army of media cheerleaders.

Good morning salinasron and all hbbers. Enjoy your work out this morning.

Housing Wizard or anyone else w/insight,

I was doing some research on a street the other day. Went and looked at tax records for the entire length. There was a notably large proportion of “arms length” sales for $1. The names were not the same.

Any idea what’s going on there?

The street is very stable. Most homes were last purchased in the early 90s.

Thank you for your time.

Toxic assets still festering

“The Congressional Oversight Panel says the economy is still at risk because bad loans remain on banks’ balance sheets.”

“Nobody really knows how big the pool of troubled assets is because there’s no agreed upon definition of troubled assets. The panel looked at “level three” assets, which are considered tough to put a value on. Among the top 19 stress tested financial firms, federal officials found $657.5 billion in “level 3″ assets in the first three months of 2009, a 14.3% hike in those assets from three months earlier.”

http://money.cnn.com/2009/08/11/news/economy/TARP_report/?postversion=2009081103

Oh yeah, those things. We almost forgot. ; )

Toxic assets may need more Treasury support.

http://www.reuters.com/article/ousiv/idUSTRE57A0JO20090811

Wonder what expletives Potty Mouth Timmay used to reply to that?

Unreal. I woke up this AM with the stark realization that the US, as we knew it, is done. As a result, I don’t feel so good today.

After seeing one of the greatest reverse-Robin Hood wealth transfers in our nation’s history play out in short order last fall, I cannot overstate my agreement with this author.

Yellen might be an interesting alternative. Think of it: First black president, first female Fed chairperson. And her husband is himself a Noble Laureate economist…

Let finance sceptics take over

The world needs a Fed chairman instinctively sceptical of financial markets and their social value

Dani Rodrik / August 11, 2009, 0:50 IST

What the world needs is a Fed chairman instinctively sceptical of financial markets and their social value.

The race is on to fill the most important economic policy position in the world. United States Federal Reserve Chairman Ben Bernanke’s term ends in January, and President Barack Obama must decide before then: either re-appoint Bernanke or go with someone else — the names most often mentioned are Larry Summers and Janet Yellen — with more solid Democratic credentials.

It is a decision of momentous consequence not just for the US, but also for the world economy. As guardians of the nation’s money supply and setters of short-term interest rates, central bankers have always played a critical role. Lower the interest rate too much, and inflation and monetary instability result. Raise it too much, and the economy slides into recession and unemployment.

Monetary policy is hardly a science, so a good central banker must be humble. He must appreciate the limits of his understanding and of the efficacy of the tools at his disposal. Yet he cannot afford to be perceived as indecisive, which would only invite destabilising financial speculation.

Indeed, as important as their functions are, in recent decades central banks have become even more significant as a consequence of the development of financial markets. Even when not formally designated as such, central banks have become the guardians of financial-market sanity. The dangers of failing at this task have been made painfully clear in the sub-prime mortgage debacle. Under Obama’s proposed new rules, the Fed will have even larger responsibilities, and will be charged with averting financial crises and ensuring that banks are not taking on too much risk.

This is a job at which former Fed Chairman Alan Greenspan proved to be a spectacular failure. His blind spot on financial-market excesses — the little “flaw” in his thinking, as he later termed — left him oblivious to the dangers of Wall Street titans’ financial innovations. As a member of the Fed’s Board of Governors under Greenspan during 2002-2005, Bernanke can also be faulted for having played along.
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News here in DC is going bonkers over the 10% year-to-year increase in sales for July. They even brought out the bought and paid for George Mason University economists to talk about how great this news was for the region. I thought those guys had been tarred, feathered, and run out of town, but apparently they were just in hibernation.

Report from the waterways of VT. I’m in the river portion of Champlain at the south end below Ft Ticonderoga. The marina I am in is something out of the 1950s. A stone warehouse built in 1810 serves as the marina office, showers that and above that the owner’s home. The place is small, but the people here are from all over N. America. The owner leaves the keys in his car, and anyone who needs to go to town can borrow it. Our dock neighbors filled our grocery list when they went to town like it was an obligation.

No bubble housing observations in this stretch, but numerous sailboats headed north with American names and ports painted on the stern and French Canadian owners taking their spoil home.

A hot shower is one of life’s greatest luxuries.

Wondering what is generating the tremendous upsurge in home sales at the height of the worst economic downturn since the 1930s? Look no further than Subprime Uncle Sam for the answer.

Wall Street Journal

* REVIEW & OUTLOOK
* AUGUST 11, 2009

The Next Fannie Mae
Ginnie Mae and FHA are becoming $1 trillion subprime guarantors.

Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too.

Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. (See the nearby table.) Earlier this summer, Reuters quoted Anthony Medici of the Housing Department’s Inspector General’s office as saying, “Who would have predicted that Ginnie Mae and Fannie Mae would have swapped positions” in loan volume?

Ginnie’s mission is to bundle, guarantee and then sell mortgages insured by the Federal Housing Administration, which is Uncle Sam’s home mortgage shop. Ginnie’s growth is a by-product of the FHA’s spectacular growth. The FHA now insures $560 billion of mortgages—quadruple the amount in 2006. Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee.

Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.
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We’ve long argued that Congress has a fiduciary duty to secure the safety and soundness of FHA through common sense reforms. Eliminate the 100% guarantee on FHA loans, so lenders have a greater financial incentive to insure the soundness of the loan; adopt the private sector convention of a 10% down payment, which would reduce foreclosures; and stop putting subprime loans that should have never been made in the first place on the federal balance sheet.

The housing lobby, which gets rich off FHA insurance, has long blocked these due-diligence reforms, saying there’s no threat to taxpayers. That’s what they also said about Fan and Fred—$400 billion ago.

Brain cancer “’so what, who cares’?”

Potential Acreage cancer cluster hurts home sales
By MITRA MALEK

Palm Beach Post Staff Writer

Monday, August 10, 2009

THE ACREAGE — Looming concerns over a potential cancer cluster in The Acreage are casting a pall over the community’s real estate.

At least one bank turned down a mortgage because of the scare, and buyers have backed out of deals. One young couple nearly lost the home they were about to close on because the lending bank wanted an official letter noting that a cluster hadn’t yet been confirmed. In the least, the pool of buyers has shrunk.

“People are holding off,” said Nancy Drysdale, who’s been selling homes in the area since 1978. “They’re kind of waiting for the state to give them an answer.”

The Florida Department of Health by the end of August is expected to determine whether a brain cancer cluster is in the central Palm Beach County community. Some residents suspect environmental contamination, and the state Department of Environmental Protection last week sampled water ahead of the DOH findings.

SunTrust Mortgage on Friday denied a credit request for one family to buy a house in the northern Acreage, citing “possible environmental hazard” and referencing the DOH investigation in its statement of denial.

“It’s common industry practice to not move forward with a loan if environmental questions are raised,” said SunTrust spokesman Michael McCoy. “That said, we are committed to working with our clients in the area on a case-by-case basis.”

It’s unclear how many other banks might be following suit.

“We’ve got nothing, no restrictions on anything there,” said Fred Solomon, a spokesman with PNC Financial Services Group, Inc.

But Solomon declined to comment on whether the bank had denied any mortgage requests because of the cancer investigation or environmental concerns.

Wells Fargo “is continuing to lend in the market in question,” said Kathy Harrison, a spokeswoman for Wachovia, a Wells Fargo company.

Without losing sight of the Federal Equal Credit Opportunity Act, banks generally craft their own underwriting guidelines, said John Hart, a real estate attorney with Carlton Fields in West Palm Beach.

“From a lender’s standpoint, if it turns out that there is an area that has significant environmental issues” and properties could be seriously devalued, “certainly the lender has a right to look at that,” Hart said.

Teresa Hans almost lost the Acreage home she’d hunted for since April when on July 28 - the day before she was scheduled to close - Wells Fargo said it needed a letter from the DOH stating that its investigation hadn’t concluded. The bank found out about the suspected cluster because Hans’ appraiser had made a note about it in his report.

Hans, who currently lives in The Acreage, got the letter late last week and is scheduled to close today. .

Vickie Meyer, of Re/Max Masters, said one of her Acreage home sales recently fell through because the buyer feared a cancer cluster. She’s had one recent sale in the area, and that was in June.

“You’re always going to have a certain percentage of people that are going to be very cautious and not buy,” Meyer said. “And you’ll have people with the attitude of, ’so what, who cares’?”

Is Toll Bros selling anything any more these days?

Wall Street Journal

* LARGE STOCK FOCUS
* AUGUST 11, 2009

Toll Brothers Slides; Hormel Climbs 5.8%

BY ANJALI CORDEIRO

NEW YORK — Stocks finished lower Monday as Priceline dot com jumped on earnings news, Best Buy fell on an analyst downgrade, and Toll Brothers slid with the rest of the housing sector.

Monday’s pullback came after stocks hit fresh 2009 highs Friday on data that showed a drop in the unemployment rate. Investors have increasingly begun to watch for signs the economy is beginning to rebound, and the jobs data helped feed that optimism.
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There has never been a better time to be a bear!

Indications

Aug 11, 2009, 8:19 a.m. EST
Stock-index futures flat ahead of productivity figures

By William L. Watts, MarketWatch

LONDON (MarketWatch) — U.S. stock index futures were mixed Tuesday, pointing to a flat start for Wall Street as the Federal Reserve begins its two-day monetary-policy meeting and traders await data on productivity in the second quarter.

S&P 500 futures fell 2.9 points to 1,004.60. Nasdaq 100 futures were down 3.5 points to 1,609. Futures on the Dow Jones Industrial Average fell 11 points.

Data to be released by the Labor Department at 8:30 a.m. Eastern are forecast to show second-quarter U.S. unit labor costs fell 5.3%, while productivity is expected to show a 5.4% increase, according to a survey of economists by MarketWatch.

Meanwhile, many strategists have grown skeptical of prospects for the market’s continued advance.

“So far, the market’s gains have been pretty spectacular,” wrote John Higgins, senior market economist at Capital Economics. “The S&P 500 is roughly 50% higher than it was on [March 9]. But if history is a useful guide, the rally is likely to run out of steam soon.”
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Krugman said the Fed had run out of bubbles. But he failed to recognize the tremendous potential for recycling them.

Paul B. Farrell
Aug 11, 2009, 12:01 a.m. EST
New bull, new bubble, new meltdown by 2012
Commentary: Brutal ‘collateral damage’ will follow recovery

By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) — Something’s in the air. You can feel it. A new bull. Hype? Maybe, but also a roaring new bull — and eventually another meltdown.
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New, bigger bubble — and a meltdown ahead

Yes, folks, a new bubble cycle is already in motion. You can feel the energy building, the kind that fueled the meltdowns of 1998, 2000 and 2007. We never resolved the problems fueling the dot-com insanity. We made matters worse feeding the subprime credit-derivatives disaster with cheap money, Reaganomics ideology and two costly wars. Lessons were never learned, nothing was resolved. Today matters continue deteriorating.

Behind the hoopla, the Wall Street conspiracy has dumped $23.7 trillion new bailout debt on taxpayers. The bill will come due. But for now, we’re getting their wish: A new bubble is accelerating, thanks to America’s “too-greedy-to-fail” Wall Street banks.

Folks, you can bet on it, sure as Regis is hosting “Who Wants to be a Millionaire?” The bull, a bubble, and another meltdown are virtually certain and accelerating faster than earlier cycles, coming by 2012. How to profit? Ride it up for a couple years, then pray you’ll have enough brain left to bail out in time before the crash (most don’t) because at that point the euphoria is blinding, like a cocaine addiction.

Want more proof of inevitability? Here are some visionaries who aren’t working for Wall Street’s hype machine: Michael Lewis, former Wall Street trader and author of “Panic: The Story of Modern Financial Insanity,” recently told Newsweek: “There’s a false sense that it’s over, that the crisis is passed.” The bailouts have merely postponed the inevitable. “We are in for another day of reckoning down the road.”

The next one will be bigger, “badder,” a real demolition derby. Several months ago, in a Vanity Fair article, “Wall Street Lays Another Egg,” Harvard financial historian Niall Ferguson sounded more like a shrink: “Markets are mirrors of the human psyche.” Like individuals “they can become depressed … even suffer complete breakdowns.”

The five stages of a bubble popping

In the 400-year history of stock markets “there has been a long succession of financial bubbles,” Ferguson says. “Time and again, asset prices have soared to unsustainable heights only to crash downward again.” It’s an all-too-familiar cycle, in fact, so familiar is this pattern — as described by the economic historian Charles Kindleberger — that it is possible to distill it into five stages:

1. Displacement: “Some change in economic circumstances creates new and profitable opportunities.” Last year’s historic bailout, election, new ideology.

2. Euphoria or overtrading: “A feedback process sets in whereby expectation of rising profits leads to rapid growth in asset prices.” Goldman is proof.

3. Mania and bubble: Prospects of “easy capital gains attract first-time investors and swindlers eager to mulct them of their money.” More bubbles: 2010-2011.

4. Distress: “Insiders discern that profits cannot possibly justify the now exorbitant price of the assets and begin to take profits.” Wall Street replays 2007-2008.

5. Revulsion or discredit: “Asset prices fall, the outsiders stampede for the exits, causing the bubble to burst.” Yes, 2008’s brutal meltdown repeats in 2012.

The culprit? The Fed, Ferguson says: “Without easy credit creation a true bubble cannot occur. That is why so many bubbles have their origins in the sins of omission and commission of central banks.” So the next bubble (and meltdown) is virtually certain, thanks to Washington’s $23.7 trillion explosion in debt.

Revolution coming with next meltdown
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Economic Report

Aug 11, 2009, 7:00 a.m. EST
China bank lending fell almost 77% in July

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) — Lending by Chinese banks slowed in July, softening the pace of growth in the nation’s broad money supply, following record loan issuance in the first half.

Data released Tuesday by the People’s Bank of China showed new loans for July totaled 355.9 billion yuan ($52 billion), down almost 77% from June’s 1.53 trillion yuan.

The latest figures brought total lending growth this year to 7.7 trillion yuan, a more than doubling from the first seven months of last year.

Of July’s loan figure, 236.5 billion yuan went to households while 119 billion yuan went to corporations, the smallest such issuance since November 2007.

“After the blowout in June (when 1.228 trillion of net loans were extended to corporations), a sharp slowdown was always going to happen, but this may still unnerve the market and is another signal that the momentum has dissipated,” wrote Standard Chartered analysts in a note Tuesday.
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SALARIES
Pay raises fall as bonuses rise

A new survey shows U.S. companies this year are doling out the lowest salary raises in the 33 years of the poll’s history, but are also devoting the largest portion yet of their payrolls to bonuses.
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Real estate slump blamed for Barratt American’s failure
Builder going out of business
By Roger Showley
Union-Tribune Staff Writer

2:00 a.m. August 11, 2009

Homes in La Costa stood unfinished in February after the project was foreclosed upon. The builder, Barratt American, is going out of business. - Earnie Grafton / Union-Tribune

“We’re not quite sure of all the liabilities.”

RICHARD M. KIPPERMAN, court-appointed trustee for Barratt American

Barratt American President Michael D. Pattinson (right) before a tour of a project in downtown San Diego in 2007.

Barratt American, once one of San Diego County’s leading home builders, is going out of business — a victim of the real estate slump and, perhaps, its expansion into pricey housing projects and big master-planned communities.

The company, which filed for Chapter 11 bankruptcy reorganization in December, agreed to switch to Chapter 7 bankruptcy liquidation last week after its creditors complained that reorganization would be “futile.”

Barratt President Michael D. “Mick” Pattinson, who with local management partners had acquired the company from its British owners in 2004 for $165 million, said yesterday that he intends to start a new company next year after learning the lessons of building in a boom and bust.

“Here’s the mistake we builders made — we went on building when we should have put our tools down and stopped work and said these land prices are ridiculous, the time to get entitlements is stupid and $100,000 per house in fees is unconscionable,” Pattinson said.

As national builders abandoned the San Diego market, local companies retrenched in line with slower demand. Through June, builders have obtained only 907 single-family-home building permits, down from 1,408 for the same period last year and 4,794 in the first half of 2005, the last boom year. Barratt is one of the few to go out of business completely.
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“It’s not a crime to be ignorant of economics…but it is irresponsible to have a loud and vociferous opinion on economic issues while remaining in that state of ignorance.”

~Murray Rothbard

I guess I am not the only USA citizen who views Main-Street-financed bonus payments to Wall Street managers who threw away billions of shareholder wealth as an abomination.

Judge puts brakes on BofA deal, criticizes bonuses
By Louise Story
NEW YORK TIMES NEWS SERVICE

2:00 a.m. August 11, 2009

NEW YORK — Reigniting a major controversy over Wall Street pay, a federal judge yesterday sharply criticized the bonuses that Merrill Lynch hurriedly paid out before it was acquired by Bank of America last year, and he pointedly questioned a federal settlement that had seemed to put the issue to rest.

A week after the Securities and Exchange Commission announced that it had settled the matter, Judge Jed Rakoff questioned whether the $33 million agreement with Bank of America was sufficient. Rakoff refused to approve the deal, saying too many questions remained unanswered, including who knew what and when about the controversial payouts.

His ruling prolongs what has become a major embarrassment for Bank of America and its chief executive, Ken Lewis, and also deals a stinging blow to the SEC. Rakoff ordered the bank and the commission to submit more information to him within two weeks.

During an at times heated hearing in New York, the judge was scathing about the settlement, in which the SEC accused Bank of America of misleading its shareholders. Bank of America neither admitted nor denied wrongdoing.

Bank of America and Merrill Lynch, Rakoff said, “effectively lied to their shareholders.” The $3.6 billion in bonuses paid by Merrill as the ailing brokerage giant was taken over by the bank was effectively “from Uncle Sam.”

The Merrill bonuses, which were the subject of a state investigation and prompted an outcry in Congress, were paid even though Merrill Lynch lost $27 billion last year. Its deepening red ink later forced Bank of America to seek a second taxpayer-funded bailout.

“Do Wall Street people expect to be paid large bonuses in years when their company lost $27 billion?” the judge asked.
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U.S. productivity rises at fastest pace in six years
http://finance.yahoo.com/news/US-productivity-rises-at-rb-1456518377.html?x=0&sec=topStories&pos=8&asset=&ccode=

“Analysts polled by Reuters had forecast productivity, which measures the hourly output per worker, rising at a 5.3 percent rate in the second quarter.
“It’s good because it helps keep inflation low; labor costs are pretty benign,” said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida.
“On the other hand it means you can do more with fewer people,” he said.”

What a novel concept. Let’s actually do our job….
Unfortunately, I still see a projects that could be done by one person but reponsibility is spread out to multiple people. It’s also funny when they do cut positions, employees with added responsibilities think it’s too much to handle and they start looking for another gravy train. But this time it’s different. Not like in the Dot Com era where you can hop from one job to another. Recent workforce from 2000-2007 never really experienced a major Recession. I remember my dad was layed off in the early eighties. It was a tough time. The time he got work (as an engineer) he worked his tail off to get more hours and when he finally became full time, he took on more responsibilties to make sure he is not the first one canned if they went through another round of layoffs. Luckily he retired from the same company. He once told me, it was a difficult job and many times he wanted to quit but he always looks back to when he didn’t have a job.

I’m somewhat a different breed since I specialize on a specific trade and projects lasts between 4-7 years. (I’m involved in 3 projects so my workload is high) I just remember what my dad said so I always try to learn more things, stay up to date with technology, get certified on other trades. I may have a bunch of unnecessary certifications but you’ll never know.

China’s Falling Exports, Loans Signal Stimulus Needed.

Aug. 11 (Bloomberg) — China’s exports and new loans tumbled in July and industrial output rose less than estimates, underscoring government concern that the world’s third-biggest economy is yet to establish a solid recovery.

Exports fell 23 percent from a year earlier, the customs bureau said. Industrial production gained 10.8 percent, the statistics bureau reported. New loans plunged to 355.9 billion yuan ($52 billion), less than a quarter of June’s level, the central bank said.

China will maintain a “moderately loose” monetary policy and “proactive” fiscal stance to bolster domestic spending in the face of slumping exports, Premier Wen Jiabao said Aug. 9. New loans fell as the government and banks moved to avert bad debt and bubbles in stocks and property after a record $1.1 trillion of lending in the first half helped drive a 7.9 percent economic expansion in the second quarter.

“There’s an element of fragility in the recovery,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale in Hong Kong. “The government needs an appropriately loose monetary policy.”

Oh happy happy joy joy. Boise is the center of an article on housing in Time.

http://www.time.com/time/magazine/article/0,9171,1913763-1,00.html

By last winter, the game had changed. When the couple started looking at houses again, they found plenty in their price range. The western suburbs of Boise, Idaho — four- and five-year-old neighborhoods scattered among hay farms and potato fields — are no longer a favorite stomping ground of out-of-state speculators, no longer a surefire way to get rich in real estate.

This, you might be asking, is the good news? Well, yes, it is, because a housing recovery isn’t just about bottoming out on price. What is more important for a healthy market is that there be a prevailing logic or reason — rooted in local neighborhoods, in local economies — for houses to cost what they do.

Oh, gee, look, the markets are down today. I almost didn’t notice as I was watching Arlen Specter get raked over the coals over the healthcare reform bill.

CIT shares drop on bankruptcy warning…

NEW YORK (Reuters) - Troubled lender CIT Group Inc said on Tuesday it has delayed filing its second-quarter report with regulators and said if it could not complete its debt tender or arrange other financing, it would file for bankruptcy.

CIT is still reviewing assets and businesses that it may sell as well as the related valuation adjustments that must be included in the quarterly report, it said in a filing with the U.S. Securities and Exchange Commission.

New York-based CIT, which last month secured $3 billion in emergency funding from bondholders, has been battling to restructure its debt and avoid bankruptcy.

The company has launched a tender offer for its outstanding $1 billion floating-rate notes due August 17. In a filing on Tuesday, it said if this offer were successful, it would use the proceeds from its emergency funding to complete the tender and make the payment on the August 17 notes.

The 101-year-old lender had already postponed its results, originally expected on July 23, while arranging the emergency funding. It said last month it expected a second-quarter loss of more than $1.5 billion.

Shares in the company slipped slightly to $1.46 in premarket trading, down from $1.48 on Monday.

I was at a client Friday close to closing time. One of the girls in the office was very excited because she and her boy freind were going house shopping. They’re interested in a particular house but it needs some work. That’s OK because boyfriend is unemployed and “has plenty of time to work on the place”. The company she works for is very slow, and she’s pretty low on the totem pole. I would be scared to death to buy a house under these circumstances but then, I think, what do they have to lose? They use Uncle Sam’s $8K first time buyers credit to get in with little or no money of their own… Worst case, they live in the place a year or more rent free, then walk. What a country!

Hi. Cash must be king. Got a flyer yesterday from American Express. They are offering a 1.85% APY FDIC insured savings account - no mininum balance, no fees. Did not know they were in that business.
On the way to work saw a Citibank ad in lobby of my office building. $100 for you and $100 for the person you refer for a new account. Four types accounts were listed. Did not read closely some were business. But one was CitiGold which I have. Not as golden as it sounds. I think the mininum balace is $5K and you need direct deposit for paycheck.

Wholesale inventories fall for record 10th straight month but sales post second straight gain…Tuesday August 11, 2009, 10:28 am EDT

WASHINGTON (AP) — Businesses slashed inventories at the wholesale level for a record 10th consecutive month in June, a decline that has contributed to the longest recession since World War II.

The Commerce Department said Tuesday that wholesale inventories declined 1.7 percent in June, nearly double the 0.9 percent decrease economists had expected.

But in an encouraging sign, sales rose 0.4 percent for a second straight month, the first back-to-back increases in a year.

The hope is that a rebound in sales will encourage businesses to switch from reducing their stockpiles to building up inventories to meet rising demand. That change would generate rising orders to U.S. factories, helping to support a rebound in the overall economy.

The 1.7 percent drop in June inventories followed a 1.2 percent reduction in May and marked the 10th straight decline. That record stretch surpassed the old mark of nine straight declines from June 2001 to February 2002, during the last recession. The government’s records go back to 1992.

The latest inventory drop left the inventory to sales ratio at 1.26, meaning it would take 1.26 months to exhaust stockpiles at the June sales pace. That was slightly lower than the 1.28 ratio in May, but still well above the 1.11 inventory to sales ratio of a year ago.

Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest.

The 0.4 percent increases in sales in June and May were the first consecutive gains since sales rose for four straight months in March to June of last year. Starting in July, sales had fallen every month until rising in May.

Spun numbers, wishful thinking, the last vestiges of paper millionaire-dom, or evidence that thriftiness is alive and well in our nation’s youth?

In Study, Most Graduates’ Debt Load Is Manageable
By TAMAR LEWIN, New York Times
August 11, 2009

About a third of all students who earned bachelor’s degrees in 2007-8 graduated with no debt at all, about the same share as in the 2003-4 academic year, according to a policy brief released Tuesday by the College Board.

“People think students are drowning in debt, and there is a small proportion of students that borrow an exorbitant amount, but most students graduate with a manageable debt load,” said Sandy Baum, an author of the brief.

For bachelor’s degree recipients who did borrow, the median loan debt was $19,999, up 5 percent from $18,973 four years earlier. The data, the latest available, come from the federal Department of Education’s National Postsecondary Student Aid Study, which is conducted every four years.

About 6 percent of those who completed a degree or certificate — and 10 percent of those who received a bachelor’s degree — borrowed more than $40,000, the brief said.

I found an REO I want to bid on. It is in the $600’s and I want to bid $300k cash. Do you think banks care if it is cash or a loan? I am sure the realturd will just laugh. I need to find out what bank has it, maybe I can go direct? I could not find it on Reality Trac, is there a better REO source?

One of our previous lowball receivers called and asked us to resubmit our lowball. (With a hint that bringing it up a little bit would help.)

We talked it over and decided that we still really did like the house, so we sent back our original offer. We felt we were being EXTREMELY generous with that move. If they do anything but accept, that’s the last time they’ll see an offer from us. (At least at that price.)

Bob Prechter “Quite Sure” Next Wave Down Will Be Bigger and March Lows Will Break.
Posted Aug 11, 2009 11:52am EDT by Aaron Task

In late February, Robert Prechter of Elliott Wave International said “cover your shorts,” and predicted a sharp rally that would take the S&P into the 1000 to 1100 range.
With that prediction having come to pass, Prechter is now saying investors should “step aside” from long positions, and speculators should “start looking at the short side.”

“The big question is whether the rally is over,” Prechter says, suggesting “countertrend moves can be tricky” to predict. But the veteran market watcher is “quite sure the next wave down is going to be larger than what we’ve already experienced,” and take major averages well below their March 2009 lows.

Yes, the late 2007-early 2009 market debacle was just a warm-up to what Prechter believes will be the bear market’s main attraction. In this regard, he says the current cycle will echo past post-bubble periods such as America in the 1930s and England in the 1720s, after the bursting of the South Sea bubble.

The 2000 market peak market a “major trend change” for the market from a very long-term cycle perspective, and the downside is going to continue to be painful well into the next decade, Prechter says. “The extreme overvaluation, the manic buying and bubbles in the late 1990s [and] mid-2000s are for the history books - they’re very large,” he says. “The bear market is going to have balance that out with some sort of significant retrenchment.”

Adult entertainment industry faces demand shrinkage:

COMPANY TOWN
Tough times in the porn industry

Ann Johansson / For The LA Times

Adult entertainment actress Savannah Stern, whose income has dropped because of the rapid decline in job opportunities in the porn business, is replacing her Mercedes-Benz with a used car from her parents.

The business, centered in the San Fernando Valley, is being undercut by a growing abundance of free content on the Internet.

By Ben Fritz
August 10, 2009

On a recent Saturday night, Savannah Stern earned $300 to hang out for seven hours at a party in Santa Monica wearing nothing but a feather boa.

The veteran of more than 350 hard-core pornography productions took the job to earn extra cash and to network. But the word at the 35th anniversary party for Hustler magazine was not heartening, especially among the roughly 75 other women working there.

“At least five girls I haven’t seen in a while came up to me and said, ‘Savannah, are you working?’ ” said Stern, who started in the industry four years ago and, like most adult performers, uses a stage name. “I had to say, ‘No, not really,’ and they all said, ‘Yeah, I’m not either.’ ”
…

Keep’um drunk and kicking off early… less hassle.

Report: Alcohol Responsible for 50 Percent of Russian Deaths
Tuesday, August 11, 2009

Russia is grappling with a major public health crisis in which residents are essentially drinking and smoking themselves to death, according to the country’s public health officials.

About a million Russians die each year from alcohol- and smoking-related causes — between 600,000 and 700,000 of those deaths are attributed to drinking alone, Andrei Demin, of Russia’s Public Health Association, told Fox News.

“It’s threatening the future of the country,” he said.

The problem? Unlike other countries, Russia has refused to levy hefty taxes on cigarettes and alcohol to discourage drinking and smoking.

The resulting statistics are staggering:

— The average Russian drinks 50 bottles of vodka a year.

— A bottle of beer can be purchased on the street for less than the cost of a bottle of water.

— Twelve million of Russia’s 141 million residents have died over the past 15 years due to alcohol-and smoking-related causes.

— A pack of cigarettes can be purchased for about 30 cents.

— The average Russian male lives to be 60 years old, dying 15 years earlier than his American counterpart. Russian women die 13 years earlier than American women.

Although the country has launched a series of television commercials encouraging Russians to choose healthier lifestyles, many critics say this is of little benefit.

So far, Russian President Vladimir Putin has refused recommendations to raise taxes on cigarettes and alcohol, with some health critics saying the Kremlin would like the Russian public to stay “pacified and anesthetized.”

Isn’t it a little too convenient that OPEC, several months back, had called $70 per barrel oil a “fair price”, and the price of crude is, coincidentally, hovering right around that mark?

Guess what, dummies? The credit bubble is not history yet. In fact, reflation efforts are in overdrive at the moment.

Try not to catch yourself a falling-knife REIT.

market pulse

Aug 11, 2009, 11:57 a.m. EST
REITs’ capital raises a good sign: analyst

BOSTON (MarketWatch) — Recent capital raises by real estate investment trusts Tander Factory Outlet Centers Inc. (SKT 35.55, -2.56, -6.72%) , Federal Realty Investment Trust (FRT 60.20, +0.08, +0.13%) and Simon Property Group Inc. (SPG 63.03, -1.47, -2.28%) “demonstrate that capital markets have improved for financially sound REITs and capital is available again on reasonable terms for REITs with sound balance sheets,” said Morningstar Inc. analyst Todd Lukasik. “We continue to believe that credit will be priced significantly higher than it was during the credit bubble for highly leveraged REITs, if it is available at all,” the analyst wrote in a research note Tuesday.
…

Nothing like a hairy potbellied no butt dude strolling around the resort…

Theme Park Cracks Down On Skin-Tight Trunks
UK, Tuesday August 11, 2009 Sky News Online

A surge in men wearing unsightly Speedos has prompted Alton Towers to revise its poolside dress code.

Not family friendly, says Alton Towers

The theme park is considering a ban on Speedos after hot weather at the weekend led to a surprise resurgence of the infamously graphic form of swimwear.

Bosses at the holiday attraction may also introduce mandatory male bikini waxes “to prevent unsightly hair from being on display”.

“With the heatwave over the weekend, we saw a big increase in men wearing tight Speedos,” PR manager Rachael Lockitt told Sky News Online.

“Plans are in place to introduce a ban, should this continue. We are a family resort and we don’t want children asking questions.”

She added that at present, men wearing Speedos would be asked to reconsider their choice of outfit.

But if the situation gets any worse a full ban will be brought in.

A statement released by Alton Towers read: “While women may hail the return of the skimpy bathers, the style itself is not deemed public or family friendly.

“Therefore we are requesting that male swimmers wear more appropriate styles such as boardshorts.”

It added that Speedos, favoured by the likes of Rod Stewart and footballer Cristiano Ronaldo, are “more suited to Spain than Staffordshire”.

The next meteor shower is the Perseids on August 12, 2009. The shower peaks early afternoon on the 12th, so the morning of the 12th (midnight to dawn) and late evening are the best times to watch from the U.S.

12:00 A.M Central, until 5:00 A.M. !! Be there or be square!!

I see that a Madoff “associate” is now talking, offering a glimpse into the giant Ponzi scheme which likely involved hundreds of participants. I wouldn’t be surprised to find the SEC was involved, though it would likely be covered up. It’s finally blatantly apparent that crime pays big in this country, and the people who play by the rules are the suckers. Case in point: the bailouts for crooked wealthy bankers, addicted to bonuses, at the expense of the hard working taxpayer. Perhaps the correct play for J6P, from here on out, is to stiff the banks, the IRS, and all other corps, and just drop out.

Feds force Westchester to build affordable housing
Mon, Aug 10, 2009
Featured posts, Real Estate

Westchester County will build 750 units of affordable housing in mostly white areas to settle a federal fair housing lawsuit, according to a statement from the U.S. Department of Justice.

The U.S. Attorney’s office filed the suit claiming that Westchester received federal community development grants to build affordable housing, but it hasn’t “assured that the housing is fully available to all residents of the community.”

Having failed to identify impediments to fair housing based on race or ethnicity, the feds say the county took no corrective action. As a result, the county’s production and placement of affordable housing may have perpetuated or increased racial and ethnic segregation in the area, the statement said.

As part of the settlement, Westchester has agreed to use $30 million of its funds to build affordable housing and pay the U.S. an additional $30 million, much of which will later be made available to the county for more housing. The county will also have to submit to the oversight and enforcement authority of a court-appointed monitor.

The Anti-Discrimination Center of Metro New York, a fair-housing advocacy group, which filed the initial complaint against the county, will get $7.5 million as part of the False Claims Act settlement.

Acting United States Attorney Lev Dassin said local governments that accept Housing and Urban Development grants undertake “a serious commitment and responsibility to affirmatively further fair housing”.

“This groundbreaking agreement with Westchester County will ensure that hundreds of new units of housing are built to be not only affordable, but fully available throughout the community,” Dessin said in the statement.

Sergey Update: Goldman Motion To Quash Subpoena Denied

NEW YORK, Aug 10 (Reuters) - A U.S. judge on Monday denied a motion by Goldman Sachs Group Inc (GS.N) to quash a request for personnel information on a former computer programmer accused of stealing trade secrets from the firm.

Judge Paul Crotty in Manhattan federal court ordered the firm to provide the programmer’s lawyer with documents from the personnel file of Sergey Aleynikov, who faces criminal charges of stealing Goldman code used in trading.

The lawyer subpoenaed Goldman for the file last week and the firm submitted a motion to quash the request.

What happened to Oly?

RECORD NUMBER OF FORECLOSURES SCHEDULED FOR SALE
California Foreclosure Prevention Act fails to slow filings
Discovery Bay, CA, August 11, 2009 –
ForeclosureRadar , the only
website that tracks every California foreclosure and provides daily auction updates, issued its monthly
California Foreclosure Report for July 2009. Once again, foreclosure stats were mixed, with Notice of
Default filings flat, Notice of Trustee Sale filings rising by 31.6 percent and foreclosure sales dropping
22.7 percent. The number of properties scheduled for foreclosure sale – new Notices of Trustee Sale
minus those sales that have cancelled or sold – rose to a record level of 124,874, nearly double the levels
reached during the foreclosure peak last year.
High-level findings for July 2009 include:
o Filings of new Notices of Default were little changed from June at 44,996 filings, a 1.5 percent
decrease. Year-over-year filings rose by 11.9 percent from July 2008.
o Notice of Trustee Sale filings bounced back after dropping in June to 39,294; a 31.6 percent
increase over the prior month, and a 0.7 percent increase over the prior year. The California
Foreclosure Prevention Act, which adds 90 days prior to the filing of the Notice of Trustee Sale
for lenders that do not have a comprehensive loan modification plan in place, had only a fleeting
impact last month; with Notice of Trustee Sale filings hitting their second highest level on record
in July, just two weeks after the law took affect.
o After increasing for 3 consecutive months, foreclosure auction sales dropped by 22.7 percent to a
total of 17,239, with a combined loan value of $8.08 Billion dollars. Year-over-year sales
dropped a substantial 40.1 percent, with July 2008 having the highest level of foreclosure sales
on record at 28,795. Opening bids set by lenders were an average of 39.1 percent lower than the
loan balance, with 45.0 percent of sales discounted by 50.0 percent or more.
o Sales to third party bidders were flat from June, with 2,683 foreclosures sold to investors, or in
increasingly rare instances, junior lenders. As a percentage of total sales, sales to third parties
continued to increase; though lenders still took back 84.4 percent of foreclosures at auction,
representing 14,555 loans, with a total of $6.93 Billion dollars in loan value.
o Foreclosures scheduled for sale rose to 124,874, a 10.4 percent increase from the prior month,
and a 93.3 percent increase year-over-year from July 2008. The year-over-year increase is
significant given that foreclosure sales in July 2008 set a record that has not again been reached.
The increase appears to be primarily due to the fact that lenders are willingly postponing
foreclosure sales.
o The new “Home Affordable” loan modification plans now include a 3-month trial. It is our
understanding that foreclosures are not cancelled until the completion of this trial period. As
such, we believe monitoring the cancellation of scheduled foreclosures should provide some
insight into the effectiveness of this program, as successful trials should result in cancelled
foreclosures. We had a record number of cancellations in July at 10,789, a 24.8 percent increase
over the prior month and an 86.3 percent increase year-over-year. It should be noted, however,
that as a percentage of the foreclosures actively scheduled for sale, there was little change from
prior months. It appears that the significant increase is primarily due to the high number of
foreclosures that are scheduled for sale, but postponing rather than selling.
“Despite the failure of the California Foreclosure Prevention Act to slow Notice of Trustee Sale
filings it is clear that lenders and servicers are delaying foreclosure” says Sean O’Toole, founder and
CEO of ForeclosureRadar. “More homeowners are now sitting at the brink of foreclosure, just days
away from the next scheduled auction date, then ever before, yet we simply aren’t seeing the wave of
foreclosures many predicted.”
Political pressure, financial incentives and the postponement of sales awaiting the completion of loan
modification trial periods are likely reasons for the delays. The vast majority of foreclosures, 72 percent,
are postponing either due to lenders request, or mutual agreement between the lender and borrower.
Only 10 percent are being postponed due to bankruptcy. With few exceptions the remainder have not yet
been postponed and are scheduled for their first sale date.
The average California foreclosure has a total loan balance of $425,134 on a home that is now worth
$236,739. While negative equity is a prerequisite for the vast majority of foreclosures in California, the
degree of negative equity varies a great deal by location. Foreclosures in Santa Cruz County had loan
balances just 110 percent of the current estimated value, while Foreclosures in Merced County had loan
balances an average 283 percent higher than the estimated value. The Bay Area counties of Santa Cruz,
San Francisco, Marin, San Mateo were among the least underwater. Inland counties including Merced,
San Joaquin, Stanislaus, Solono, Sacramento, San Bernardino, and Riverside were among the most
underwater.

“From FT.com:McDonald’s expansion into fancy coffees under the McCafé brand is part of a strategy to capture more customers at breakfast time and win them over from coffee chains to its lower-priced drinks.

The move has forced Starbucks to defend its brand. It has been running marketing campaigns with the slogan: “It’s not just coffee. It’s Starbucks.”

In the US, McDonald’s is selling espressos and mochas in its existing stores.

In Europe, it is emulating its Australian business and opening separate McCafé counters, operating in or next to its restaurants. The group plans to have 1,200 McCafés in Europe by the end of the year.”

I guess that when dollars count, cheaper always wins out. If that is the case, then why all the allure to things like overpaying for a gucci purse, BMW, Rolex, etc? Just because you get a windfall in money (HELOC, etc) why waste it?

“Daniel Wagner: MyWayNews:
Owners of shopping malls, hotels and offices have been defaulting on their loans at an alarming rate, and the commercial real estate market isn’t expected to hit bottom for three more years, industry experts have warned. Delinquency rates on commercial loans have doubled in the past year to 7 percent as more companies downsize and retailers close their doors, according to the Federal Reserve.”

Why haven’t we heard this on the alphabet MSM channels? Why is the media so remiss in doing their duty as a watchdog for the American public? I guess when you have big companies like GE who have moved from the commodity side to the service side, to include banking and MSM outlets, it’s to be expected! Where are the outcries?

Do Congress folks really hang out under rocks?

* The Wall Street Journal
* REAL ESTATE
* AUGUST 11, 2009, 4:23 P.M. ET

Home Builders Group Struggles to Lower Costs

By JAMES R. HAGERTY
…
The need to slash costs results from a steep drop in fees from members. The number of member companies has fallen to about 190,000 from a peak of 256,000 in May 2007, Mr. Howard said. Although Mr. Howard said “we are starting to see a bottom in the housing market,” he added that home builders remain under severe pressure. “We’re not in a recovery mode yet,” he said, and the group’s membership may fall further.

As a result, he said, “we’re looking under every rock” for cost savings and new sources of revenue.

In its lobbying, the association is asking Congress to extend and expand a tax break for home buyers, enhance tax benefits for builders and encourage more bank lending to builders, among other things.

http://www.investopedia.com/terms/s/structured-investment-vehicle.asp

Hoz - Dumb bet, pay up!

R.I.P.

Best,
Leigh

Just because we loathe Obama doesn’t mean we love Republicans:

To The RNC: WAKE UP
I just received one of the famous “fundraising calls” from the RNC.

They were soliciting people to give them money (and tried for slightly over $3k!) to “stop Obama’s Health Care plan that will cost $1 trillion.”

Oh boy did that poor sap get an earful.

I “explained” that:

•$1 trillion is a lot of money. $12 trillion is a lot more, and that’s how much the RNC has allowed to be pissed away backstopping and rewarding people who have stolen from the American people through bailouts and handouts, all of which have gone to the very people doing the stealing!
•John McCain, to whom I gave a significant campaign donation, returned my favor by suspending his campaign to push through the EESA/TARP, a bill that by 300:1 margins the American People opposed.
•If the Republicans are the party of the people why is it that they are allowing these bankers to steal over $30 billion dollars by re-ordering transactions to generate the MAXIMUM in overdraft fees? That’s FRAUD and yet it was under a REPUBLICAN administration that this happened.
•The Republicans have for years presented themselves as “conservatives” and the party of “family values.” Why is it that “conservative” doesn’t include calling for EACH AND EVERY ONE OF THESE SCAMMERS TO BE THROWN IN PRISON and WHY IS IT THAT I KEEP HEARING ABOUT SOME FLOOZY SCANDAL FROM THESE SO-CALLED “FAMILY VALUES” CHAMPIONS?
•The ONLY difference between the RNC and DNC is that the DNC tells me up front that the Democrats intend to gang-rape me at the outset. The Republicans claim to intend to protect me, but then after I lower my guard I am violated from behind without warning. This is unacceptable but if I am forced to choose between being warned first and being lied to I’ll take the warning thank you very little.
(From K. Denninger)

Sounds like there are something like 25 systemically important megafirms which need to be broken up into smaller pieces in order to protect Main Street American wallets from future bank robberies by Wall Street insiders.

Bernanke Says About 25 Financial Firms Systemically Important
By Scott Lanman

July 24 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said about 25 financial companies may be deemed too big to fail and subjected to additional oversight by the central bank under the Obama administration’s proposed regulatory plan.

Twenty-five is a “very rough guess,” and “virtually all of those firms” are already subject to umbrella supervision by the central bank, Bernanke said in response to a question from Representative John Campbell, a California Republican, during a House Financial Services Committee hearing today. He didn’t identify any of the companies.
…
Let me see if I can help out the reporter:

1. J P Morgan
2. Goldman Sachs
3. Citigroup
4. Wells Fargo
5. Bank of America
6. AIG
7. GMAC
8. Countrywide
9. Fannie Mae
10. Freddie Mac
11. Lehman Brothers
12. Bear Stearns
13. Washington Mutual
14. GM
15. IndyMac
…

totally o/t

He might want a bikini wax too:
http://uk.news.yahoo.com/18/20090805/tod-saudi-businessman-orders-solid-gold-7f81b96.html

INTERVIEW
Taxpayers to Fed: Show Us the Money
An analyst says the central bank is too secretive.
By Anne Kates Smith, Senior Associate Editor
From Kiplinger’s Personal Finance magazine, September 2009

A bill that would give government auditors more access to the Fed’s books is gaining momentum in Congress. Dean Baker, co-director of the Center for Economic and Policy Research, in Washington, D.C., supports the idea.

You’ve been an outspoken advocate of auditing the Fed. How come?

Think about all the concern over the $800 billion spent through the Treasury’s Troubled Asset Relief Program. Yet the Fed has more than doubled its balance sheet to nearly $2 trillion. You can see on the Fed’s Web site how much has gone to each of its lending facilities. But you don’t know how much Citibank might have borrowed, or Goldman Sachs.

I don’t understand all the secrecy. It’s the public’s money, not Ben Bernanke’s. I don’t assume the Fed has done anything improper — but it’s a huge amount of money and there’s no accountability.

What do you want to see in an audit?

My main focus is what happened to that money in the bailout. Who got what, and under what conditions? What was the collateral? There’s concern that the Fed relaxed standards for money it lent during the financial crisis. Are there banks that didn’t pay it back? Banks behind in the payback schedule?

I don’t want the Fed audited gratuitously, just an accounting at regular periods. If once a year is too onerous, then maybe once every two years.

Won’t greater scrutiny discourage some companies from participating in relief programs or seeking needed emergency funds?

I’m willing to live with companies facing greater scrutiny. If they need a lifeline and don’t take it, they’ll have to explain why to their shareholders.

Is an expanded audit a threat to the Fed’s political independence?

I have a hard time seeing how an audit would interfere with setting monetary policy. That is an area where the Fed is more open and transparent than it used to be anyway. And the Fed has independence in the sense that Bernanke and the other governors can’t get fired easily. But they should have to explain their actions to Congress.

Over the past decade — and probably further back — the problem hasn’t been that the Fed has been too influenced by Congress. The problem has been that it isn’t sufficiently independent of Wall Street. An audit will shed more light on the relationships between the Fed and the banks it’s doing business with.

The Christian Science Monitor

Opinion
End the Fed? A not-so-crazy idea.

Congressman Ron Paul’s bill may never pass, but history suggests the US economy would be better off without the Federal Reserve.
By George Selgin

from the August 3, 2009 edition

Athens, Ga. - Since it was introduced in February, Representative Ron Paul’s “Audit the Fed” bill (H.R. 1207) has gained 282 congressional cosponsors. If adopted, the bill would allow the Government Accountability Office to review, not only the Federal Reserve’s balance sheet, but its recent monetary policy deliberations and transactions.

Fed Chairman Ben Bernanke opposes the plan, saying it would undermine the Fed’s hallowed independence.

But Mr. Paul, a noted libertarian who ran for president last year, also wants to keep the Fed out of Congress’s clutches – by scrapping it altogether. That’s the goal of his follow-up Federal Reserve Board Abolition Act (H.R. 833). Although that measure has yet to gain a single cosponsor, it has plenty of grass-roots support, and Paul hopes that members of Congress will jump on the bandwagon once their eyes are opened by a no-holds-barred audit.

Wacky stuff? Well, if not having a ghost of a chance is enough to make a bill bonkers, Paul’s measure probably qualifies. But that doesn’t mean you’ve got to be crazy to believe that the US economy would be better off without the Fed.

The Fed’s apologists suggest otherwise, of course. They note that the US spent nearly half the years between 1854 to 1913 in recession, as opposed to just 21 percent of the time since the Fed’s establishment in 1913. Who would want to go back to those bad old days?

But consider: the US economy has actually grown less rapidly since 1914 than it did before. And inflation has been much worse, despite both the Civil War, which featured the nation’s worst inflation, and the Great Depression, which featured its severest deflation!
…

Jon Stewart’s Daily Show certainly is one of the best things to ever happen to America. After watching him take down one of the Obamanomics Team members using comments peppered with terms like “too-big-to-fail”, “trust busting” and “pitchforks”, I can’t really tell whether he is channeling us or we are merely channeling the Zeitgeist. Either way, this interview is not to be missed!

You can find the entire interview here:

http://www.thedailyshow.com/