The Housing Bubble

Buffett’s ‘Dangerous Business’ Ensnares Municipal Bond Insurers.

Feb. 19 (Bloomberg) — Forewarned bankruptcies linked to infrastructure projects from Las Vegas to Harrisburg, Pennsylvania, may prove Warren Buffett’s conclusion that insuring municipal bonds is a “dangerous business.”

Ambac Financial Group Inc., the second biggest bond insurer, faces as much as $1.2 billion in claims if a judge in Nevada allows Las Vegas Monorail Co., which runs a train connecting the city’s casinos, to reorganize in Chapter 11 bankruptcy. The City Council of Pennsylvania’s state capital shelved a plan to sell taxpayer-owned assets to meet payments on $288 million of debt used for an incinerator funded in part with bonds insured by a unit of Bermuda-based Assured Guaranty Ltd. Harrisburg is weighing a possible bankruptcy filing.

With state tax collections last year through September showing the biggest drop since at least 1963, as measured by the Nelson A. Rockefeller Institute of Government in Albany, New York, local governments are seeking concessions from creditors of public projects, including bond insurers. The moves further threaten companies backing $1.16 trillion of public debt that already face $11.6 billion of claims on collapsed securities backed by mortgages.

“It is a worst-case scenario if the dynamics of the municipal bond market change,” said Rob Haines, an analyst who covers the bond insurance business at CreditSights Inc., an independent research firm in New York. “The companies have modeled in virtually no losses.”

A little good news for California, appears that LA will be trimming some fat…

City Council Votes to Cut 4,000 Jobs ~ NBC News

The 9-3 vote came a day after a major credit-rating agency put the city on its negative watch list.

Faced with a growing budget deficit and an endangered credit rating, the Los Angeles City Council voted Thursday to eliminate 4,000 municipal jobs by July 1.

The council instructed “all departments and offices of the city, including elected offices, to expedite the elimination of 4,000 positions by any means necessary, including layoffs.” Under the council’s instruction, the positions must be identified within 45 days and scheduled for elimination as of July 1, the beginning of the next fiscal year.

The 9-3 vote came a day after a major credit-rating agency, Moody’s Investors Service, put the city on its negative watch list, citing delays in dealing with a $212 million budget deficit this fiscal year.

Interesting development.

Got an email that my Citi Card number had been comprimised in a leak from a mechant database, stating that a new card would be forthcoming.

Got new card, of course activating it involves a phone call. Roger (not his real name, just the one given to me) proceeded to upsell me every balance transfer, paper check, identity protection, credit monitoring, and finally, job loss “insurance” product available. Five products in all.

Said no to all, but it got me wondering if it really was a merchant database leak or simply a method to get me on the phone during a time of perceived crisis…

Wells Fargo doubles mortgage modifications
Charlotte Business Journal ~ 2-18-10

Wells Fargo & Co. says 17,652 of its customers have been able to permanently modify their mortgages through the federal government’s Home Affordable Modification Program.

Wells Fargo, parent company of Charlotte-based Wachovia Corp., says it has doubled the number of loans permanently changed since the end of December.

San Francisco-based Wells Fargo (NYSE:WFC) says it had 7,554 permanent modifications pending completion as of Jan. 31.

The federal program was launched to help lower mortgages for homeowners who could no longer could afford their monthly payments.

Georgia No. 14 for mortgage fraud risk.
Atlanta Business Chronicle ~ 2-18-10

Georgia ranked 14th on Interthinx’s fourth-quarter Mortgage Fraud Risk Report, which includes an analysis of national mortgage fraud and indexes for the four most common types of mortgage fraud.

The report indicates most fraud types are on the rise, with increases in the risk index for occupancy fraud, employment/income fraud and property valuation. The latter is up more than 100 percent from two years ago.

Other findings from the quarterly report include:

* California now has the highest mortgage fraud risk. Nevada, which had the highest index for the previous five consecutive quarters, drops to second place and is closely followed by Arizona. Florida remains in fourth place, while Colorado is fifth.

‘Bribes’ often needed to prevent mortgage defaults or destruction of homes

By James Thorner, Times Staff Writer
In Print: Friday, February 19, 2010

Workers for Total Clean and Restore of Riverview tackle the mess left behind by the former owners of a Brandon home that fell into foreclosure. Banks often have to hire companies like these because of the behavior of defaulting homeowners.

They’re resorting to bribery.

Lenders and politicians won’t call it that, but that’s what it is.

A raft of recent programs, both private and governmental, essentially hand cash to homeowners who (A) make mortgage payments on time and (B) refrain from vandalizing their homes if they fall into foreclosure.

It’s like paying a person to brush his teeth or not belch at the banquet table. Where appeals to good manners fail, cash apparently works wonders.——–>

http://www.tampabay.com/news/business/realestate/bribes-often-needed-to-prevent-mortgage-defaults-or-destruction-of-homes/1074249

Guess what……

Realtors Are Liars

New York’s “affordable housing” isn’t selling because housing is too affordable.

http://www.nytimes.com/2010/02/19/nyregion/19affordable.html?ref=nyregion

Money quote, which makes sense only because it involves New York City.

“Developers of higher-priced affordable housing were especially hurt by the housing crash, which caused price differences between their units and market-rate homes to narrow. In addition, market-rate homes do not have the resale restrictions that the affordable homes often have.”

There you have it, “high priced affordable housing.”

http://www.huffingtonpost.com/2010/02/19/aig-bailout-issa-demands_n_468521.html

Props to Rep. Darryl Issa, who is demanding that the Fed turn over all of its documents relating to the AIG bailout. The Fed has been stonewalling, naturally. Issa deserves full credit and the active support and thanks of those who would like to see greater transparency and accountability when it comes to the cozy relationship between the Fed and the “too big to fail” financial services firms. I hope our California HBBers will take the time to e-mail his office and express their appreciation and backing.

Premiums Jump 14 Percent on Medicare Private Plans
Millions of seniors face 14 percent premium increase for popular Medicare Advantage plans. ~ ABC News/Money ~ 2-19-10

Millions of seniors who signed up for popular private health plans through Medicare are facing sharp premium increases this year — another sign that spiraling costs are a problem even for those with solid insurance.

A study to be released Friday by a major consulting firm found that premiums for Medicare Advantage plans offering medical and prescription drug coverage jumped 14.2 percent on average in 2010, after an increase of only 5.2 percent the previous year. Some 8.5 million elderly and disabled Americans are in the plans, which provide more comprehensive coverage than traditional Medicare.

The Medicare findings are bad news for President Barack Obama and his health care overhaul, bogged down in Congress. That’s because the higher Medicare Advantage premiums for 2010 followed a cut in government payments to the private plans last year. And the Democratic bills pending in Congress call for even more cuts, expected to force many seniors to drop out of what has been a rapidly growing alternative to traditional Medicare.

With all the wailing and hand-wringing about sinking home values, we don’t hear enough about the upside: it’s becoming more affordable for those who can scrape up a decent down payment and live within their means.

Man angry at IRS crashes small plane into Texas office building

AUSTIN, Texas – A software engineer furious with the Internal Revenue Service launched a suicide attack on the agency Thursday by crashing his small plane into an office building containing nearly 200 IRS employees, setting off a raging fire that sent workers fleeing for their lives. At least one person in the building was missing.

The FBI tentatively identified the pilot as Joseph Stack. A federal law official said investigators were looking at a long anti-government screed and farewell note that he apparently posted on the Web earlier in the day as an explanation for what he was about to do.

In it, the author cited run-ins he had with the IRS and ranted about the tax agency, government bailouts and corporate America’s “thugs and plunderers.” “I have had all I can stand,” he wrote in the note, dated Thursday, adding: “I choose not to keep looking over my shoulder at `big brother’ while he strips my carcass.”

Stack, 53, also apparently set fire to his house about six miles from the crash site before embarking on the suicide flight, said two law enforcement officials, who like other authorities spoke on condition of anonymity because the investigation was still going on.

In the long, rambling, self-described “rant” that Stack apparently posted on the Internet, he began: “If you’re reading this, you’re no doubt asking yourself, `Why did this have to happen?’”

He recounted his financial reverses, his difficulty finding work in Austin, and at least two clashes with the IRS.

He railed against politicians, the Catholic Church, the “unthinkable atrocities” committed by big business, and the government bailouts that followed. He said he slowly came to the conclusion that “violence not only is the answer, it is the only answer.”

“I saw it written once that the definition of insanity is repeating the same process over and over and expecting the outcome to suddenly be different. I am finally ready to stop this insanity. Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well,” he wrote.

Lawmakers mull nuclear power as renewable source
Phoenix Business Journal - 2-18-10

A bill introduced in the Arizona Legislature would establish nuclear power as a renewable or carbon-free energy source, angering solar advocates and sparking the ire of the Arizona Corporation Commission.

House Bill 2701, introduced last week, seeks to set up a legislative version of renewable energy standards for Arizona that would require companies to get 15 percent of their power from renewable or carbon-free sources by 2025. On the list are traditional renewable sources, such as wind and solar, as well as nuclear and hydroelectric.

The Shadow Inventory Of Troubled Mortgages Could Undo U.S. Housing Price Gains
Standardandpoors.com

In summer 2009, the seasonally adjusted S&P/Case-Shiller Home Price Index rose for the first time in virtually two years. Since May 2009, the index has risen by over 3%, suggesting that the necessary correction to U.S. residential home prices is nearing an end. However, in Standard & Poor’s Ratings Services’ view, the mortgage crisis may be far from over. The overhang of homes heading toward liquidation suggests more delinquencies and lower home prices are to come.

The current “shadow inventory” (including all delinquent loans, not only those that are real estate owned [REO]) of troubled mortgages will likely take about 33 months or nearly three years to clear at the current rate of liquidations. Moreover, we believe this estimate is conservative, as we do not assume any loans that have yet to show any serious signs of distress to date will default in the future and further increase the overhang of homes. Nonetheless, we believe that in reality additional loans will default in the near future due to the weak economic environment, distressed residential home values, and the resulting contraction in the supply of mortgage finance.

We believe that the recent reversal in housing prices is the result of a temporary constriction in the supply of foreclosed homes on the market. This temporary constriction ensued because servicers have completed fewer foreclosures due to court delays, servicing backlogs, and political pressure to keep borrowers in their homes. However, there is a rapidly growing shadow inventory of properties where borrowers are delinquent but foreclosure has not been completed. Overall, it is our opinion that recent positive housing reports should not be construed as a sign that the distress in the residential housing market is abating, but rather should be attributed to the temporarily limited supply of homes on the market.

Millions on the line as first Chinese drywall trial opens
South Florida Business Journal - 2-19-10

The first federal trial in the nationwide Chinese drywall controversy was set to open Feb. 19 in New Orleans, with hundreds of millions in remediation dollars on the line.

The case is being closely watched nationally by manufacturers, lawyers, insurance companies and homebuilders, including Miami-based Lennar Corp. Blame is not the focus of the first trial, but the court is expected to set a minimum threshold for fixing homes where defective drywall was installed.

The case involves seven Virginia plaintiffs whose homes have drywall manufactured by China-based Taishan Gypsum Co.

At issue is whether the homes must be gutted completely, as the plaintiffs argue, or whether proper ventilation will do. Taishan was served with court papers, but has not responded. Another Chinese drywall manufacturer, Knauf Plasterboard Tianjin, is providing its view on what the minimum fix should be.

The difference between Knauf’s experts and the plaintiffs would be dramatic. Multiplied by tens of thousands of drywall cases, the amount of money at stake could be in the billions. National Underwriters, an insurance publication, recently said house repairs alone could cost $8 billion to $10 billion, depending on how rigorous the removal protocol is. The liability of insurance companies will be determined in future trials.

Lines drawn over mass firing at Central Falls High School

CENTRAL FALLS, R.I. — A deeply divided community poured into the middle school Wednesday night to hear Supt. Frances Gallo explain why high school teachers left her no choice but to fire them all.

Once the state identified Central Falls High School as one of the lowest-achieving schools in Rhode Island, Gallo had to choose one of four federally mandated options. She said that two of them — closing the school and having it taken over by a charter company — were out of the question because the district has no other high school and there aren’t many charter companies who want to take over a failing secondary school.

That left her with two other options: the transformation model, which, under Gallo’s plan, called for adding 25 minutes to the school day, submitting to more rigorous teacher evaluations and participating in two weeks of paid summer training, or the turnaround model, which called for removing the entire staff and rehiring no more than 50 percent.

Gallo chose the transformation model, in part, because it was less punitive to the staff. But, in order for it to work, she said she needed every teacher to sign on. The teachers union, however, turned it down because members felt that they weren’t being adequately compensated for the additional time.

Gallo said Wednesday night that each teacher would have made an additional $3,400 per year if they had agreed to the transformation model. Once the union said no, Gallo said, “I had nothing left but the turnaround model.”

Parents had clearly made up their minds before listening to Gallo’s 30-minute speech. In one camp were the adults whose children had had a positive experience in the city’s schools. In the other camp were parents who were concerned about the high school’s 52-percent dropout rate.

Ana Cecilia Rosado, a parent and member of the Board of Trustees, Central Falls’ version of a school committee, said she wishes that more teachers held their students to higher standards. “Very seldom have I heard students say how much their teacher demands of them or how hard they have to work,” she said. “When my daughter was in eighth grade, she was told that she could become a hairdresser. I asked her, ‘What about becoming a professor, an engineer, a teacher?’ They never mentioned those.”

Other parents, however, praised teachers for their dedication, their willingness to go beyond the call of duty. Elizabeth Laramee said two of her children were inspired to become teachers because of the care and attention they received in Central Falls. “I think these teachers should be given another chance,” she said. “They have given kids a hug when no one else would.”

But one parent wanted to know why teachers, if they truly care about their students, “can’t spend 20 more minutes to help them out.”

Obama to tout housing help Friday in Las Vegas
Feb 19, 7:05 AM (ET)

LAS VEGAS (AP) - President Barack Obama is unveiling $1.5 billion in housing help, a boost timed to his appearance in the city with the worst foreclosure crisis in the nation.

Obama’s move, detailed by aides in advance of his town hall here Friday, is the latest by a White House determined to show it is helping families rebound from a deep recession. The downturn is taking an election-year toll on Obama’s party as voter frustration builds.

Obama was to announce that housing finance agencies in the five hardest-hit states in the housing crisis will receive $1.5 billion to help spur local solutions to the problem. Those five are Arizona, California, Florida, Michigan and Nevada.

The policy wrinkle comes during a two-day Western trip with different agendas for the president. He will be back in town-hall mode, a venue that aides say allows him to connect with people and distance himself from the messy process of Washington governing.

The president is also out to help vulnerable senators protect their seats and, in turn, gain as much legislative leverage as he can.

Sorry - your CD rates or CC rates are not going up (yet). But it may be the start of a long and slow trend.

————–

Federal Reserve bumps up discount rate it charges banks
USA Today - 2/19/2010

The Federal Reserve raised the discount rate it charges banks for emergency loans by a quarter-point Thursday, the first increase in nearly four years and further evidence that the financial crisis is history.

Fed Chairman Ben Bernanke last week signaled the move and the central bank said Thursday it would have no effect on interest rates for consumers. In an announcement after the markets closed, it reiterated that its benchmark federal funds rate is likely to remain near zero “for an extended period.”

Still, investors were surprised the Fed moved so quickly. Yields on the 10-year Treasury note rose to 3.81% from 3.74% in anticipation of the increase, which takes effect today.
…

Bernanke last week likened Thursday’s move to other steps the Fed recently has taken to wind down programs that injected cash into markets that had frozen during the crisis, such as short-term commercial paper loans among businesses.

The Fed on Thursday also raised the minimum bid for loans from another cash reserve, the Term Auction Facility, or TAF, by a quarter-point, to 0.50%. The final TAF auction will be March 8.

Economist Brian Bethune of IHS Global Insight called the Fed’s maneuvers “technical adjustments” that have “no meaning” for monetary policy. Many economists don’t expect the Fed to raise its benchmark interest rate until late this year. Bethune voiced surprise the central bank didn’t wait until its meeting next month to boost the discount rate, adding that the quick action spooked investors.

America’s Most Miserable Cities 2010
Cleveland leads a slew of Midwestern towns on our annual list
Kurt Badenhausen, Forbes.com

The city of Cleveland has had a colorful history. The Cuyahoga River, which runs through the city, famously caught fire in 1969 thanks to rampant pollution, and it wasn’t the first time. In 1978 it became the first U.S. city to default on its debts since the Great Depression. Cleveland sports fans have had to endure more anguish than those in any other city. The city has been dubbed with a less than endearing nickname: the Mistake by the Lake.

This year Cleveland takes the top spot in our third annual ranking of America’s Most Miserable Cities. Cleveland secured the position thanks to its high unemployment, high taxes, lousy weather, corruption by public officials and crummy sports teams (Cavaliers of the NBA excepted).

Our most miserable city last year, Stockton, Calif., nabbed the second spot on this year’s list. Unemployment and crime continue to be major issues. Stockton ranked seventh worst in both of these areas. Stockton residents have average commutes that are among the highest in the country and, like all Californians, they suffer from onerous sales and income taxes.

Other cities on the list include Memphis, which came in third thanks to the second-worst rate of violent crime in the U.S. and an alarming rate of convicted public officials. Detroit, ravaged by the ailing auto industry was forth. Flint, Mich., was fifth. Also on the list? Chicago (No. 10) and New York City (No. 16). Torturous commute times and nosebleed-inducing taxes are the high prices locals pay for the cultural opportunities and corporate headquarters located there.

Associated Press reports what we predicted here years ago: inflation in needs, deflation in wants…

WASHINGTON - Consumer prices rose less than expected in January while prices excluding food and energy actually fell, something that hasn’t happened in more than a quarter-century.

The Labor Department said Friday that consumer prices edged up 0.2 percent in January while prices excluding food and energy slipped 0.1 percent. That was the first monthly decline since December 1982.

Is anyone in the mood for a little bit of Fed-engineered Wall Street bungee jumping today?

Wall Street’s Bailout Hustle
Rollingstone.com
Posted Feb 17, 2010 5:57 AM

Goldman Sachs and other big banks aren’t just pocketing the trillions we gave them to rescue the economy - they’re re-creating the conditions for another crash

http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/print

The Fed yesterday raised the rate charged to banks for direct loans by a quarter-point to 0.75 percent, the first increase since June 2006. The Fed said it was a “normalization” of lending that wouldn’t affect monetary policy, and the main federal funds rate would remain low for an “extended period.”

Is this just another slight of hand, now that they can funnel money to banks by paying interest on their deposits at the FED?? Result more money for banks, less risk as they won’t need to lend as much.

Last remaining U.S. sardine cannery closes ~ February 19th, 2010

GOULDSBORO, Maine - Workers were shocked when they were told the last remaining sardine cannery in the United States would close down for good April 18, ending more than 100 years of local history.

Reduction in the U.S. limit on herring is the main reason behind the closure of the cannery.

Bumble Bee Foods, which acquired the former Stinson Seafood plant in 2004, made the announcement Wednesday to employees at the facility in the village of Prospect Harbor in Maine. With the closure, 128 people are expected to lose their jobs.

“It’s devastating, for lack of a better term,” Dana Rice, the town’s first selectman, said about the news. “It’s like somebody died.”

Melody Kimmel, a spokesperson for the San Diego-based Bumble Bee Foods, confirmed the announcement.

* The Wall Street Journal
* HEARD ON THE STREET
* FEBRUARY 19, 2010

Slump in Tax Revenue Creates State of Siege

By LIAM DENNING

Welcome to the General Motors economy.

U.S. states face a “lost decade,” says Raymond Scheppach, head of the National Governors Association. The problem is a broken fiscal model exposed by the recession, and likely to extend the pain beyond the downturn’s official conclusion.

GM’s eventual bankruptcy was rooted largely in the award of ever-more-generous employee benefits, all paid for by cyclical car sales. States have similarly expanded the scope of services beyond their revenue-raising abilities. Some 55% of state revenue, before federal transfers, comes from personal- and corporate-income tax and sales tax, according to Donald Boyd at the Nelson A. Rockefeller Institute of Government. All three get killed in a downturn, and the first three quarters of 2009 were the worst for state tax receipts since at least 1963.

Expenditures are harder to rein in. States projected a collective $145.9 billion budget gap for fiscal year 2010, which began in July, equivalent to 9.2% of the previous year’s total state expenditures. Apart from voter backlash against cuts, the economic cycle raises spending as the newly unemployed turn to government programs like Medicaid for help. The result is a lagged effect on state finances, with tax revenues usually taking as long as five years to reattain prior peaks, according to Mr. Boyd.

Since states can’t run general funding deficits, closing gaps mean raising taxes, cutting services and resorting to one-time measures. No prizes for guessing which option politicians prefer. A big one is $246 billion of stimulus transfers from Washington. More than half of this pot will have been spent by the end of this year. And while states had estimated rainy-day funds of $36.5 billion in fiscal year 2009, it is likely they have since drawn them down significantly.

Besides the near-term crisis, the other similarity states have with the old GM is an overhang of debt. Between 2000 and 2008, state debts—distinct from other municipal debts—almost doubled to about $1 trillion, according to the Census Bureau. However, that is only 7% of gross domestic product, and low rates mean interest charges have been manageable, reaching $47 billion, or 3.7% of total expenditures, in 2008.

The bigger issue is retirement obligations. Like GM, many localities have struck generous deals with public-sector workers. In part, this reflected a desire to appease unions with promises for tomorrow that didn’t have to be paid for until well after the next election. In a new study, the Pew Center on the States estimates there was a $1 trillion funding gap on $3.35 trillion of state health-care and retirement obligations as of fiscal year 2008.
…

Pondering Ahansen’s superb essay, “You never know where love is going to come from” led me to wonder if the Wall Street/political cabal didn’t know where its real troubles were really going to come from either.

I think the bailouts, Supreme Court decisions, unjust bonuses, increasing unemployment, political corruption and economic deterioration have unleashed growing public unease that’s building and could culminate in political change.

There could be a nasty double dip and if this happens Wall Street, banks and our political parties will be even more at the center of the public’s ire. Giving and taking bailouts, then conducting business as usual and paying lavish bonuses might have been the “bridge too far”, the “let them eat cake” moment that will prove to be the ultimate strategic mistake for the banking/political cabal.

Yes, most of the fat cats will walk away richer than kings however their hubris and disregard for Americans could have been the death knell for finance’s death grip on America. They just don’t know it yet.

Part of the American character is apathy, going along and passivity. However, unlike many cultures displaying such traits, Americans have always responded strongly when pushed too far. Always. The American Revolution, The Civil War, WWI, WWII, Women’s suffrage, and fighting for unions and labor laws are examples of American pushback behavior.

Change is needed but it should not come by violence or guns. We are fortunate that we hold the more powerful tool for change at the ballot box. This tool is the most powerful tool any country wanting real change could have but right now, it has to be used like a massive blunt weapon to indiscriminately clean house over a couple voting cycles. Some say this is impossible but it is not impossible.

Movements are building to vote every incumbent out of office and I believe it could work. Politicians don’t want to lose their jobs and the newly elected of any party would be more beholden to the people if they feared for their jobs. Fear for their jobs could force them to lessen special interest influence as well.

We citizens should explore, support or start such anti-incumbent movements now, as there is no easier way to force necessary change.

In D.C., more evidence that commercial real estate headed for foreclosure crisis. ~ Washington Post ~ February 19, 2010

A mortgage crisis like the one that has devastated homeowners is enveloping the nation’s office and retail buildings, and few places are likely to be hit as hard as Washington.

The foreclosure wave is likely to swamp many smaller community banks across the country, and many well-known properties, including Washington’s Mayflower Hotel and the Boulevard at the Capital Centre in Largo, are at risk, industry analysts say.

The new round of financial pain, which some had anticipated but hoped to avoid, now seems all but certain. “There’s been an enormous bubble in commercial real estate, and it has to come down,” said Elizabeth Warren, chairman of the Congressional Oversight Panel, the watchdog created by Congress to monitor the financial bailout. “There will be significant bankruptcies among developers and significant failures among community banks.”

I’m thinking another ten percent drop in national U.S. home prices will translate into a future drop of at least twenty percent in former bubble zones like San Diego. Thoughts?

Home Sales Tank: What it Means for You
By Luke Mullins

Posted: January 25, 2010

Existing home sales plunged in December, falling nearly 17 percent from November in their largest month-over-month drop since record-keeping began. Meanwhile, December’s inventory represented a 7.2-month supply of unsold homes, notably higher than the 6.5-month supply recorded in November, the National Association of Realtors reported Monday. Although the monthly decline was larger than expected, the figures are much less jarring when compared with December 2008. Existing home sales remain 15 percent higher than a year earlier, while raw unsold inventory fell 11 percent from December 2008 to its lowest level since March 2006.

Although the monthly drop-off was steep, it had been expected for some time. Buyers scrambled to close transactions by November to qualify for the $8,000 first-time home buyers’ tax credit, which was originally set to expire at the end of November. The credit—which was later extended through June—worked to juice home sales figures in November at the expense of December. “The collapse in sales simply reflects the bringing forward of transactions to beat the originally planned expiration of the first-time buyer tax credit,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a report.
…

Will this really happen according to announced plans, or will it prove to be a Fed head fake?

Mortgage rates poised to jump as Fed cuts funds

Carolyn Said, Chronicle Staff Writer

Monday, February 15, 2010

The Federal Reserve is poised to turn off a major money spigot that has helped sustain the ailing real estate sector, as an extraordinary program under which the Fed has pumped $1.25 trillion into the mortgage market is slated to end March 31.

“Housing has been on government life support, and without it the crash would have been much more severe,” said Mark Zandi, chief economist with Moody’s Economy.com in Pennsylvania. “This spring and summer as those policy efforts unwind, we most likely will see mortgage rates move higher and more house-price declines.”

Rather than being held by banks, today’s mortgages are sliced, diced and resold on Wall Street to create liquidity - money that then can be lent in more mortgages. After the credit crunch beginning in the fall of 2008, investors lost their appetite for these mortgage-backed securities, so the Federal Reserve stepped in to purchase them to ensure that money would keep flowing to home purchasers.

The Fed started buying securities backed by Fannie Mae, Freddie Mac and Ginnie Mae in January 2009 and originally planned to conclude the program by year’s end. It extended it for three months to ease the impact on mortgage markets, although it didn’t allocate more money. The program’s ultimate cost won’t be known until the Fed sells off the securities, something that officials said it will do gradually starting this year. It’s conceivable that the program could end up generating a modest profit, breaking even or losing money, depending on what prices the securities go for.

While experts agree that the Fed’s exit will cause mortgage rates to rise, the big unknown is how severe the effect will be.

“There is no question rates have been kept artificially low by the Fed’s heavy buying,” said Guy Cecala, publisher of Inside Mortgage Finance. “My opinion is that rates will go up a full percentage point initially,” meaning that 30-year fixed conforming loans, now hovering around 5 percent, would hit 6 percent.
…

“Goldman Sachs (GS), Wall Street’s most profitable securities firm …has angered EU regulators over its role as Greece’s enabler—helping the Greek government mask the severity of its debt problems early last decade.”

Ya gotta love the way the BW writers play the conspiracy theory card, rather than questioning the legality of the Gollum debt mask scam, as any respectable journalistic outfit would do.

Goldman Stars in This Greek Tragedy
The firm’s currency and bond deals for Greece have drawn fire

By Elisa Martinuzzi
BW Magazine

March 1, 2010

Finance Minister Papaconstantinou Jason Alden/Bloomberg

Goldman CEO Blankfein Ramin Talaie/Corbis

Goldman Sachs (GS), Wall Street’s most profitable securities firm and a boon to conspiracy theorists the world over, has angered EU regulators over its role as Greece’s enabler—helping the Greek government mask the severity of its debt problems early last decade. Goldman designed an off-balance-sheet currency swap deal that delivered a windfall to the Greeks shortly after they entered the euro zone.

Now there’s evidence Goldman may have also misled investors when it managed the sale of $15 billion worth of Greek bonds in subsequent years, according to a review of bond prospectuses by Bloomberg News. No mention was made of the Greek currency swap in sales documents for the bond offerings in at least 6 of the 10 sales the bank arranged for since the 2002 currency transaction.
…

Bloomberg
Greece Replaces Debt Chief as Crisis Batters Markets (Update1)
February 19, 2010, 06:34 AM EST
More From Businessweek

(Adds comments from new debt chief in fifth paragraph.)

By Matthew Brown and Maria Petrakis

Feb. 19 (Bloomberg) — Greece replaced its debt management chief with a former Goldman Sachs Group Inc. investment banker, as declines in the country’s bonds roil European markets.

Petros Christodoulou, general manager of treasury and global markets at National Bank of Greece SA, the country’s biggest lender, will take over from Spyros Papanicolaou as head of the Athens-based Public Debt Management Agency, the country’s Finance Ministry said yesterday in an e-mailed statement. Christodoulou worked at various positions in global markets at Credit Suisse Group AG, Goldman Sachs and JPMorgan Chase & Co. before joined the National Bank of Greece in 1998, according to a company filing.

“The incoming guy is walking into a tough mandate,” said Charles Diebel, senior interest-rate strategist at Nomura International Plc in London. “Such is the sentiment towards Greece at the moment, a new broom could be a positive.”
…

Normally I don’t offer hot stock tips, but….

If you hold Cherokee Lab Systems, SELL SELL SELL!

so last night i’m watching the olympics and girls are flying head first down that luge track on tiny little sleds… i think it’s called skeleton racing.
They hit the finish line right around 90 mph.
That’s gotta be a huge rush.. makes me wanna buy a sled.

AUSTIN, Texas – Joe Stack felt the federal government — especially its tax code — robbed him of his savings and destroyed his career while allowing corrupt executives to walk away with millions.

OK if this is your beef, why didn’t he take off from NY or DC. He probably killed a lowly secretary??

With America facing $1 trillion annual deficits and debt-to-GDP ratios on par with those of Europe’s so-called PIGS, some are asking what was once unthinkable:Is the U.S. at risk of defaulting on its debt?
Earlier this week, Nobel-prize winning economist Joseph Stiglitz told Tech Ticker the U.S. “has absolutely no real problem servicing the debt at the current level”; meanwhile, Treasury Secretary Tim Geithner recently said America will “never” lose its vaunted triple-A credit rating after Moody’s suggested it was a possibility if we don’t get our fiscal house in order.

Take a hard look at America’s balance sheet and “you have to be concerned,” says Charles Ortel, managing director of Newport Value Partners.

Total gross U.S. debt is now $50 trillion or 12 times the nation’s total gross income, according to Ortel, whose debt calculation excludes unfunded mandates such as Social Security and Medicaid but does include corporate debt which he says are “potentially eligible for bailouts.”

Furthermore, Ortel says the Federal Reserve overestimates U.S. household net worth, because most of the “asset” side of the ledger is based on real estate valuations he says are overinflated.

“A strict, hard look at the national net worth statement will tell you that our assets are lower than you think and our debt is higher than you think,” he says.

While the risk of an imminent U.S. default remains low, Ortel says the U.S. is facing a “crisis of confidence” among global investors and recommends credit default swaps on U.S. Treasuries.

1. How can you default if you have a printing press.
2. CDS on US treasuries - Is there any bigger counter party risk. Where would people hide from a collapse of US treasuries. Guns ammo food?

Oh it is reparations time in the Obama admin. Told you all this would start getting pushed forward. Free handouts for minority farmers on basis of a shoddy class action suit. Looking at more money to be handed out in the future.

www dot cnn dot com/2010/US/02/18/black.farmers.lawsuit/index.html?hpt=Mid

The head of the National Black Farmers Association said Thursday the U.S. government has agreed to pay qualified farmers $50,000 each to settle claims of racial bias.

U.S. Agriculture Secretary Tom Vilsack said those farmers may also pursue a claim for actual damages from the bias, and potentially receive up to $250,000.

The settlement, which covers as many as 80,000 black farmers at a price of more than $1 billion, still needs to be funded by Congress, both sides acknowledged Thursday.

http://attackmachine.com/blog/2010/02/19/score-one-for-the-chinese/

notice the garbage bags.

WASHINGTON (Reuters) - Securities regulators will consider new short sale restrictions at an open meeting next week, a person familiar with regulators’ plans said on Friday.

The Securities and Exchange Commission is expected to meet on Wednesday to vote on rules that would restrict short selling in a company’s stock if that stock fell by more than a certain percentage such as 10 percent, another person familiar with the SEC plan said.

The SEC proposed a number of measures last year to rein in short selling, where investors bet the stock’s price will fall.

Lawmakers and bank executives blamed short selling for contributing to the downfall of now-defunct investment banks Lehman Brothers and Bear Stearns.

The agency proposed restrictions that would apply across equity markets as well as curbs that would only apply if a stock fell precipitously.

The SEC is expected to consider a “circuit breaker” measure that would trigger a so-called passive bid test, which would only allow short selling above the national best bid, one of the sources said. The sources requested anonymity because the meeting has not been made public.

CHICAGO – Boeing Co. said on Friday that it sent layoff notices to more than 1,000 people, most of them technology workers in Washington state and California

Did anyone else notice the coincidence of two prominent, mixed race men addressing the nation today?

http://www.wlwt.com/news/22600154/detail.html

Frustrated Owner Bulldozes Home Ahead Of Foreclosure
Man Says Actions Intended To Send Message To Banks

Hoskins said he’d gotten a $170,000 offer from someone to pay off the house, but the bank refused, saying they could get more from selling it in foreclosure. (He owed $160k on it)

Hoskins told News 5’s Courtis Fuller that he issued the bank an ultimatum.

“I’ll tear it down before I let you take it,” Hoskins told them.

And that’s exactly what Hoskins did.

Photos of bulldozed home and comments to the original story

http://www.wlwt.com/slideshow/news/22602245/detail.html#COMMENTTOP

The market went up today. Can someone please fill me in on what “rate hike furor” these guys are talking about?

Rate hike furor shows delicate task ahead for Fed
Ann Saphir
CHICAGO
Fri Feb 19, 2010 1:49pm EST
Related News

* Dollar climbs after Fed discount rate hike
5:03pm EST
* Instant View: Fed raises discount rate to 0.75 percent
7:34am EST
* Factbox: Fed’s exit strategy toolkit
7:34am EST
* Nikkei dips 0.7 pct, mood cautious on Fed move
Thu, Feb 18 2010
* UPDATE 3-Fed hikes discount rate but not tightening policy

Thu, Feb 18 2010

CHICAGO (Reuters) - The sharp financial market reaction to the Federal Reserve’s discount rate increase — despite its assurances that the hike is not monetary tightening — shows the tricky communication task officials face as they tiptoe toward an eventual change in rate policy.

The Fed’s announcement on Thursday that it was increasing the rate it charges banks for emergency loans to 0.75 percent from 0.50 percent knocked down global stocks and commodity prices and pushed up the U.S. dollar.

It prompted futures traders to boost bets the Fed will raise its benchmark short-term interest-rate target by September, even though the Fed signaled it is still committed to holding that rate ultra low for “an extended period.”

“To some extent, the market’s reaction must be quite perturbing to the Fed,” said Alan Ruskin, head of currencies for RBS Global Banking and Markets in Greenwich, Connecticut.

“The concern from the Fed must be, ‘Now what happens when we really want to do something substantive?’”
…

http://www.wlwt.com/news/22600154/detail.html

Man bulldozes home before foreclosure.

Frustrated Owner Bulldozes Home Ahead Of Foreclosure
Man Says Actions Intended To Send Message To Banks

http://www.wlwt.com/news/22600154/d...

Possible alternative to Fed central bank monopoly: State-owned banks with federal government as overseer. The goal would be to provide a greater level of local control over the banking system, including judicious use of a local-based printing press technology and any allocation of the spoils thereof. This would make it much harder for Wall Street to grab all the Fed’s bailout money at the point when a financial crisis struck, leaving Main Street high and dry of liquidity.

P.S. Long before Bank of America joined the Megabank, Inc cartel, its founding predecessor was a local agricultural lender called the Bank of Italy Our banking system has subsequently evolved from a service industry into a Wall Street sponsored kleptocracy.

National Public Radio
Economy Prompts New Look At North Dakota Bank
February 17, 2010
Listen to the Story

Morning Edition
[1 min 10 sec]

February 17, 2010

The Bank of North Dakota, the nation’s only state-owned bank, might seem to be a relic. It provides loans to farmers, businesses and students. The bank’s president won’t take credit for North Dakota’s enviably low jobless rate, or the state’s budget surplus. But officials in other states are wondering if it is helping North Dakota sail through the national recession.