The Housing Bubble

Well. Lost is over. They decided to wrap it up with what I thought was a pretty standard type ending to such a story line.

I did a habitat for humanity build and can hardly move now. Best thing I did all year. Must have moved a couple tons of concrete.

They are getting a lot of REo from investors and selling the homes to lower income families who put in sweat equity. My guess is they are buying the homes in bulk. Give out zero interest loans.

Okay all you Lostie fans, yeah or nay to the finale? The Target commericals were pretty funny.

Now back to housing and politics.

I thought it was good, if enigmatic. I felt I got my money’s worth anyway

I wouldn’t use the word “if”, “when” fits in the paragraph much better…

One false move in Europe could set off global chain reaction.
Treasury Secretary Timothy F. Geithner in Beijing on Sunday. The euro crisis may discourage China from a currency policy he seeks.
Washington Post May 24, 2010

If the trouble starts — and it remains an “if” — the trigger may well be obscure to the concerns of most Americans: a missed budget projection by the Spanish government, the failure of Greece to hit a deficit-reduction target, a drop in Ireland’s economic output.

But the knife-edge psychology currently governing global markets has put the future of the U.S. economic recovery in the hands of politicians in an assortment of European capitals. If one or more fail to make the expected progress on cutting budgets, restructuring economies or boosting growth, it could drain confidence in a broad and unsettling way. Credit markets worldwide could lock up and throw the global economy back into recession.

For the average American, that seemingly distant sequence of events could translate into another hit on the 401(k) plan, a lost factory shift if exports to Europe decline and another shock to the banking system that might make it harder to borrow.

Defaults on Apartment-Building Loans Set Record for U.S. Banks

May 24 (Bloomberg) — Defaults on apartment-building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter, almost twice the year-earlier level, as more borrowers failed to repay debt approved near the market peak, said Real Capital Analytics Inc. in a report.

Defaults on so-called multifamily mortgages rose from 4.4 percent in the fourth quarter and from 2.4 percent during the same period in 2009, the New York-based real estate research firm said today. Commercial-mortgage defaults also rose in the first quarter for loans against office, retail, hotel and industrial properties, Real Capital said.

“Apartment defaults are leading other commercial real estate,” Sam Chandan, global chief economist at Real Capital, said in an interview. “Banks tended to make more aggressively underwritten apartment loans earlier during this last cycle. Credit and pricing reached their peaks for office properties and other commercial assets later.”

page 1

By Paul Owers
Sun Sentinel
Posted: 11:14 p.m. Sunday, May 23, 2010

Before Larry Thomas unloaded his Pompano Beach home last fall for a fraction of what he paid, he cut a deal that will keep him from worrying about a huge debt hanging over his head.

Thomas insisted that his lender, American Home Mortgage Servicing, agree not to come after him for the estimated $174,000 he still owed on his two mortgages. “I feel incredible relief,” the 32-year-old restaurant manager said last week.

Others may not be as fortunate.

Lenders will file a tidal wave of lawsuits against homeowners in the next few years as a way to recoup losses when home sales or foreclosure auctions don’t result in enough money to pay the mortgages in full, real estate and legal analysts say.

“It will be a dramatic problem because the borrowers will not know it’s coming,” said Frank Alexander, a law professor at Emory University in Atlanta.

Under Florida law, banks have five years from the date of the sale to file for so-called deficiency judgments and up to 20 years to collect. Lenders can garnish wages or make claims on borrowers’ assets.

Before the housing meltdown, few lenders filed these lawsuits. Foreclosures and short sales — selling for less than the mortgage amount — were relatively rare at the time, and many of the homeowners didn’t have sufficient assets to make it worth the banks’ time and expense.

But following the heady days of the housing boom that spawned millionaire investors seemingly overnight, it’s not uncommon for borrowers to default on mortgages while still holding lucrative investments.

As the next wave of the housing crisis plays out, those most in danger of getting slapped with lawsuits include angry homeowners who ransack properties they’re losing in foreclosure and borrowers who walk away from “underwater” mortgages. In both cases, analysts say, banks will want to discourage other people from such behavior.

More than four in 10 homeowners said they would consider abandoning properties that are underwater, or worth less than the mortgages, according to a national online survey released last week by real estate firms Trulia and RealtyTrac.

Mortgage companies typically won’t sue homeowners who negotiate in good faith or those who default on their loans because of job losses or other unforeseen circumstances, said Anthony Manno, an executive with Steelbridge Real Estate Services. The Miami-based company works with lenders on the resale of foreclosed homes.

Still, borrowers shouldn’t rely on a lender’s verbal commitment, Manno said. “Get something in writing.”

Critics insist that spite will play a role in some of these lawsuits. Lenders deny it.

“We certainly would not do that,” said Russell Greene, president of Grand Bank & Trust of Florida in West Palm Beach. “It’s a business decision — not an emotional decision. It’s very time-consuming to take someone to court.”

Even if lenders don’t pursue the judgments, they could sell mortgage debt to collection agencies at deep discounts. And it will be those debt collectors that will hound borrowers, said Shari Olefson, a Fort Lauderdale real estate lawyer.

“They paid money to be able to hassle you,” she said.

Thomas, the former Pompano Beach homeowner, said he didn’t have money for a down payment but was approved for 100 percent financing on two loans in spring 2006. He bought a three-bedroom home for $245,000 near Copans Road and Dixie Highway.

Thomas said he soon became responsible for the entire mortgage after his roommate lost his job. That became even more difficult after Thomas took a pay cut.

So he attempted a short sale, eventually finding plenty of prospective buyers interested in a property that had plummeted nearly 70 percent in value. He and American Home Mortgage accepted one offer for $80,000. After closing costs, the lender netted about $71,000, said his Fort Lauderdale lawyer, Joe Kohn.

But before the sale closed, Kohn had American Home Mortgage waive its right to collect on the remaining mortgage debt.

page 2
Analysts expect barrage of lender lawsuits to recoup mortgage debt

By Paul Owers
Sun Sentinel
Posted: 11:14 p.m. Sunday, May 23, 2010

Christine Sullivan, a spokeswoman for the lender, wrote in an e-mail that she can’t discuss Thomas’ case because of privacy issues. But when homeowners seeking short sales demonstrate legitimate hardship, “we provide a full release of liability, and we do not pursue deficiency judgments.”

Some banks say they won’t file a lawsuit, though they aren’t willing to put that in writing, Kohn said.

“I have no choice but to accept that,” he said. “Even when you play by the rules, banks don’t always do what we’d like.”

Under new government guidelines for short sales that took effect this spring, lenders aren’t supposed to hold homeowners responsible for any remaining mortgage debt. But not all short sales fall under the guidelines, while some lenders choose not to implement them, Kohn said.

A forgiven mortgage balance through 2012 is not considered taxable income on a primary residence as long as the debt was used to buy or improve the house. But borrowers who walk away from investment properties risk having to pay federal income taxes on the forgiven amount.

Homeowners who hand their properties back to the bank through so-called deeds in lieu of foreclosure also should make sure they won’t be on the hook for any mortgage debt.

With friends facing deficiency judgments, Thomas said he’s grateful he sought legal advice on how to avoid a lawsuit. He now rents a home west of Boca Raton, but he just found out the owner is in foreclosure.

“I’ve escaped my own problem, only to inherit someone else’s,” Thomas said. “But this is nothing. It’s just a matter of picking up the pieces and moving on to the next rental.”

The gathering revolt against government spending.
Michael Barone ~ Washington Examiner

This month three members of Congress have been beaten in their bids for re-election — a Republican senator from Utah, a Democratic congressman from West Virginia and a Republican-turned-Democrat senator from Pennsylvania. Their records and their curricula vitae are different. But they all have one thing in common: They are members of an Appropriations Committee.

Like most appropriators, they have based much of their careers on bringing money to their states and districts. There is an old saying on Capitol Hill that there are three parties — Democrats, Republicans and appropriators. One reason that it has been hard to hold down government spending is that appropriators of both parties have an institutional and political interest in spending.

Their defeats are an indication that spending is not popular this year. So is the decision, shocking to many Democrats, of House Appropriations Committee Chairman David Obey to retire after a career of 41 years. Obey maintains that the vigorous campaign of a young Republican in his district didn’t prompt his decision. But his retirement is evidence that, suddenly this year, pork is not kosher.

Hey, boyz n’ girlz! 5 bargain spots for a vacation home! Hurry, hurry, these won’t last! I think they’re a bit optimistic in their pricing for Orlando vacation homes, though.

http://www.walletpop.com/blog/2010/05/19/five-popular-bargain-spots-for-a-vacation-home/?icid=main|verizon|dl6|link3|http%3A%2F%2Fwww.walletpop.com%2Fblog%2F2010%2F05%2F19%2Ffive-popular-bargain-spots-for-a-vacation-home%2F

A happy 69th birthday goes out to Mister Zimmerman. So many of his words still ring true for this forum.

- To all of the FBs: “How does it feel? How does it feel?”

- To the thought of walking away from your mortgage just because you can: “For the times they-are-a-changin’”

- For the ongoing disaster in the world’s economy: “And it’s a hard rain’s a gonna fall”

- When will the market bottom?: “The answer my friend is blowin’ in the wind”

- To all of the economists that keep shooting off their mouths: “Idiot wind, blowing every time you move your teeth. You’re an idiot babe it’s a wonder that you still know how to breathe”

- For those calls from FBs looking for cash to keep their lifestyle going: “It ain’t me babe, it ain’t me you’re looking for”

- To the masters down on Wall Street: “All the money you’ve made will never buy back your soul”

- Regarding the actions of the Fed: “And the buying power of the proletariat’s gone down”

- For all of us that have been watching this mess play out for several years now: “I was so much older then, I’m younger than that now”

Happy Birthday, Bob. Let the quotes keep on coming.

CNBC Story Head this morning:

Campbell Profit Tops View on US Soup Sales Gain

I predict, later this week:

Ramen Sales Explode Past Street Estimate

Munis! It’s what’s for dinner!

http://www.time.com/time/business/article/0,8599,1991062,00.html

I can’t agree more strongly with Ms. Evans: The U.S. residential real estate picture will get much more interesting once the effect of the first-time buyer credit washes away. I think the average observer who misses the leverage effect $8,000 can have on the home purchase budget is in for a surprise regarding just how substantial the effect of a few thousand dollars in other people’s money was on the purchase bid for recent first-time buyers.

* The Wall Street Journal
* AHEAD OF THE TAPE
* MAY 24, 2010

Positive Housing Data Likely Just a Respite

* By KELLY EVANS

If the latest recession were a Broadway drama, the housing market would be its star. Yet data out this week could show its time in the spotlight is drawing to a close.

The National Association of Realtors kicks things off on Monday with its April report on existing-home sales. It is expected to show a 5% gain from March to a seasonally adjusted 5.6 million annualized rate. On Wednesday, the Commerce Department is expected to say new-home sales climbed 3% in April, after a 27% surge in March, to a 423,000 annualized pace.

Such positive news offers a respite from the housing market’s tale of woe. But it may not bring investors much cheer. On Tuesday, for example, the S&P/Case-Shiller index of home prices is likely to show prices in major U.S. cities posting year-to-year gains in March, but also a further decline on a month-to-month basis.

And any improvements in the housing market were likely fueled in large part by a temporary boost from the government’s home-buyer tax credits, which expired on April 30 for contract signings and on June 30 for closings. These incentives probably pulled forward housing demand at the expense of future sales.

Any improvements in the housing market were likely fueled in large part by a temporary boost from the government’s home-buyer tax credits.

Take last week’s report showing construction of new homes rose about 6% in April, yet permits for future building slumped by 11.5%. J.P. Morgan chief U.S. economist Michael Feroli notes that, while those figures are volatile, data from the Mortgage Bankers Association seem to confirm the weakening trend. The group’s latest weekly index of purchase applications plunged 27% to its lowest level since records began in 1997, despite falling borrowing rates.

Unlike the government’s “cash-for-clunkers” program, which included a scrapping scheme for old vehicles, there has been no destruction of excess housing supply. Inventories of existing homes are still elevated, and the rising rate of delinquencies and foreclosures ensures a steady stream of supply that will keep downward pressure on prices for some time to come.

True, sales activity may benefit from low interest rates as well as steadily rising job growth that boosts housing demand. But going forward, the drama of the last few years is likely to give way to a plodding sequel.

Maybe it should be called “Stuck in the Cellar.”

This Time is Different

Carmen Reinhart and Kenneth Rogoff actually wrote a book about the subject - sounds like a good read actually.

In “This Time Is Different,” Carmen M. Reinhart and Kenneth S. Rogoff construct the richest and most detailed history of financial crises that anyone has developed. Their data set covers 66 countries, five continents and centuries, and it gives them an unparalleled ability to see patterns and predictors among different types of crashes. I spoke to Rogoff about the causes, trajectories and solutions to financial crises. This is an excerpt:

So how did having access to all that historical information change the way you understood our financial turmoil?

We had the major charts and tables ahead of the crisis. The key charts in Chapter 13, for instance, were published before the crisis and said the U.S. was at high risk for a crisis based on virtually every available indicator. And the main prediction we made in our work was that deep financial crises are different than typical recessions. It takes longer to recover from a financial crisis. So economists who had just studied the handful of previous U.S. recessions and used those to benchmark everything — the majority of forecasters — missed the boat because this kind of recession is different.

…

The main way in which this crisis is different from other postwar crises, however, is that it was global. And that adds an important dimension. The Depression was global, and there were global crises in the 1800s, but they’re not common. Global crises are more worrisome because a way countries get out of these crises is exports. But not everyone can ramp up exports all at once.

…
So the people who think this was all about Lehman haven’t read our book. This wasn’t about some mistakes made over one weekend the way many books portray it. Housing prices had doubled, debt had exploded, we were set to lose trillions of dollars in the value of our capital stock. Lehman was the spark, but the idea that it could’ve been largely avoided is very naive. If people think that the only real problem was letting Lehman fail, then that bodes badly for the steps we’ll take to prevent future crises.
…

I liked his “heart attack” analogy of when you can predict the timing of the crisis (i.e. the popping of a bubble) - i.e. you know it’s coming if you’re high risk, you just have no clue when…

Start with a really important point: It’s very hard to call the timing of a crisis. You can see that an economy is vulnerable, and maybe even fairly reliably say you’ll have a crisis in five to 10 years, but until it’s upon you it’s hard to narrow the window down with any precision.
There’s irreducible uncertainty coming from fragile confidence and political factors. The analogy is someone who’s vulnerable to a heart attack. You can go to the doctor and they can see your cholesterol is high and you have risk factors, but you might go on for 20 years without anything happening. Or it might be 20 hours.

Also I thought this was very pertinent, regarding trying to prevent crises via regulation:

So how do you defend against them?
You need several levels of defense. To depend excessively on regulatory judgment would be naive. The banks and financial institutions are clever at staying ahead of regulators. A big problem there is that regulators don’t get paid enough. I watch star regulators and analysts get bid away by the financial firms all the time. You can’t have people regulating these hundred-billion-dollar firms who are paid less than executive secretaries at the firms they’re regulating.

(emphasis mine)

We’re heading down the exact same path with the finance bill. It’s fraught with loopholes, and only addresses the symptoms, not the root cause of the problem.

Almost 9:30. Fat fingers up or fat fingers down?

Since the Eurozone crisis is not providing sufficient financial instability to the globalized economy, how about some Korean tensions to make things more interesting?

US urges action to contain ‘precarious’ Korea situation
Page last updated at 12:14 GMT, Monday, 24 May 2010 13:14 UK

The US secretary of state says her country is working hard to avoid an escalation after a report blamed North Korea for the sinking of a South Korean warship.

After talks in China, Hillary Clinton urged countries in the region to contain “the highly precarious situation created by North Korea”.

Earlier, South Korean President Lee Myung-bak froze trade with Pyongyang, vowing to punish those who carried out the attack, which killed 46 sailors.

North Korea says it will retaliate.

The country’s main newspaper called the investigation an “intolerable, grave provocation”.

President Lee addressed the nation on television to announce Seoul would no longer tolerate “any provocative act by the North and will maintain a principle of proactive deterrence”.
…

Net worth of every US president (I bet no one can guess the richest one):

/www.theatlantic.com/business/archive/2010/05/the-net-worth-of-the-us-presidents-washington-to-obama/57020/

Sure, the guy’s a pain in the arse. OK, he’s in contempt of court. But this is just wrong. 14 months in jail without being charged is just too long.

http://www.cnn.com/2010/CRIME/05/24/jailed.lawyer.richard.fine/?hpt=C1

Black swan oil bomb: Got crude?

* The Wall Street Journal
* U.S. NEWS
* MAY 24, 2010

U.S. Wasn’t Ready for Major Spill
Despite Mature Off-Shore Oil Operations, Gulf Crews Are Improvising With Chemicals, Protective Boom And Outdated Maps

By JEFFREY BALL, STEPHEN POWER and NEIL KING

Crude gushing into the Gulf of Mexico and washing ashore in Louisiana is exposing how ill-prepared the U.S. has been to respond to a major offshore oil spill.

In the fight to limit environmental damage from the month-old spill—which is on track to rival the 1989 Exxon Valdez disaster in size—BP PLC executives, government officials, and scientists are learning as they go, even though the industry has been drilling in the Gulf for decades and has 77 rigs operating there, according to ODS-Petrodata, a research firm.

The Environmental Protection Agency says it is still assessing the ecological effect of the 600,000 gallons of chemicals that BP has sprayed into the Gulf to break up the oil so far. As of Sunday, the agency and BP were locked in a standoff over whether to continue using the same chemical dispersant.

Some scientists researching the spill don’t have the right instruments to measure the spill or to study its impact. Maps that federal officials are using to identify priority areas to protect from spreading oil are outdated. And the Coast Guard says the country lacks enough plastic piping, or “boom,” to keep the incoming oil away from the coast.

“The national system did not contemplate you would have to do all that at once,” Coast Guard Commandant Thad Allen told a Senate committee last week, referring to laying boom across a coastline as big as the Gulf’s.
…

Office update. After a dearth of lookers, ( no surprise there ), we got a little flurry of interest a couple of weeks ago, and one cautious couple made a pretty good offer on it. We, naturally, accepted it. Now they’re looking it over again, and trying to figure out all of the angles, after they made an offer. So far, though, it looks like it will go to close in about a month. I don’t have much more at this point.

What is this J.P. Morgan strategist talking about? It appears the DJIA is already taking a plunge today, at the opening bell.

Sell in May, and go away.

Indications

May 24, 2010, 9:12 a.m. EDT
U.S. stock futures return to losing ways

After bashing, U.S. stock futures drop further

By Steve Goldstein, MarketWatch

NEW YORK (MarketWatch) — U.S. stock futures came under renewed selling pressure Monday, retreating after Spain’s weekend move to rescue a troubled lender fueled fresh concerns over growth in Europe and globally.

S&P 500 futures fell 4.9 points to 1,079.70 and Nasdaq 100 futures dropped 1.0 points to 1,818.25. Futures on the Dow Jones Industrial Average dropped 35 points.

U.S. stocks suffered through a difficult week, with the S&P 500 losing 4.2% despite strength on Friday, in what’s been a decidedly bearish month. Negative sentiment grew after Germany enacted a short-selling ban on German financials, euro-zone bonds and certain credit-default swaps.

“We believe that we are in an environment where investor heroism is not required. While the risk/reward balance is starting to move back in favor of equities, it is not yet time to take the plunge,” said David Shairp, strategist at J.P. Morgan Asset Management.
…

Don’t Rule Out a Double Dip Recession

“Meanwhile, the fundamental trend in the West remains profoundly deflationary. Last week the U.S. government reported that the country’s core consumer price index (CPI) inflation rate slid in April to its lowest level in 44 years”

http://online.wsj.com/article/SB10001424052748704852004575258332608266808.html

While I’ve expecting to get inflation due to the wholesale printing of new money (don’t they just add a few zeros to the compuer ledgers?), we now have deflation?

So in other words, buying a house right now is really a bad idea considering everything we think and know.

How fast can we go from deflation to inflation?

Lip

Not sure if it was posted or not - but on Friday mortgage rates broke through to their lowest level on record. 4.87% on 30-year, per bankrate.com.

I got mine, so screw the rest of yous.

BusinessWeek Logo
Monday May 24, 2010
Bloomberg
Paulson, Once a Top Earner, Says Bankers Are Overpaid (Update1)
February 10, 2010, 9:45 PM EST

(Adds Buffett’s $100,000 salary in the sixth paragraph, Paulson’s compensation in table.)

By Andrew Frye

Feb. 10 (Bloomberg) — Henry Paulson, who was paid an $18.7 million cash bonus for his final six months of work on Wall Street in 2006, said bank bailouts he later orchestrated as Treasury secretary should encourage firms to rein in pay.

“Today, restraint is very much in order by the top people,” Paulson, 63, said yesterday in an interview conducted by billionaire Warren Buffett in Omaha, Nebraska. “If you have losses, you are supposed to bear responsibility.”

Bank executives, who tapped taxpayers amid losses in 2008, are under pressure from lawmakers to keep compensation in check as profits return. Lloyd Blankfein, the chief executive officer of Paulson’s old firm, Goldman Sachs Group Inc., turned in record profit in 2009 and received a $9 million all-stock bonus, about one-seventh the size of his 2007 award.

“During benign periods, I think compensation levels on Wall Street are out of whack,” Paulson said to an audience of more than 2,400 people at a lunch meeting organized by the Omaha chamber of commerce. “I would have these conversations with Wendy all the time,” Paulson said, referring to his wife.

Paulson led Goldman Sachs for seven years before joining George W. Bush’s cabinet. In the first half of 2006, he turned in what was then the biggest profit in Wall Street history. Paulson stepped down after a career at the firm with stock and restricted shares valued at more than $500 million. He sold the stake to ease his confirmation, saving on capital gains taxes under a rule meant to avoid penalizing wealthy people who take government jobs.
…

* The Wall Street Journal
* EUROPE MARKETS
* MAY 24, 2010, 8:44 A.M. ET

Libor Hits Highest Level Since July

By NEELABH CHATURVEDI

LONDON—The cost of borrowing dollars for three months raced to its highest level since July last year Monday, and analysts said the London interbank offered rate will remain at elevated levels in the near term as the euro-zone debt crisis sparks demand for dollars and fans worries over the health of banks’ balance sheets.

Data from the British Bankers’ Association showed the three-month U.S. dollar Libor rose to 0.50969% from Friday’s 0.49688%. The sterling rate was also higher at 0.70188%, from 0.70000%.The euro rate fell to 0.63438% from 0.63625% Friday.

Monday’s dollar Libor fixing was the first above 0.5% for almost 10 months. While money-market rates haven’t galloped to the levels seen during the days of the global financial crisis, there have been signs of unease. Investor anxiety was underscored after the Spanish central bank had to seize control of a regional lender over the weekend.

The spread between the three-month dollar Libor and overnight index swaps, a barometer of market stress, widened to 0.0284 percentage point points Monday from 0.0266 percentage points Friday. Forward spreads point to a further widening between Libor and overnight swaps.

“The money markets are saying that whilst banks currently have a liquidity buffer, this will run out in three months,” Credit Agricole said in a research note.
…

Don’t — trust — Gollum:

WaMu Chief Killinger Didn’t Trust Goldman Sachs, E-Mails Show
April 14, 2010, 12:03 AM EDT

By Christine Harper

April 14 (Bloomberg) — Washington Mutual Inc.’s former Chief Executive Officer, Kerry Killinger, didn’t trust Goldman Sachs Group Inc. to give the bank advice in 2007 as it slid toward collapse, according to e-mail released by congressional investigators.

“I don’t trust Goldy on this,” Killinger wrote in an Oct. 12, 2007, e-mail reply to Todd Baker, Washington Mutual’s executive vice president for corporate strategy and development. “They are smart, but this is swimming with the sharks. They were shorting mortgages big time while they were giving CfC advice,” he said, referring to Countrywide Financial Corp., the home lender that ran short of cash the same year.

The e-mail exchange shows that concern about conflicts between investment banking and trading may have hurt Goldman Sachs’s ability to win business. Seattle-based WaMu became the biggest lender to fail in U.S. history in September, 2008.
…

Bloomberg
Soros Says U.S. Bank ‘Oligopoly’ Should Be Broken Up (Update1)
April 13, 2010, 5:39 PM EDT
(Adds Soros’s bank holdings in third paragraph.)

By Gabi Thesing

April 13 (Bloomberg) — Billionaire investor George Soros said the “oligopoly” formed by the four biggest U.S. banks “does need to be broken up.”

Soros, speaking today at an event in London organized by the Economist magazine, also said he is “in favor” of the so- called Volcker rule, a U.S. proposal to block banks from engaging in proprietary trading and owning hedge funds or private-equity operations.

Financials accounted for 6.6 percent of Soros Fund Management LLC’s U.S. stock holdings during the fourth quarter, according to a regulatory filing. Citigroup Inc. was the hedge fund’s fifth-largest stake as of Dec. 31, with 94.7 million shares.

The U.S. Senate’s banking panel in March approved Senator Christopher Dodd’s financial-rules overhaul, advancing the Obama administration’s bid for the biggest restructuring of Wall Street oversight in seven decades.

The bill proposed by Dodd, a Democrat from Connecticut, would create a consumer protection bureau at the Federal Reserve. It also would set up a mechanism that enables the government to dismantle failed firms that threaten the financial system, and implement the Volcker rule, named for former Fed Chairman Paul Volcker.

Soros Fund Management, based in New York, oversees about $25 billion.

If shadow inventory appears to be seeing the light of day in a big way now, just wait until after the effects of the first-time buyer credit wear off — you ain’t seen nothin’ yet.

Economic Report

May 24, 2010, 10:01 a.m. EDT
Existing home sales rise 7.6% on tax credit
Inventories surge 11.5% to 4.04 million, suggesting glut of supply

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) - Resales of homes in the United States rose 7.6% in April to a seasonally adjusted annual rate of 5.77 million as buyers rushed to complete sales before a tax credit expires, according to data released Monday by the National Association of Realtors.

Inventories surged 11.5% to 4.04 million in April, an “unwelcome” development, said Lawrence Yun, chief economist for the real estate agents’ lobbying group.

The inventory level represented an 8.4-month supply at the April sales pace. Inventories typically rise in April, but this year’s gain was bigger than usual, Yun said. The inventory data are not seasonally adjusted.

Yun said the elevated inventories suggest that prices won’t rise much over the next year or two.

The trend in sales prices has stabilized over the past four months, Yun said. The median price is up 4% in the past year at $173,100.

It’s not clear what’s behind the increase in homes for sale, he said. It could be pent-up supply from homeowners who’ve wanted to sell but didn’t think the market was right. That would imply pent-up demand. But it’s also possible that investors are putting their properties on the market because they aren’t getting the cash flow they need.

Supply of foreclosures and short sales has been steady, Yun said. Sales of “distressed” homes, including foreclosures and short sales, accounted for 33% of sales in April, compared with 45% a year ago.
…

MarketWatch First Take
May 24, 2010, 9:58 a.m. EDT

God’s actual bankers behaved a lot like Lehman’s
Commentary: Better regulation is the key to financial health
By MarketWatch

LONDON (MarketWatch) — With due respect to Goldman Sachs Group Inc.’s Lloyd Blankfein, CajaSur has a better claim to be God’s actual bankers, with six priests on a 21-person board.

And look what they did — load up on property investments, and refuse to merge with a stronger rival when the chips were down. See CajaSur story.

Basically, the priests acted the same way as Dick Fuld of Lehman Brothers, minus Repo 105.

Global markets are seeing selling pressure again as concerns about Europe’s debt crisis reassert themselves. Spain’s nationalization of a regional bank has contributed to the anxiety, Dow Jones Newswires’s Paul Vigna and Micheal Reid report.

That tells one of two things (or a little of both) — that those of the cloth are no less greedy than Wall Street bankers, or that even those with enviable moral fiber are prone to make the same mistakes as those whose idea of a higher calling is a cell-phone connection on a private jet.

In either case, the conclusion is the way to fight systemic banking system risk is not through better management but through better regulation — the bankers either can’t or won’t help themselves.

And to be fair, the Bank of Spain has a claim to be regarded as a better regulator than most.
…

The euro is plunging again.

May 24 (Bloomberg) — The euro declined, erasing all of last week’s advance against the dollar, as the Bank of Spain’s takeover of a failed lender drove concern that the region’s sovereign debt crisis may stall global growth.
…
The euro fell as much as 1.8 percent before trading at $1.2361 at 9:47 a.m. in New York, from $1.2570 on May 21. Last week’s advance of 1.7 percent from $1.2358 on May 14 was the biggest since September….

I pray that BP can shut down the oil leak in the Gulf.

In 2007, my sister bought in Cape Coral FL. Somehow in the last month she decided to double down and bought on Marcos Island and rent the place in Cape Coral. You know like ride out the storm.

From john Mauldins weekly letter, it has a chart showing even though the FED has loaned 1.25T into the economy Banks are not lending like they used to. This is the big picture of why I expect little inflation any time soon. Money is loaned into the economy and too much money and inflation follows like we saw with the housing bubble. Too many loans chasing too few homes.
————————————————————————————-
Now, notice that with both graphs you see a large increase beginning in the middle of 2008 as the Fed pumped the money supply in order to inject liquidity into the system. This was basically the $1.25 trillion purchase of mortgages, but toward the end even that was not boosting the money supply as much as it did in the beginning. Why? Partially, because of the following graph.

This shows total commercial lending at US banks. It is down almost 25% in less than a year and a half. Notice that in the last recession commercial lending dropped by “only” 18% in 3.5 years.

What do pilots call the phenomenon of a plane racing straight up, then running out of gas? I am thinking of “stalling,” but is there a fancier term?

Existing home sales soar in April
By Hibah Yousuf, staff reporterMay 24, 2010: 12:18 PM ET

NEW YORK (CNNMoney.com) — Existing home sales soared in April as home buyers scrambled to claim the tax credit that expired at the end of the month, according to a real estate industry report released Monday.

The National Association of Realtors reported that existing home sales jumped 7.6% last month to a seasonally adjusted annual rate of 5.77 million units, up from the upwardly revised rate of 5.36 million in March. Sales year-over-year were up 22.8%.

The gain was widely anticipated, but still beat forecasts. Analysts surveyed by Briefing.com were looking for resales in April to rise to an annual rate of 5.65 million units.

“The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” said Lawrence Yun, NAR chief economist. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, an improving economy and mortgage interest rates that remain historically low.”
…

A couple of days ago, I was shocked to see how many HBB people were standing up for Rand Paul’s remarks about businesses’ deserving the right to discriminate.

I’m a big libertarian and fan of Rand and Ron, but I go along with George Will and Rich Lowry and David Boaz, all very conservative but completely opposed to RP’s remarks on this subject.

Then it occurred to me that it could be a generational thing. So many of you are under 40 that you don’t remember the White lunch counters, nor do you remember how hard it was for women to get any job other than teacher or nurse.

An interesting observation from today’s JHK weekly post:

“A New Urbanist developer had gotten a small project going for a traditional neighborhood. Despite the global financial clusterf*ck, the developer was able to meet the payments of his commercial loan. But the FDIC sent bank examiners around America and they told the small regional banks that if they had more than twenty percent of their loans in commercial real estate (CRE) they would be put out of business. The banks were ordered to reduce their loads of CRE by calling in the loans and liquidating the assets. Ironically, the banks only called in their “performing” loans, the ones that were being regularly paid off, because they were ignoring and even concealing the ones that weren’t being paid.”

“The developer in question had his loan called in when the FDIC descended on his bank. He couldn’t pay off the $3 million in one lump, of course. The FDIC’s agents are going to seize and sell off his project if he can’t get it refinanced in short order. He can’t get it refinanced because there is now such a shortage of capital in the banking system that no one can get a loan for anything. Also, since it is now well-known that the bank failed, the vultures are circling above his project hoping to buy it for a discount, so even the few private investors who have money won’t throw him a lifeline. By the way, the FDIC agents told him they are doing this because they now expect that virtually all commercial real estate loans in the USA will fail in the months ahead.”

Hey eco -

I’d like to hear your opinion of Bill White’s tenure as mayor of Houston. I heard him speak yesterday in Rockport and I was impressed, but I’d like to hear a Houstonite’s point of view.

Short BP.

yahoo has an article explaining how the european debt crisis is great news for mortgage rates.

sick.

It’s mutual fund Monday and the market can’t catch a bid. This is going to get messy. Dire straits, I say.

I want my PPT….
End of day rally?
Money for nothing.

Filed under: “America” …a Nation of Savers…without Savings”

BWAHAHAHicHAHAHicHAHAHAHAHicHAHAHic* (DennisN™)

Starving for Yield on Savings
by Laura Rowley,Yahoo Finance
Wednesday, May 19, 2010

“it’s bad news for the nation’s savers, who continue to subsidize the government’s economic stimulus efforts to the tune of billions of dollars.

Americans who chose to save instead of buying homes they could not afford or cashing out their equity to splurge on luxuries during the real estate boom need a Robin Hood at the Fed, because they’re the ones getting robbed to pay for the recovery. Conservative places to park cash — savings, money markets and certificates of deposit — are still paying well below the inflation rate of 2.2 percent. As of this week, savings accounts are averaging returns of 0.20 percent; one-year CDs are yielding 0.77 percent, according to the Federal Deposit Insurance Corporation.

“The Fed is determined to keep rates very low, and while it’s painted as fiscal stimulus I think it’s really a stealth bailout of the banks,” says Richard Barrington, a certified financial analyst and expert with the bank comparison site Money-Rates.com. U.S. savers have lost $140 billion in purchasing power to inflation over the 12 months ending in March, according to a Money-Rates study released last month.

“If you tried to raise $140 billion in taxes there would be massive outrage and protests but they’ve taken the equivalent of that out of the pockets of depositors by keeping rates below inflation,” Barrington says. “Depositors are really getting the shaft in this environment and it’s something that’s not really talked about. There’s sympathy for borrowers who are overextended, but they contributed to the financial problem. The sympathy should be with people who did the right thing and saved their money, and are getting teeny tiny interest rates.”

Question for you hbbers. I have a house that I could finally get pmi dropped. However, I was wondering if holding onto pmi might be a good idea if things get really out of control this fall for a worst case scenerio in a large price drop. Open to your comments…thanks in advance….

Although gasoline prices are dropping ahead of the Memorial Day weekend and the start of the summer driving season, there’s no sign motorists are rushing back to the pump to top off their tanks.

Data released Monday by the Federal Highway Administration show the number of miles driven on U.S. roads rose in March compared with February, but still was below March 2009, in the depths of the recession.

There is no sign of anything more than a modest increase in demand for gasoline so far this year. Last week’s MasterCard SpendingPulse report showed consumption of gasoline for the first two weeks of May running about 1.3 percent ahead of last year. For the year, consumption has risen about 1 percent.

Demand is 4 percent below 2007 levels, according to the MasterCard data, which tallies total gas sales paid by credit card, checks and cash.

Drivers are logging about the same number of miles as they did in 2005. Analysts say the stubbornly high unemployment rate, muted consumer confidence and, until recently, rising gasoline prices have held back driving and gasoline demand.

I wonder what these numbers would look like if you took out highway construction, which consumes massive amounts of oil.

Since Yun and others are declaring the housing correction over, there should be no further need for the Fed to prop up the market by holding on to all those MBS they snapped up at fire sale prices. When will they start to unwind those positions?

Tax credit’s last hurrah?
Home sales up in April, but swelling inventories could undermine prices
By Inman News, Monday, May 24, 2010.

Inman News

The federal homebuyer tax credit helped boost existing-home sales again in April, but total housing inventory swelled as homes came on the market faster than they were sold, the National Association of Realtors said today.

With the homebuyer tax credit gone — buyers had to be under contract by April 30 to claim it — NAR Chief Economist Lawrence Yun acknowledged that “no doubt there will be some temporary fallback” in coming months.

But Yun said other factors continue to support housing markets — including mortgage rates that remain near historic lows, and an improving economy and buyer confidence — and that “the housing price correction appears essentially over.”
…

CLICK!

Colorado mass layoffs jump in April
Denver Business Journal

The number of Colorado businesses that laid off 50 or more employees at a time fell jumped in April to 20, the highest single-month total in four months, the U.S. Department of Labor reported.

The total of 20 Colorado companies that announced “mass layoffs” for the month was up from seven in March, 10 in February and 13 in January, the Labor Department’s Bureau of Labor Statistics said in its monthly report on large-scale job cuts.

There were 24 mass layoffs in Colorado in December 2009, 14 in November, 19 in October, 14 in September and five in August. The August total was an 11-month low.

BLS said that 2,269 Colorado workers filed for unemployment insurance as a result of mass layoffs in April, up from 626 in March, 706 in February, 1,301 in January and 1,941 in December.

The state figures are not seasonally adjusted.

I guess in an international financial system that operates like a casino gambling piracy cartel, above the rule of law, gambling on endangered species extinctions makes perfectly good sense? Why not place a bet, then get out your gun and go hunting in order to hedge it? I am wondering if Gollum is going to participate in the extinction sweepstakes?

* May 24, 2010, 3:46 PM GMT

Paddy Power Seeks To Cash In On Marine Life Extinction
By Quentin Fottrell

This time, Paddy Power may have gone too far. In a press statement entitled “Ridley Turtle Tipped For Oily Exit” the plucky Irish bookmaker is taking bets on which marine species will first become extinct due to the month-long oil spill disaster in the Gulf of Mexico.
…

Big banks use capital efficiently alright — provided the objective use of said capital is to cast it into the sea, in order to claim the right to bailouts.

* May 24, 2010, 10:09 AM GMT

Breaking Up Big Banks Could Make Future Crises Worse

By Lauren Mills

Vince Cable, UK Business Secretary, wants to break up the big banks

Renée Schultes, Deputy Editor of Financial News, has an interesting take on the potential consequences of breaking up the big banks.

She says:

“The United Kingdom has drawn a new line in the sand between “us and them”. And it has nothing to do with the euro zone or budget deficits.

Instead, the Conservative-Liberal Democrat government has set out plans for the creation of a commission to consider the arguments for breaking up big banks into a collection of smaller, less systemically important institutions.

But there are reasons to believe such a plan could actually make future crises worse.

Policymakers around the world are united in their goal to prevent the rise of banks deemed too big to fail. Last week the U.S. Senate voted through a raft of changes in the financial reform bill but stopped short of forcing a break-up of the country’s largest banks.

In Europe there has been a preference for imposing higher capital requirements and caps on leverage to limit the growth in bank balance sheets. Meanwhile the UK is charting a different, and potentially dangerous, course. The U.K. commission, advocated strongly by, among others, business secretary Vince Cable, will consider whether retail and investment banking activities should be separated. Cable argues that retail banks have no business engaging in riskier investment banking activities.

However large diversified banks are good for market stability. Markets like Australia and Canada, where a small number of large banks dominate, showed this during the crisis. Large banks also use capital more efficiently than a collection of smaller institutions without economies of scale.
…
BULLSH!T. HOW CAN YOU TELL WHETHER BIG BANKS THAT GOT BAILED OUT ARE EFFICIENT OR NOT? LET ‘EM FAIL IF THEY THROW AWAY MONEY, THEN SEE HOW EFFICIENTLY THEY USE CAPITAL.

The global Dow is rapidly seeking a lower equilibrium level. There has never been a better time to sell all your stocks and hide your money under a mattress.

Is the Fed in on this deal? One certainly can hold out hope…

market pulse

May 24, 2010, 6:57 p.m. EDT
Australia currency firm accused of bribery: report
By Benjamin Pimentel

SAN FRANCISCO (MarketWatch) - A company firm partly owned by the Reserve Bank of Australia has been accused of hiring prostitutes and paying bribes to foreign officials in order to win banknote supply contracts, the Sydney Morning Herald reported Monday. Securency International, the reserve bank’s polymer currency company, is under investigation by the Australian Federal Police for allegedly bribing officials in such countries as Nigeria, Malaysia and Vietnam, the newspaper said.

I would like to thank the WSJ editors for shining a bright light on the institutionalized systemic theft operation which our banking system has become. Unfortunately, as this Op-ed piece explains, the financial reform bill essentially allows crony capitalistic banking business to continue as usual, at the cost of long term destruction of the real U.S. economy.

BTW, does anyone else find it highly peculiar that the Wall Street Journal is taking the largest banks on Wall Street to task regarding so-called ‘financial reform’?

* The Wall Street Journal
* REVIEW & OUTLOOK
* MAY 24, 2010

The New Lords of Finance
Why Wall Street and Washington both like ‘reform.’

If you think the lobbying is intense while Congress considers financial reform legislation, wait until the President signs it. That is when the real battle will begin to shape the new rules of Wall Street.

The unifying theme of the Senate bill that passed last week and the House bill of last year is to hand even more discretion and authority to the same regulators who failed to foresee and in many cases created the last crisis. The Democrats who wrote the bill are selling it as new discipline for Wall Street, but Wall Street knows better. The biggest banks support the bill, and the parts they don’t like they will lobby furiously to change or water down.

Big Finance will more than hold its own with Big Government, as it always does, while politicians will have more power to exact even more campaign tribute. The losers are the overall economy, as financial costs rise, and taxpayers when the next bailout arrives.

This new power for Washington flows from the politically convenient Washington analysis that a lack of regulation caused the financial panic. A popular talking point among Members of Congress is that Wall Street is less regulated than a Las Vegas casino. Notwithstanding the illustrious history of the Nevada Gaming Commission, this is unfair to pit bosses.

To take one example: Washington has failed to prove that derivatives caused the crisis, yet even if one believes that they did, they were hardly unregulated. Look at the list of the largest derivatives dealers—all banks—and you’ll see institutions regulated by the Federal Reserve and the Securities and Exchange Commission. Were regulators barred from examining derivatives books? Not at all.

The Treasury Department, whose Office of Thrift Supervision regulated AIG and blessed its derivatives bets, will now gain even more power as its Secretary chairs the new Financial Stability Oversight Council under the Senate bill. The Fed, author of the loose monetary policy that created the bubble and overseer of Citigroup and its off-balance-sheet adventures, will now oversee even more institutions. The Federal Deposit Insurance Corporation, which allowed its member banks to load up on stratospheric levels of real-estate loans, will now replace bankruptcy judges in managing the collapse of a large financial firm.

These new lords of finance look an awful lot like the old lords of regulation, but with much more discretion to write the rules as they please. In a market crying out for clearer rules, Washington is about to make the standards even more opaque, as subjective regulatory judgment replaces territory once occupied by the rule of law.
…

Holy sh!tstorm! Besides pouring your tax dollars down the real estate rat hole, what does the CEO of Fannie do that is worth over $6 million a year???

The Wall Street Journal
Payday Primer
Select Annual Salaries

Fannie Mae CEO $6,680,806
Freddie Mac CEO $2,076,011
Regional Fed bank presidents (SF & NY) $410,000
POTUS $400,000
Chief Justice, SCOTUS $223,500
Fed Chairman $199,700
Treasury Secretary $199,700

US Treasuries or land you can pi$$ on… what are the slant eyes thinking, it’s not like their ancestors toiled for nothing, right?

http://cgi.ebay.com/Full-Section-640-Acres-Nevada-Land-/270570789149?cmd=ViewItem&pt=Land&hash=item3eff46991d

America Baby! …Go Palin/JebShrub III

Has the unexpected result of us not running out of land been announced yet?

One of my children seems to think he is too-big-to-fail. He is threatening to fail his English class if I don’t continue to type up all his papers for him.

I informed him he is going to learn how to type this summer, whether he likes it or not.

Mr. Bernanke show me the “note,”

New rule says banks must prove ownership before foreclosing

By Kimberly Miller Palm Beach Post Staff Writer
Posted: 11:09 a.m. Sunday, May 23, 2010

Foreclosure filings have backed off this year, dropping 36 percent in Palm Beach County last month compared with March, but it may not be a brightening economy causing the decline.

A new Florida Supreme Court rule requires lenders to verify they are the actual owners of a home before making the initial case for foreclosure.

Show me the “note,” in other words.

The problem is that the notes - legal promises from borrowers to repay a debt - have been sold and resold, bundled into securities, scanned into computers, sealed in unknown vaults and lost in other ways as homes got caught up in the puzzling markets of the real estate boom.

“The original note is something very significant, and they just seem to have lost thousands of them,” said Boca Raton attorney Marlyn Wiener, who handles real estate cases. “Nobody knows where the stuff is.”

The new rule was approved in February with the intention of unclogging the foreclosure courts, which have an estimated statewide backlog of 500,000 cases. It also gives judges power to sanction plaintiffs who make false accusations on the ownership of notes or missing notes.

“Nobody knows where the stuff is.”

Bernanke Admits Printing $1.3 Trillion Out Of Thin Air
By Greg Hunter
USAWatchdog.com

Fed Chairman Ben Bernanke admitted the central bank created $1.3 trillion out of thin air to buy mortgage backed securities. This shocking admission came from the Joint Economic Committee hearing on Capital Hill last week. I was dumbfounded when I saw Bernanke shake his head in the affirmative as Representative Ron Paul said, “Well, where did you get the money? You created this money. So you did monetize debt, and that went into the banking system.” I was amazed he admitted this. I looked up the original hearing on C-Span to make sure the clip was not edited. It was not.