The Housing Bubble

I’ve been waiting a long time to see this happen:

Mortgage Risk Premiums Widen
Quick Move After Fed’s Exit Could Draw Buyers Next Week

Mortgage-backed securities stumbled on Thursday as the market struggled to adjust to the absence of Federal Reserve buying.

Risk premiums on securities sold by Fannie Mae, Freddie Mac and Ginnie Mae widened 0.4 percentage points compared with Treasurys to 1.34 percentage points. They have widened 0.13 percentage points this week, and are heading toward their widest levels in five months. Investors had expected premiums to widen by 0.15 to 0.20 percentage points once the Fed exited the market, but at a more gradual pace. The speedy move raises the possibility that buyers could return to the market as early as next week.

“A lot of people are observing what’s going to happen now that the Fed is actually out,” said Chad Stephens, portfolio manager of a $1 billion government and agency fund at StableRiver Capital Management in Atlanta, Ga. He’s among those on the sidelines: “I would rather wait it out,” he said.

AIG Less Reliant on U.S., on Path to Repaying Bailout, CEO Says

The bailed out insurer is “now on a path” to repaying the loans included in its $182.3 billion rescue package, Benmosche said in an interview yesterday. The company will first pay off the $25.3 billion it owes the Federal Reserve before deciding how to raise the cash it needs to end its separate arrangement with the U.S. Treasury that includes a draw on a second credit line of more than $40 billion.

Go team!

First! (?) Whatever happened to NHZ? He was an interesting poster. And we used to get first hand RE news from the Netherlands.

Alright California, now you’re going too far!

Local wine growers said a proposal in California to tax wine $5 a bottle will kill their business, and the California economy along with it.
The Alcohol-Related Harm and Damage Services Act of 2010 would increase the excise tax on a bottle of wine 12,675 percent. That means the current tax of 4 cents on a bottle would go up to $5.11.

Bank Failure Friday (BFF) Report:
(Note: I write this in jest, as Friday was a bank holiday as well as the start of another quarter. Since 2000, the FDIC has never shuttered a bank on the first friday of April.)

Anticipating a great Final Four weekend, the FDIC called in sick this weekend and took a few days off. The no show friday result was no banks closed, holding the tally for 2010 to 41 failed banks.

Journalists, economists, and the NAR rejoiced at the news that lead many of them to remove the “u” and “n” keys from their computers in anticipation of never using the word “unexpected” again.

Too Big to Nail:

Prosecutors said that excluding Pfizer would most likely lead to Pfizer’s collapse, with collateral consequences: disrupting the flow of Pfizer products to Medicare and Medicaid recipients, causing the loss of jobs including those of Pfizer employees who were not involved in the fraud, and causing significant losses for Pfizer shareholders.

The CNN Special Investigation found that the subsidiary is nothing more than a shell company whose only function is to plead guilty.

http://www.cnn.com/2010/HEALTH/04/02/pfizer.bextra/index.html

SV movie review,

Watched Inglourious Basterds last night. I thought it to be a very good movie. Not Pulp Fiction good, but damn good nonetheless.

Christoph Waltz was outstanding as Colonel Hans.

From John Maudlin.

“Remember, we need about 125,000 new jobs a month to just keep up with the growth in our population. Though if you look at today’s employment release, they added a whopping 398,000 people to the civilian labor force (a huge number when compared to the 162,000 new jobs - a discrepancy you didn’t read about in any report.). What kept the unemployment rate from rising significantly was that they deducted 238,000 people who are no longer considered unemployed, due to the fact that they have given up looking for jobs. The U-6 unemployment rate rose to 16.0%, however. The U-6 rate includes people who have part-time work but wish they had full-time work. That part-time number rose above 9 million again this month, in a rather large monthly jump.”

ST. PETERSBURG — A 45-year-old woman was arrested Friday, accused of trying to blow up her own apartment building.

http://www.tampabay.com/news/publicsafety/crime/police-st-petersburg-woman-tried-to-blow-up-her-own-apartment-building/1084882

The U.S. wage rate for the next generation, like water, has found its natural level. Apparently it isn’t enough to take away employer-provided wages and health insurance.

http://www.nytimes.com/2010/04/03/business/03intern.html?hp

“With job openings scarce for young people, the number of unpaid internships has climbed in recent years, leading federal and state regulators to worry that more employers are illegally using such internships for free labor.”

I talked to a CSX Locomotive engineer friend , who said they’re starting to haul a lot of ”Scrap metal” down the main lines. Where it’s headed he dosen’t know , but he’s getting a lot of runs. and that’s good news for the economy , though not nesesarily for housing.
Maybe metal prices will head back up to where they were a few years ago . The whole countryside was self cleaning . If a house trailer was left empty or unattended it was stripped in short order . Lately , some of the real dumb thieves are frying themselves stealing live copper wires .
Also , a couple of Spanish folks were caught removing 500 railway spikes , to try and sell as scrap . Talk about an impending train wreck .

Is everyone ready for another Fed-engineered credit bubble? You have to admit it beats looking for work.

Credit Markets

April 2, 2010, 11:41 a.m. EDT

Junk bonds, swaps show firms flush with credit
Concerns rise that overheating credit could spell trouble … again

Mortgage rates expected to stay low after Fed exit

By Deborah Levine, MarketWatch

NEW YORK (MarketWatch) — A fivefold surge in the sale of junk bonds, a drop in borrowing spreads to two-plus-year lows, and heightened buzz about a coming wave of leveraged buyouts are the latest signs that credit markets are getting close to their pre-crisis levels — and, to some observers, sowing the seeds for a dangerous new borrowing binge.

Companies sold $54.3 billion in U.S. high-yield debt during the first quarter of the year, according to Dealogic, up from $9.6 billion a year ago, as the sharp drop in interest rates made it cheaper to borrow. Including investment-grade debt, bond sales in March rose to their highest level since May.

Last week, the growing debt issuance turned swap spreads, a metric of how issuers adjust their interest-rate exposure, negative for the first time on record.

And borrowing costs measured by corporate-bond spreads have returned to December 2008 levels, though they are still far higher than they were before the housing bust.

Selling debt has become much cheaper for companies as the credit crisis fades into history and investors lay their hopes on the recovery of the economy.

Plus, there’s little allure for investors to lend to some of the most stable borrowers, such as the U.S. government.

The Federal Reserve’s 15-month policy of keeping rates near 0% alongside a pledge to keep them low for a “extended period” have pushed 10-year Treasury yields /quotes/comstock/31*!ust10y (UST10Y 3.93, +0.07, +1.73%) to 3.94%, after falling to record lows from around 5.25% when the Fed started cutting in 2006.

Yields on 1-month CDs have fallen to 0.47%, from 2.5% in 2007, according to Bankrate.com.

For some private-sector analysts, as well as Federal Reserve policy makers, this lengthy period of low benchmark rates and investor appetite for higher returns poses a risk of again pushing the economy to an unsustainable reliance on debt — not far from the situation that led to the credit crisis just a few years ago.

“We look at this as a replay of what happened in 2007,” said Walter Zimmermann, chief technical analyst for United-ICAP.
…

Home sellers beware: Fee might be hidden
San Antonio Express-News | 03/29/2010 | By Jennifer Hiller - Express-News

Here’s a new concept in real estate: Buy a house, and when you go to sell it years later, owe the original developer or builder 1 percent of the sales price.

Freehold Capital Partners, a company started in Texas, is selling developers across the country on a plan that would attach a private transfer fee to homes, allowing developers to profit for generations.

The fee, written into neighborhood restrictions, would encumber the property for 99 years and throw 1 percent of the sale price back to the developer — or his or her estate or another investor — and Freehold each time the home changes hands.

It’s an idea that’s drawn the attention of some state legislatures and real estate trade organizations, which are fighting to stop the transfer fees from gaining a spot in the market.

Critics say such fees could taint entire neighborhoods, making it difficult to sell homes, and could complicate title records for decades. If the fee is not paid by the seller, a lien is placed on the property and the title becomes muddy.

And then there’s the basic question: “What it comes down to is, 20 years later, why is the developer still profiting?” asked Jeremy Yohe, director of communications with the American Land Title Association, the national association for title companies.

Back to the discussion with Joey yesterday about whether the Fed recently engaged in illegal actions. It seems the Fed recently decided to allocate liquidity to some private firms (e.g. those deemed too big to fail) while throwing others (those small enough to fail) under the bus. I thought only Congress had a legal mandate to make allocation decisions?

It seems highly questionable whether the action of “replacing less liquid assets with more liquid assets” had no bottom-line effect, as a primary reason for assets to lack liquidity is for the seller’s asking price to exceed the market value of the so-called “illiquid” asset. By contrast, assets that are “liquid” feature a large number of sellers willing to price the assets at or below market value, where buyers are readily forthcoming.

The Fed, Liquidity, and Credit Allocation
Daniel L. Thornton

The current financial turmoil has generated considerable discussion of liquidity. Moreover, it has been widely reported that the Federal Reserve played a major role in supplying liquidity to financial markets during this distressed time. This article describes two ways in which the Fed has supplied liquidity since late 2007. The first is traditional: The Fed supplies liquidity by providing credit through open market operations and by lending to depository institutions at the so-called discount window.

The second is by enhancing the liquidity of portfolios of some institutions by replacing their less-liquid assets with more-liquid assets. The Fed has used the second approach since late 2007. Unlike several previous occasions, however, it began supplying liquidity in the first, more traditional way only recently—in September 2008. This article notes that the Fed departed from its long-standing tradition of minimizing its effect on the allocation of credit by supplying liquidity
to institutions that it believed to be most in need; at the same time, it neutralized the effects of these actions on the total supply of liquidity in the financial market. The article also discusses the Fed’s reasons for reallocating credit this time rather than simply increasing the total supply
of financial market liquidity.
…

Here is a key reason why I believe this time is different, in the sense that real estate investors who thought they were being smart by purchasing devalued property at the trough of a recession are likely to find they got severely burned going forward. THE MARKET WAS ARTIFICIALLY PROPPED UP TO AVOID THE FIRE SALE SCENARIO THAT USUALLY ACCOMPANIES A RECESSION. Hence future price appreciation will be “lower than expected” compared to real estate price gains during past recovery periods.

“Another reason may have prompted the Fed’s
unconventional approach. Benanke (2008) notes
that “recent research by Allen and Gale (2007)
confirms that, in principle at least, ‘fire sales’
forced by sharp increases in investors’ liquidity
preference can drive asset prices below their
fundamental value, at a significant cost to the
financial system and the economy.” Bernanke
goes on to say that “A central bank may be able
to eliminate, or at least attenuate, adverse outcomes
by making cash loans secured by borrowers’
illiquid but sound assets.”12 Benanke (2008) suggests
that in so doing borrowers could avoid selling
securities in an illiquid market, which would
avoid potential economic damage “arising, for
example, from the unavailability of credit for productive
purposes or the inefficient liquidation of
long-term investments.””

Fed should hand over bank bailout records
McClatchy-Tribune News Service The Sacramento Bee
Published: Thursday, Apr. 1, 2010 - 5:15 am

The following editorial appeared in the Fort Worth Star-Telegram on Wednesday, March 31:

In the movie that gets made some day about Bloomberg’s lawsuit against the Federal Reserve, Mark Pittman will be the rumply crusading reporter who slashes through the government bureaucracy to shine a disinfecting light on the sinister scheming of greedy bankers.

Once you get past the details about complex lending mechanisms and the scope of Freedom of Information Act exemptions, it isn’t plain old good versus evil, actually, but a balancing of interests.

And it’s about more than $2 trillion in taxpayer funds that Federal Reserve Banks lent to struggling private banks in spring of 2008 to help counteract the nation’s financial crisis and calm a panicky stock market.

Who got it and why? And why shouldn’t the public get to know?

Pittman, a Bloomberg News reporter, used FOIA to ask the Fed, the nation’s central bank, for the names of banks that received loans through several emergency programs, the amounts they received and the collateral they provided to get the funds.

The Fed wouldn’t provide the information.

Bloomberg sued the Federal Reserve System’s Board of Governors in 2008 and this month won another round. The 2nd U.S. Circuit Court of Appeals in New York said a trial court judge correctly found against the Fed. (The appeals court also ruled for Fox News in a separate but similar case.)

FOIA requires federal agencies to give the public records about their operations, except in specific categories.

The Fed (joined by a consortium of the largest banks) wants the data Bloomberg seeks withheld as “commercial or financial information obtained from a person and privileged or confidential.”

The argument is that telling taxpayers who got loans isn’t in the public interest because it would undermine public confidence in the banks, destabilize financial markets and deter teetering banks from seeking federal help.

Bloomberg counters that the documents “are central to understanding the government’s response to the most cataclysmic financial crisis in America since the Great Depression” and that taxpayers need to know “how the Fed is safeguarding the public’s money.”

A coalition of media organizations added in a supporting brief that secrecy “conceals any collusion, corruption, fraud or abuse that might have occurred” and that ruling for the Fed would set a standard that allows other regulators to withhold important information.

(The brief was joined by the National Conference of Editorial Writers, to which members of the Fort Worth Star-Telegram Editorial Board belong.)

The media have the stronger argument.
…

Here is the original version of this editorial. Feel free to leave your comment…

Fort Worth Star-Telegram
Editorials

Fed should hand over bank bailout records
Posted Tuesday, Mar. 30, 2010

WSJ Blogs
Real Time Economics
Economic insight and analysis from The Wall Street Journal.

* March 19, 2010, 3:45 PM ET

Discount-Window Future Darkens After Court Move

By Michael S. Derby

The Federal Reserve might be facing the irrelevancy of one of its key emergency lending tools.

On Friday an appeals court rejected the Fed’s argument that disclosing borrower names and collateral information for its emergency lending facilities compromises their effectiveness. The programs in question most notably include the discount window. The Fed had been sued by Bloomberg LP’s news division and Fox News Network LLC’s Fox Business Network for this information. Fox is owned by News Corp., which also owns Dow Jones, publisher of this Web site.

The Fed contended that more disclosure would drive away future borrowers, with institutions fearing public knowledge of their emergency loans would be a signal to markets of their weakness. While the fight was over what the Fed has already done, central bankers are worried about what all this means for the future.

Many economists agree with the Fed’s view. That said, the Fed’s increased public profile, arising from its lead role in fighting the financial fires of recent years, has made openness in its activities a similarly important goal.

With most of the Fed’s emergency tools wound down, the main issue is what happens with the discount window. It exists to make collateralized loans to deposit-taking banks, and it is a venerable tool in the central bank arsenal. The discount window was the first line of defense as the financial crisis began to take hold in late 2007, and it was later joined by a smorgasbord of other programs aimed at aiding firms across the spectrum.

In normal times the discount window sees almost no borrowing, but starting in early 2008 borrowings rose sharply and at an unprecedented rate, rising as high as $400 billion in late 2009, before moving lower as financial conditions mended and the Fed put in place other emergency lending facilities. As of March 17, discount window borrowing had ebbed to $11 billion.
…

WSJ Blogs
Real Time Economics
Economic insight and analysis from The Wall Street Journal.

* Much of U.S. Was Insulated From Housing Bust
* Secondary Sources: Productivity, Mortgage Debt, Political Affiliation
* March 31, 2010, 8:30 AM ET

Economist Warns of Public Bubble

By Conor Dougherty

The U.S. economy has traded a public bubble for a private one, according to this forecast by California forecasting firm Beacon Economics.

The firm’s stance is that the $787 billion federal stimulus package and the Federal Reserve’s near-zero interest rates have propped up the economy but will prove unsustainable and are actually exacerbating some of the imbalances that led to the recession. “The nation seems to be trading in its private bubble for a public one, swapping one set of unsustainable economic drivers for another,” the report said.

The firm cites a lot of familiar problems, such as the deficit and the potential for inflation down the road. (For the record, inflation is so tame right now that some economists are more worried about deflation) And, like many reports that call “bubble,” it is light on specifics as to how, when or if it might pop.

The gist is this: The stimulus and other such measures have prevented a shedding of debts that needs to happen before the economy can return to sustainable growth. The saving rate has grown from its record lows, but has been propped up by tax cuts that have exacerbated the mountain of debt at all levels of government. Property values have fallen, but accounting changes have prevented banks from acknowledging a lot of underwater loans. Even the roaring stock market is artificial, in the firm’s view.

“The rally in the equity markets seems to be occurring despite the fact that overall asset prices still seem too high given our long-run potential for growth. And the bounce in the asset markets overlooks the fact that overall the national deleveraging that needs to occur to shed off record levels of debt has yet to really get underway,” the report said.

This is, obviously, a bearish stance. Beacon’s founder, former UCLA Anderson Forecast economist Chris Thornberg, has done well forecasting bubbles before. He serves on the advisory board of New York hedge fund Paulson & Co., which made many billions of dollars betting on a housing collapse and was subject to a book by Journal reporter Gregory Zuckerman.

To be sure, even Beacon acknowledges that there are ways out of a bubble that don’t involve a pop. “The best-case scenario is that the Federal Reserve and the Obama administration manage to draw down the public bubble slowly, a possibility that private bubbles typically don’t share,” the report says.

The downside? “The worst-case scenario is that the bubble pops rapidly, putting the economy squarely back into another recession — the double dip.”
…

It seems premature to presume the housing bust is history. After all, Japan is still reeling from its early-1990s housing bust two decades hence. The Fed has only just begun removing its support for the market; it is way too early to tell how this will play out as the economic recovery takes hold.

WSJ Blogs
Real Time Economics
Economic insight and analysis from The Wall Street Journal.

* Volcker Optimistic Financial Overhaul Will Include His Rule
* March 30, 2010, 4:58 PM ET

Much of U.S. Was Insulated From Housing Bust

By Phil Izzo

The U.S. still is feeling the effects of widespread housing bust, but a new report serves as a reminder that large swaths of the nation didn’t experience a boom in home prices and hasn’t suffered from the bust.

New York Federal Reserve staffers Jaison R. Abel and Richard Deitz released a report highlighting the stability of upstate New York’s housing markets. The research notes that while the rest of the U.S. saw a real-estate boom and bust, upstate New York was largely insulated from the cycle.

“Despite upstate’s long-term weak economic growth and population loss, Buffalo, Rochester, and Syracuse all ranked in the top 10 percent of metro areas in terms of home price appreciation in 2009, with Buffalo ranking sixth overall,” the authors wrote.

But upstate New York isn’t alone in bucking the national trend. “Most U.S. metro areas actually experienced more moderate increases in house prices than the nation between 2000 and 2006. In fact, 249 of the 383 metropolitan areas tracked by the Federal Housing Finance Agency saw price increases below the national rate of 8.1% during the boom,” Abel and Deitz said. Many of these areas, in turn, didn’t experience the resulting bust.
…

Who hasn’t noticed that in tough times more people are looking out for those who use the system to their advantage? The following forum post over at City Data Forum reminds me of this (and there are plenty more postings all over the internet in a similar vein - people are pissed-off):

“..Where I live there is a thing called a Quest card. This is the state system for providing handouts. It can be used just like a cash card. A person can get cash at any cash machine or they can use it at any store to buy things.

One day I was over at the local Safeway store. As I was checking out I saw a sign that said that the store would give out no more than $100 in cash when using the Quest card. While I was checking out I was teasing the cashier. I said what’s this Quest card thing. So explained it to me. I said do you mean that if I get one of those cards I can get tax payer money from here or a cash machine? That set her off. Trying to keep her voice down she said that people that are supposed to be poor sure don’t act poor. She said that the store had cake mixes for less than $2 but no more than and hour ago some people came in and bought the most expensive cake they have and paid for it with a Quest card. She said that she see it all the time. They are also the people that make the most noise when the store does not have something they want. She said she had been doing it so long that if she saw a cart full of prepared food there was a 95% chance that it was going to be paid for with public assistance.

Where I live I am a commissioner in the fire district. This is an elected position but like a lot of the fire service it’s non-paid. In fact 75% of the firefighters in the US are non-paid. There is no money to pay them but there is money to pay people to do nothing. In my area the number of firefighters that are on public assistance is zero. It’s because they don’t and won’t sign up. Those that owe the most to the system give the least back. They seem to have the mind set that it’s all owed to them.

The most outrageous behavior I have ever seen is by a couple of people in my district. This one women comes to mind. She lives 6 miles out of town. She has no car or even a license. She has more yard ornaments than 50 people should have and a lot of her money goes there. If she needs a ride to town and no one is available to take her she calls an ambulance. She demands to be taken to the hospital so they have to take her. At the hospital they can find nothing wrong so they release her. She then goes on her way shopping or what ever she really wanted to do in town. Not only did the tax payers pay for a ride in the ambulance we also paid a hospital bill for nothing. But if the ambulance was needed for a real call it won’t be available.

The hospital won’t help bust the woman because of HIPPA regulations (health privacy laws). I contend that these handout systems are out of control. Those that take out of the system should have to give back. But now-days community service is a form of punishment. Me donating my time to the fire district is community service. I don’t want to paint with a wide brush and state that all people act this way. But it must be my luck that by far most that I have encountered do. Most people on public assistance are the most demanding when it comes to services and they act like it’s all owned to them.”

Where is everyone today? Is it just me, or is it awfully quiet in here?

Business
Texas tenants may feel fallout of apartment complexes’ foreclosures
Posted Friday, Apr. 02, 2010 Comments
By MIKE LEE

mikelee@star-telegram.com

FORT WORTH — Last year, Amber Bradbury and her husband signed a great lease with their landlord. In exchange for her husband’s services as a maintenance man, they were to get a two-bedroom apartment for $250 a month — for five years.

Then their apartment complex, the 102-unit Sandy Oaks complex near Sandy Lane and Interstate 30 just east of downtown Fort Worth, was foreclosed on.

Bradbury’s husband has also lost his maintenance job, and the new owner is trying to get the couple to sign a new lease, for more than twice the rent. Other residents are being asked to reapply for their apartments because the records of their leases were destroyed in a fire.

The company that manages the complex said it’s not trying to evict anyone — it just wants to know who’s living in the complex and make sure they have a valid lease. Some of the residents haven’t responded when asked to reapply or produce a copy of their lease. The company says it has sunk thousands of dollars into repairs.

“We’ve tried to be real fair,” said Robbie Burns, a manager with Legend Asset Management. “Sandy Oaks is a very unusual case.”

Read more

We have the same sort of problem with vacant CRE in San Diego, as evidenced by “For Lease” signs on the corner of every strip mall and office complex. I am pretty sure this is also the story with residential, but the banksters have done a better job of holding inventory off the market on the residential side.

The problem of empty office space
Slump could hamper broader recovery
By Casey Ross
Globe Staff / April 3, 2010

Even as other parts of the economy show signs of life, the commercial real estate market in Boston will remain depressed, with a vicious cycle of falling rents and foreclosures preventing construction of new buildings that would create jobs.

The ongoing slump threatens to keep a broader recovery in check, as the industry is a significant contributor to the overall economy. New buildings bring additional property taxes to beleaguered municipalities, income to vendors that provide construction materials or office supplies, and wages that construction workers in turn cycle through the economy.

“It’s going to be a long process for the market to come back,’’ said Gus Faucher, director of macroeconomics with Moody’s Economy.com. “The economy can still plug along if commercial real estate doesn’t turn around right away, but it’s certainly going to be a big drain on growth.’’

The markers point downward. Rents for office space have dropped five quarters in a row. Average asking prices in Boston’s down town business district have fallen by nearly a third since the start of 2008 and are at $42.46 per square foot, according to CB Richard Ellis, a real estate services firm. Landlords are struggling to fill large empty spaces created by steep job losses during the past two years.
…

Investment Banking
Warren Says to Expect Commercial Real Estate Trouble
March 30, 2010, 4:50 am
Crisis

Elizabeth Warren, head of Congressional oversight for TARP and a major backer of the idea of a consumer protection agency, told CNBC on Monday that the U.S. economy still had a hard road ahead.

“By the end of the year, about half of all commercial real estate loans are gonna by underwater, and they are concentrated in the midsize banks,” she said. (Short-sellers, at least, may have something to look forward to.) “We now have 2,988 banks that have these dangerous concentrations of commercial real estate lending.”

She said that the banks’ exposure to shaky commercial real estate would have two upshots: 1) since they were already suffering since the subprime crisis, their stability might be affected; and 2) the midsize banks “are the banks that are supposed to be doing small business lending, and when they’re getting a sock in the teeth over over commercial real estate loans, they’re not in a position to be lending to small business,” Ms. Warren told CNBC.

“I think we have another very serious economic problem that we’re going to have to resolve in the next three years,” she said.

Asked whether things would return to normal this year, she responded: “I don’t think so.”
…

Resolved Question

Why do we have the Federal Reserve? It’s illegal according to the Constitution…..?

Article 1, Section 8 states that “Congress shall have the power to create money and regulate the value thereof”. Congress no longer has anything to do with the process.

All The Federal Reserve does is print money and for some reason charges interest for doing that. Obama won’t do a single thing about it, neither will a single President ever do anything about it.

It makes me mad!

* 1 year ago

Report Abuse
RTO Trainer by RTO Trainer

Member since:
November 12, 2006

Total points:
10711 (Level 6)

Best Answer - Chosen by Voters

Get over it.

Congress has the right to delegate that authority, and has done so to the Fed, a wholly legislatively created entity.

The Congress can change it any time they like. The President has nothing to do with it aside from signing any bill to that effect.

For those who have “gold standard” fantasies. Going back to a gold standard, while it would impose greater discipline on the economy which would be a good thing, is impossible without triggering a for real global depression. There’s not enough gold in the world to back our present economy, let alone in US holding (unless we can get gold’s price up to over $9000/ounce).

* 1 year ago

67% 2 Votes

Not to worry! Widely predicted collapses seldom materialize.

CHINADAILY
Economy
Collapse predicted as housing prices continue to soar
(Xinhua)
Updated: 2010-04-03 17:57

BEIJING - Predictions have flooded the Internet in China this week about the country’s runaway property market collapsing in 2011.

Much of the chatter voiced little concern about the possible severe consequences, instead expressed hope for the crash to come.

Coming at a time when complaints about mounting housing prices are on the rise, the online debate has drawn enormous attention from ordinary residents, industry insiders, experts and received substantive media coverage.

Related readings:

Collapse predicted as housing prices continue to soar
What’s wrong with renting?

Collapse predicted as housing prices continue to soar
Housing prices increased by 25 percent: report

Collapse predicted as housing prices continue to soar
End of housing bubble?

Collapse predicted as housing prices continue to soar
Official: Green design no excuse for housing hikes

Collapse predicted as housing prices continue to soar
Worrying impact of price hike

Speculation started after a comparison was made between China’s property market and that of Japan. In 1991, Japan’s property bubble burst. Following the Japanese yen’s appreciation in 1985, large amounts of capital flowed into the country’s real estate, inflating prices artificially which eventually led to a burst.

Two decades later, some say the same is happening in China, both in sequence and pace: the yuan appreciated in 2005, capital flowed to property markets in 2006, resulting in soaring housing prices in 2007, and now the burst is imminent.

Hope for a crash?

Feng Zhichao, a thirty-something man, has been living in Beijing for 12 years, since starting college. He is working for a foreign company with a salary of 5,000 yuan ($732.4) per month and pays 750 yuan per month for rent for a room less than 10 square meters.

“House prices in Beijing are crazy! I wish the property market would collapse this year! Then I could buy an apartment of my own in the city and be in the position to think about marriage,” he said. “If I were wealthy enough, I would not care about home prices,” he added.

Previously owned homes in Beijing stood at 14,000 yuan per square meter in the first quarter of this year, much higher than about 9,300 yuan in the same period of last year, according to the local statistics bureau.

Dong Wei, a 27 year-old Beijinger and an employee with a foreign IT company, said: “I don’t believe the property market will crash, as the government will not let that happen. It would be disastrous.”

Housing prices will definitely continue to rise, he added.

With a monthly salary of about 8,000 yuan, Dong is seeking a second home of about 80 square meters in the Yayuncun area, around the North Fourth Ring Road in Beijing. Prices of second hand homes in the area averaged 25,000 to 30,000 yuan per square meter.

He said housing prices in his target communities were around 20,000 yuan per square meter before the Spring Festival in February, and increased by 7,000 yuan per square meter during the recent two months. “Despite and because of the fast price growth, I will buy soon if I can find a proper one,” he said.
…

If Morgan Stanley incurred the biggest loss in the history of Wall Street, then why aren’t they bankrupt with their former employees joining the throngs of other SOL Americans in the unemployment lines?

A system whose incentive structure rewards massive losses with taxpayer-funded bailouts is ultimately doomed to collapse.

* The Wall Street Journal
* BOOKSHELF
* APRIL 2, 2010

Betting Against the Herd
By BRIAN M. CARNEY

Howie Hubler, “the highest-status bond trader at Morgan Stanley” in the waning years of the real-estate bubble, makes his appearance about three-quarters of the way through “The Big Short,” Michael Lewis’s captivating account of the “inside” forces that led to the bubble bursting in the fall of 2008 and to Wall Street itself nearly collapsing. Mr. Hubler’s job in the book is to serve a foil: As the heroes of Mr. Lewis’s account are preparing to make their fortunes by betting against the housing market, Mr. Hubler makes a $16 billion bet the wrong way, putting billions of dollars of Morgan Stanley’s capital at risk by insuring mortgage-backed securities against default.

“Hubler and his traders,” Mr. Lewis writes, “thought they were smart guys put on earth to exploit the market’s stupid inefficiencies. Instead, they simply contributed more inefficiency,” by pumping more money into the subprime-mortgage business than the financial system could possibly support. Not to mention leaving Morgan Stanley with a $9 billion trading loss—”the single biggest trading loss,” by Mr. Lewis’s reckoning, “in the history of Wall Street.”
…

Maybe if we pray hard enough, a similar scandal will erupt in Islam. It would be great if we could eliminate both of the major long-lived Middle Age religious scourges, Catholicism and Islam, from the face of the planet early on in the Third Millennium.

* The Wall Street Journal
* OPINION: DECLARATIONS
* APRIL 2, 2010

The Catholic Church’s Catastrophe

* By PEGGY NOONAN

There is an interesting and very modern thing that often happens when individuals join and rise within mighty and venerable institutions. They come to think of the institution as invulnerable—to think that there is nothing they can do to really damage it, that the big, strong, proud establishment they’re part of can take any amount of abuse, that it doesn’t require from its members an attitude of protectiveness because it’s so strong, and has lasted so long.

And so people become blithely damaging. It happened the past decade on Wall Street, where those who said they loved what the street stood for, what it symbolized in American life, took actions that in the end tore it down, tore it to pieces. They loved Wall Street and killed it. It happens with legislators in Washington who’ve grown to old and middle age in the most powerful country in the world, and who can’t get it through their heads that the actions they’ve taken, most obviously in the area of spending, not only might deeply damage America but actually do it in.

And it happened in the Catholic Church, where hundreds of priests and bishops thought they could do anything, any amount of damage to the church, and it would be fine. “Thou art Peter, and upon this rock I will build my church, and the gates of hell shall not prevail against it.” That is Mathew 16:18, of course, Christ’s great promise to his church. Catholics in the pews have been repeating it a lot lately as they—we—absorb the latest round of scandal stories. “The old church will survive.” But we see more clearly than church leaders the damage the scandals have done.

It is damage that will last at least a generation. It is an actual catastrophe, a rolling catastrophe that became public first in the United States, now in Europe. It has lowered the standing, reputation and authority of the church. This will have implications down the road.
…

It looks like the Wall Street TBTF banks may be nearing “escape velocity” (from paying any price for the mess they made):

The Financial Times
Summers sees ongoing job creation
By Chris Giles and Martin Wolf in London
Published: April 2 2010 22:34 | Last updated: April 2 2010 22:34

The US economy is poised for self-sustaining growth and should continue creating jobs in the months ahead, Larry Summers, senior economic adviser to Barack Obama, said in his most upbeat assessment of the economic climate.

Speaking in London ahead of Friday’s strong US payroll figures, which showed the US economy created 162,000 jobs in March, Mr Summers said the administration’s policies had underpinned confidence and fostered investment: “I think the economy appears to be moving towards escape velocity. You hear a lot less talk of W-shaped recoveries and double-dips than you did six months ago.”

The March data, which showed unemployment unchanged at 9.7 per cent, will add to Mr Summers’ confidence in his prediction last December that the economy would stop losing jobs by this spring.

The US administration still stresses that there are challenges ahead and points to the tendency for recovery from asset price recessions to be slow. But he put part of his confidence in the economy down to the still-significant stimulus coming from the monetary loosening during the crisis and the government spending that will continue throughout 2010.

“The process of recovery seems to have started earlier and more vigorously than was common in such crises,” Mr Summers said.

But he also stressed the positive effects on confidence of signing healthcare reform into law last month and other controversial domestic policies.

“The sense that the country’s long-term problems – healthcare, energy, education, long-run fiscal deficits – are being addressed. All of that should increase a generalised sense of confidence and, too, will be a source of stimulus to the economy.” Jobs growth could still be patchy and if that were the case, Mr Summers indicated that the administration would act to foster higher growth and more job creation.
…

Paper Economy
Ticking prime bomb: Fannie Mae delinquencies rise

The level of mortgage delinquency at Fannie Mae continues to mount.
By SoldAtTheTop, Guest blogger / April 1, 2010

Decades from now the summer of 2008 will likely be remembered to mark the turning point where legislative blundering took an otherwise serious financial crisis and molested it into an epic financial disaster.

‘SoldAtTheTop’ is not a pessimist by nature but a true skeptic and realist who prefers solid and sustained evidence of fundamental economic recovery to ‘Goldilocks,’ ‘Green Shoots,’ ‘Mustard Seeds,’ and wholesale speculation.

By fully assuming the liabilities of Fannie Mae and Freddie Mac, the two colossal and corrupt (and conduit of corruptness funneling junk Countrywide Financial loans onto the implied balance sheet of the federal government) government sponsored enterprises, the federal government, led by Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke, thrust taxpayers into an abyss of insolvency with one mighty shove.

The following chart shows what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

Notice that despite all the government gimmicks and manipulation the level of delinquency at these two mortgage giants continues to mount.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers.

Fannie Mae’s Portfolio Contracts Again.
Don’t Expect That to Continue in the Months Ahead
by Adam Quinones

Fannie Mae’s mortgage investment portfolio shrank for the second straight month in February while the most recent available data showed delinquencies in loans held by the nation’s largest provider of home mortgages are continuing to rise at an almost inexorable rate.

Fannie Mae’s Monthly Summary for February reports that the gross mortgage portfolio declined to a value of $725.9 billion compared to $735.21 billion in January, a decrease of 14.2 percent. One year earlier the portfolio was sized at $784.72 billion, so despite many fluctuations over the year, February’s figures represent an annualized one-year decrease of 31.2 percent.

The total book of business of the firm was $3.230 trillion at the end of February compared to $3.227 in January, a compound growth of 1.0 percent.

In January, the last month for which figures are available, 5.52 percent of the loans Fannie Mae guarantees were delinquent, an increase of 0.14 percent from December. In January 2009 the delinquency rate was 2.77 percent. In January the non-credit enhanced portion of the portfolio had a rate of 3.83 percent compared to 3.67 percent in December and 1.63 percent in January 2009. The delinquencies in the credit enhanced portion stood at 13.68 percent compared to 13.51 percent the month before and 7.24 percent a year earlier. Multifamily delinquencies increased from 0.63 percent in December to 0.69 percent in January. One year earlier it was 0.27 percent.
…

Examiner
Chicken Little doth protest too much, perhaps
April 1, 8:38
AMDC Mortgage Examiner
York Van Nixon III

Is that rain or geese flying by?

Contrary to predictions of financial implosion by worrywarts on Capitol Hill, access to mortgage money in the Washington, D.C. area did not disappear yesterday.

Last month, Fed Chairman Ben Bernanke reminded Congress of his intention to halt (quantitative easing) purchasing of mortgage-backed securities at the end of March. For those who missed my article (March Madness) on this two weeks ago, mortgage-backed securities are bundles of mortgages sold on the secondary markets to entities like GSEs Fannie Mae and Freddie Mac, as well as other buyers of blocks of mortgages.

In 2008, the Federal Treasury took control of Fannie Mae by forcing it into conservatorship to forestall complete collapse of the market. Since that time, our Treasury has struggled to keep its wards (failing financial institutions) solvent by buying a large portion of their weekly auctioned securities. With some of the largest banks showing signs of improvement (their stock prices are soaring), the Fed appears to be confident in easing off the gas pedal they have had floored since the last quarter of 2008.

There is no need to worry. You can still get a mortgage, but rates are up more than a quarter of a percentage point from this time last month. Thirty-year rates closed at 5.26 percent yesterday. Maybe this is good news for those on fixed incomes, but it may be bad news if you have been waiting for rates to fall. The Obama’s Administration’s strategy to spend our way out of the mess left from eight years of “irrational exuberance” seems to be working. Now it is time to start paying the bill. The Federal Treasury’s diminished presence in the secondary market will ultimately put pressure on private banks by forcing them to hold more debt in their portfolios. You can be sure they are going to offset this burden by charging higher fees and rates. Haven’t they been doing this since last year? Perhaps they were just practicing. Cluck! Cluck!

Vol. 74/No. 14
April 12, 2010

Residential mortgage
crisis is looming

BY SETH GALINSKY
A new residential mortgage crisis is looming. Its effects could have devastating consequences for millions of working people.

In spite of talk about an economic “recovery” and government programs to modify loan terms, a wave of foreclosures is expected in the years ahead that could dwarf the 2008 surge in mortgage defaults.

A March 12 Washington Post article warned that as many as 7 million house and apartment owners today are “seriously delinquent” but have not yet had their residences foreclosed or repossessed.

Banks are holding off on taking action for fear that putting a massive number of residences up for sale will depress the market even further and undercut their profits. On March 24 the U.S. Commerce Department announced that sales of new residences in February fell to their lowest amount on record.

“Banks have remained in foreclosure paralysis,” Sandeep Bordia, head of U.S. residential credit strategy at Barclays Capital told the Post, adding that this could not continue “indefinitely.”

Some 11.3 million people—about one-quarter of all mortgage holders in the United States—owe more on their mortgages than their residences are currently worth, due to the decline in housing prices over the last several years.

A previous plan by the Barack Obama administration to buy time for people having difficulty with mortgage payments is widely seen as a failure.

The “Home Affordable Modification Program,” was launched a year ago with promises of helping 3 million to 4 million people lower their mortgage payments. Instead, only 170,000 people have qualified for permanent changes and 1.3 million are enrolled in trial programs. More than half of those who were granted lower mortgage payments re-defaulted on their loans within nine months.

On March 26 the White House announced a new plan. But, showing the lack of confidence in ruling class circles, the New York Times article reporting the plan’s details opened with a question: “Will it work this time?”

Should the Council support, by motion, the Carbon Limits and Energy for America’s Renewal (CLEAR) Act?

1. In December 2009, Senator Cantwell introduced the CLEAR Act which would cap the emissions of greenhouse gases in 2012 by requiring oil, coal and natural gas companies to purchase monthly permits that would allow them to sell their fuels.
2. Seventy-five percent of the money from the permits would be returned to the public every month in the form of a dividend check and the remainder would go towards renewable energy studies and conservation programs.
ANALYSIS
1. Proponents believe that by driving up the cost of fossil fuel and making renewables more competitive, it will cause the emissions to decline.
3. Under this proposal, consumers will receive an annual rebate check for about $1100. Once the additional cost of the fuel is deducted it is estimated that the consumer will still be ahead by at least $100 per year.

____________________

So they propose to raise the cost of the goods by $1K, give the consumer $1.1 K, and the consumer will be happy to get the $100 that he may assume.
But how is the low income person going to pay the $1K before receiving the $1.1K? And is there income tax payable on the “dividend”?

And they passed the approval of the letter supporting the act!

A License Required for your HOUSE?

If you own your home you really need to check this out. At the end of this email is the Google link to verify. If the country thinks the housing market is depressed now, wait until everyone sees this; no one will be buying homes in the future.

We encourage you to read the provisions of the Cap and Trade Bill that has passed the House of Representatives and being considered by the Senate. We are ready to join the next march on Washington ! This Congress and whoever on their staffs that write this junk are truly out to destroy the middle class of the U.S.A ….

A License will be required for your house…no longer just for cars and mobile homes….Thinking about selling your house. Take a look at H.R. 2454 (Cap and Trade bill). This is unbelievable! Only the beginning from this administration! Home owners take note & tell your friends and relatives who are home owners!

Now, I know there is someone who can “RE-Interpreted” this to a higher level of Gov’t right?

“It’s not illegal to have a pet at the beach, but when you’re running a business and letting people pose with the animals for money, that transitions that fine line there,” Workman said.

Updated: April 3, 2010 1:58 p.m.
Main Beach’s ‘bird man’ given warning
By CLAUDIA KOERNER THE ORANGE COUNTY REGISTER

I read in one of my economics classes at Cal, that nothing can protect your home for foreclosure if you owe nothing on it, as the taxes, caused by inflation, will eventually over-ride your ability to pay in the long run, for most people that is!
California has the good old Prop 13 at the moment, which I voted against, back then.
I voted against it, as I considered it inflationary in regards to home pricing.
but, it turned out not to be as bad as the immigration from other areas as that caused the home prices to inflate even more than Prop 13.

The next thing I see as highly inflationary is the “Green ” building , solar energy, and renewable energy systems.

the cost of these system duplicate the present energy systems requiring the present energy system to have to inflate sale prices to cover both lost sales, and higher purchase prices from those clean energy sources.

I hope I am wrong, but at 87, it does not worry me very much.