The Housing Bubble

Small companies denied credit as big firms thrive
Small businesses struggle to get loans while larger companies boost earnings and pile up cash

WASHINGTON (AP) — Big companies are building up cash and are expected to report strong earnings starting this week. Not so for small businesses that can’t get loans — or hire freely until they do.

The gap helps explain why the economic rebound isn’t stronger and could even stall. Federal Reserve Chairman Ben Bernanke stepped up pressure Monday on banks to break the logjam and lend more to smaller firms, which employ at least half of American workers.

Small business owners are relying on personal credit cards or raiding retirement accounts to stay afloat, the Fed chairman said.

Retirees may soon outnumber workers contributing to state pension system. Pressure to maintain benefits rises as more state workers retire
herald-leader.com

Just four years ago, there were 51,027 state workers contributing toward the pension fund and 34,120 retirees drawing benefits from it. By 2009, the number of workers slipped to 50,394 while the number of retirees leapt 19 percent to 40,531.

(In a separate fund for Kentucky State Police workers, there already are 239 more retirees getting pensions than active troopers on duty. County governments, served by a third fund, had 93,481 workers and 45,564 retirees.)

At the same time, benefits got a little richer for workers who left under the “incentive windows” the legislature created in recent years to encourage retirement and reduce the payroll. One such incentive let workers base their pensions on their best three years of salaries rather than their best five years.

These incentives cause headaches at the Kentucky Retirement Systems because they send droves of workers for the exit years earlier than expected, Burnside said. That produces more people taking money from the funds, fewer people giving money and less money to invest for gains, he said.

Area home sales pass 1,000
Tax credit boosts transactions to highest level seen in years
The Post and Courier ~ July 13, 2010

The Charleston,S.C area’s real estate market crested on a wave of tax incentive-supported home sales last month, pushing activity past the national market as the popular incentive winds down.

Home sales during June hit 1,022 transactions, the first time that sales crossed the 1,000-home threshold in nearly three years, according to the Charleston Trident Association of Realtors. A federal tax credit worth up to $8,000 combined with record-low interest rates and thousands of available properties to send sales surging, local experts said.

Falling prices also encouraged buyers during uncertain economic times: The typical home sold for $185,612 during June, a decline from a $192,626 median price from June 2009, the association said.

The region’s real estate market growth has outpaced the rest of the country. Homes sold in the Charleston area so far this year topped last year’s year-to-date sales by 31 percent, while national sales increased by about 16 percent. The association also includes in its data a few properties outside of but adjacent to the tri-county area.

“I think there’s an American spirit of optimism in Charleston, and we have every reason to have it,” said Kay Kennerty of AgentOwned Realty Co. in Mount Pleasant, citing the region’s quality of life and economic development opportunities.

Strapped Florida Banks Ask for Help
Hobbled by Real-Estate Bust and Oil Spill’s Fallout, Lenders Seek Reprieve From Capital Raising

Florida banks—already weakened by the real-estate bust and hit again by customers suffering from the BP PLC oil spill—are asking federal regulators for a reprieve from government-ordered capital raising as they struggle to stay alive.

In a Monday letter to Federal Deposit Insurance Corp. Chairman Sheila Bair and Federal Reserve Chairman Ben Bernanke, Florida’s top banking lobbyist requested all local banks be granted a 12-month break from higher capital requirements, loan appraisals and new regulatory sanctions.

“Unless we work together in giving our banks more time to work through this oil crisis,” more financial institutions will go under, wrote Florida.

hey Drumminj, you still out there??

are you still updating the joshua tree extension?

if so, where can i get it?

thanks,
tj

Homeowners vs. Home-Loan Buyers ~ The Wall Street Journal

Eddie Patrick thought he had a deal with Kondaur Capital Corp. to restructure the mortgage on his Baltimore house after he fell behind on his payments. The 54-year-old taxi driver dropped a lawsuit against the company after he says it promised to “work with me” on a loan modification, according to a court filing.

Kondaur foreclosed anyway—and then offered to sell the house back to Mr. Patrick for $140,000. “I don’t know why they are so inhumane,” he says about the Orange, Calif., company, one of the nation’s largest buyers of troubled mortgages.

The appetite is huge among companies like Kondaur, hedge funds and investors to buy shaky mortgages, credit-card debts, auto loans and even payday loans from lenders eager to cut their losses. So far this year, nearly $10 billion in troubled mortgages has changed hands, according to Private National Mortgage Acceptance Co., or PennyMac, a mortgage-loan buyer started in 2008.

Such loans often sell for just pennies on the dollar, with the buyers hoping to make a profit by restructuring the loan, selling it to someone else or, in the case of mortgages, foreclosing if all else fails.

http://online.wsj.com/article/SB10001424052748704258604575360860682756080.html?mod=rss_whats_news_us

The Maine Twins and Scott “You guys didn’t really think I was a Republican did you” Brown gave the Dems the 60 they need to further strangle capitalism.

What’s left on the agenda? Health care is nationalized. Unemployment insurance is now a welfare program that provides the lazy with a never ending stream of income. Auto industry is nationalized providing unions with a never ending stream of income. Banking is for all intents and purposes nationalized with this so-called reform bill providing Democrat donors like Goldman Sachs with a never ending stream of inccome. Oil is pretty much a dead man walking in this country providing Democrat donors of “green” technology firms a never ending stream of income. Education has been obliterated by teachers unions over the past 50 years to the point where 50% of high school seniors are functionally illiterate, and also providing a never ending stream of income to unions in the guise of more education funding. Manufacturing has been run out of the country with onerous taxes and regulation making it impossible to make a profit by producing goods here.

So what else is left on the agenda by the left? In what other ways can they destroy this once great nation? I really can’t think of anything else they can do. Short of declaring the NFL illegal, that’s it.

Oh silly me, amnesty is on the docket.

U.S. Queries 64 Issuers of Mortgage Securities, Others
Wall Street Journal ^ | 13 July 2010 | Nick Timiraos

Posted on Monday, July 12, 2010 9:47:27 PM by Lorianne

A federal regulator said it sent 64 subpoenas to issuers of mortgage-backed securities and other entities in an effort to probe whether the firms misled Fannie Mae and Freddie Mac, two of the biggest investors in privately issued bonds.

The subpoenas, issued on Monday by the Federal Housing Finance Agency, which oversees the government-backed mortgage titans, could lead the government to recoup some of the billions of dollars that Fannie Mae and Freddie Mac lost when they scooped up mortgage-backed securities issued by Wall Street banks during the housing boom.

The FHFA didn’t disclose its targets. But the top private issuers of mortgage securities included Bear Stearns Cos. and Washington Mutual Inc., which were taken over by J.P. Morgan Chase & Co., as well as Countrywide Home Loans and Merrill Lynch, which were taken over by Bank of America Inc. Deutsche Bank AG and Morgan Stanley were also among the top issuers.

Issuing subpoenas marks the first step in any effort to rescind those mortgage security purchases. If the regulator can find loan files or other documents that show that the loans underlying the securities didn’t match the materials used to market those investments, then it could force the issuers to take back the securities, potentially costing them billions.

The probe focuses on the “private label” securities based on subprime and other risky loans that were originated by mortgage companies, packaged by Wall Street firms, and then sold to investors. Many of the mortgage securities were made up of subprime loans and mortgages requiring little or no documentation of a borrower’s income, which deteriorated most rapidly during the housing meltdown.

Fannie and Freddie couldn’t purchase those loans directly, but they were allowed to invest in slices of those securities that carried triple-A ratings.

Suffer These Crimes in Oakland? Don’t Call the Cops
Dozens of layoffs effective at midnight, barring last minute deal
Jul 13, 2010

Oakland’s police chief is making some dire claims about what his force will and will not respond to if planned layoffs happen tonight at midnight.

Chief Anthony Batts listed exactly 44 situations that his officers no longer respond to and they include grand theft, burglary, vehicle collision, identity theft and vandalism. He says if you live and Oakland and one of the above happens to you, you need to let police know on-line.

http://www.nbcbayarea.com/news/local-beat/Suffer-These-Crimes-in-Oakland-Dont-Call-the-Cops-98266509.html

“Very Toxic”: All Bets Are Off If ‘Jobless Recovery’ Becomes True ‘Double Dip’, Catalano Says. ~~ Jul 13, 2010 by Keegan Bales in Recession

By the end of the third quarter it will be clear whether the economy is forging a real recovery or slipping into another recession, says Vinny Catalano, founder and president of Blue Market Research. This is a much more important than some academic debate over whether the economy suffers a “double dip” or not.

When he sat down with Aaron Monday, Catalano said he believes the economy is in recovery mode now, albeit of the “jobless” variety. He notes that corporate profits are strong, there is significant growth in the world’s emerging economies and while developed nations are recovering slowly, they are moving in the right direction.

But a true “double-dip” recession in the U.S. could trigger widespread instability both at home and abroad.

“Given the political climate that we are in right now, that could be very toxic over the next year or two,” Catalano says. “I could see protests in the streets, things of that sort…you can see things get unhinged and there is a snowball effect.”

Look for lots of massive central bank liquidity injections over the coming weeks to buffer the effects of a collapsing Chinese property bubble.

China Property Market Beginning Collapse That May Hit Banks, Rogoff Says
By Susan Li and Jacob Greber - Jul 6, 2010

July 6 (Bloomberg) — Kenneth Rogoff, professor at Harvard University and former chief economist at the International Monetary Fund, talks with Bloomberg’s Susan Li about China’s real estate market and economy. Rogoff, speaking in Hong Kong, also discusses the outlook for European banks, the global economy and stimulus policies. (Source: Bloomberg)

China’s property market is beginning a “collapse” that will hit the nation’s banking system, said Kenneth Rogoff, the Harvard University professor and former chief economist of the International Monetary Fund.

As China’s economy develops, “especially at the speed it’s growing, it’s going to have bumps,” said Rogoff, speaking in an interview with Bloomberg Television in Hong Kong. He also said that while recoveries across the global economy are “very slow,” the danger of a return to recession isn’t “elevated.”

Rogoff’s concern echoes that of investors, who sent China’s benchmark stock index to its worst loss in more than a year last week. China’s data have been a focus because the nation has led the global recovery from the worst postwar recession.

The Shanghai Composite Index tumbled 6.7 percent last week, recouping some of those losses today on speculation recent losses were excessive. The gauge was up 1.9 percent at 2,409.42 as of 3:09 p.m. local time.

In the U.S., the world’s largest economy, the benchmark Standard & Poor’s 500 index capped a ninth day of declines in 10 sessions on July 2 after a government report showed fewer private-sector American jobs were created in June than forecast.

Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 percent annual pace in the first quarter, the most since 2007. Measures have included raising minimum mortgage rates and down payment ratios for some home purchases. Officials may also start a trial property tax, according to state media.
…

The National Association of Realtors is a corrupt cesspool.

WTH? You guys have the keys to the printing press, get to printing and passing it out dammit.

States Can’t Count on Federal Bailout, Obama Appointees Say

States can’t count on the federal government for more budget bailouts, the heads of President Barack Obama’s debt commission told governors.

States expecting Congress to authorize more assistance are “going to be left with a very large hole to fill,” said Erskine Bowles, co-chairman of the National Commission on Fiscal Responsibility and Reform. States including New York and California have urged Congress to extend stimulus spending authorized to combat the recession, including extra Medicaid funding and money to pay public school teachers.

“I don’t think we can count on the federal government again,” Bowles, White House chief of staff under former President Bill Clinton, said yesterday at the National Governors Association meeting in Boston. “They just do not have the financial resources.

We need bigger Section 8 and Food Stamp Programs.

5 Boynton Beach convenience store employees charged with food stamp fraud

By Julius Whigham II Palm Beach Post Staff Writer
Posted: 6:10 p.m. Thursday, June 10, 2010

BOYNTON BEACH — Posing as customers with U.S. government food stamp cards, undercover officers discovered fraudulent activity at five convenience stores in the city, police said Thursday.

As a result, Boynton Beach Police arrested and charged five store employees with public assistance fraud, according to a release issued Thursday afternoon.

The investigation showed that store clerks were allowing customers to use Electronic Benefit Transfer (EBT) cards to buy beer, cigarettes and get cash, the release said.

During the investigation, undercover officers would walk into a store with a fictitious EBT card and request cash in a certain dollar amount. The clerk would charge a fee for a matching amount. Police were able to conduct 68 fraudulent transactions worth $4,000 at the five convenience stores in five months, the release said.

Police arrested Shuhab Mahari, 48, Mohammed Shantonu Hossain, 32, Abdul Gaffar, 52, Rafiqul Islam Chowdhury, 50, and Kamal Ahmed, 27

Section 8 fraud

Authorities continue search for last of 16 charged with housing fraud in Palm Beach County

Posted: 8:53 a.m. Tuesday, July 13, 2010

WEST PALM BEACH — Authorities today still are searching for the last of 16 people they allege lied about their status to get nearly $600,000 in federal rental assistance to which they aren’t entitled.

As part of “Operation Shield,” 15 people were booked Monday into the Palm Beach County Jail on 21 counts of grand theft, organized scheme to defraud, public assistance fraud and falsifying homestead exemptions. The last one, Courtney Lataurus Gross, 34, of Royal Palm Beach was expected to be in custody soon, officials said. The amount of her alleged fraud is $92,859. She allegedly failed to disclose her criminal history.

The sweep is the latest of several crackdowns by the Palm Beach County Sheriff’s Office and the U.S. Department of Housing and Urban Development. According to Palm Beach County Jail records, the 16 named bring to nearly 40 the number booked on such charges in 2010; more than 100 have been charged since January 2009.

(Still at large:) Courtney Lataurus Gross, 34, of Royal Palm Beach. Amount: $92, 859. Allegation: failed to disclose her criminal history, which includes arrests for aggravated assault with a deadly weapon. She also failed to disclose the criminal history of her son, Kenton Will Ball, which includes arrests for robbery and probation violation; for her boyfriend, Duane Mark Blake, who had 26 arrests, including one for homicide, and a roommate, Eric Alexander Hunter, whose arrests included military desertion, robbery and kidnapping. All four are on probation.

B Of A Sued Again Over Hamp
http://www.courthousenews.com/2010/07/09/28698.htm

Yes, most institutions are corrupt, which is why it is important to approach the world through a skeptical lens, especially when something sounds too good to be true!

“The FICO fallout is probably more severe in Florida, which has suffered a flood of foreclosures since the housing bubble burst. Spagnuolo guessed that 40 percent of Floridians have credit scores below 600.”

And still house prices remain way too high in Florida while the LOWSCOES live in their payment free houses complaining that the bank won`t respond to help them. THE BANKS EXTEND AND PRETEND while sitting on their shadow inventory, criminals rent out their second houses without paying the mortgage, rents remain too high because of all of the above while the people with good scores who didn`t go to the Housing Casino and payed their bills and taxes, suffer.

Credit scores hit alarming lows

By Eileen Aj Connelly The Associated Press
Posted: 9:15 p.m. Monday, July 12, 2010

The credit scores of millions more Americans are sinking to new lows.

Figures provided by FICO Inc. show that 25.5 percent of consumers - nearly 43.4 million people - have a credit score of 599 or less, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards that banks now use.

Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.

“One in four consumers have a FICO score that is basically subprime,” said Louis Spagnuolo, a mortgage broker at WCS Lending in Boca Raton. “When you combine that with lenders raising the minimum scores to qualify for loans, it’s a double whammy.”

The FICO fallout is probably more severe in Florida, which has suffered a flood of foreclosures since the housing bubble burst. Spagnuolo guessed that 40 percent of Floridians have credit scores below 600.

Southern California Home Prices Rise on Tax Credits

Southern California house and condominium prices rose 13 percent in June from a year earlier as buyers took advantage of state tax credits and low interest rates, research company MDA DataQuick said.

The median price climbed to $300,000, MDA DataQuick said today in a statement. The report encompasses Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties, the San Diego-based company said.

Rates for 30-year fixed mortgages fell to the lowest on record for the third straight week on July 8, reducing borrowing costs for homebuyers, according to mortgage-finance company Freddie Mac. In California, buyers can qualify for a tax credit of as much as $10,000 under a program that began May 1.

“We’re still seeing lots of bargain hunting, and we’re not seeing much discretionary buying,” John Walsh, president of MDA DataQuick, said in the statement. “The single-biggest issue is still mortgage financing. Rates may be at record lows, but that doesn’t mean much if the lender won’t qualify you.”

There were an awful lot of open houses last Sunday.

A whiff of post July 4th fear, perhaps?

I’m also really getting a kick out of the number of MLS offerings that are clearly staged REOs. (Barest of essentials, no clutter, no window treatments) and I”m getting sick and tired of my realtor pretending that’s not what they are.

Wesley College plans to close.

FLORENCE, MISS. — Wesley College leaders say they plan to close at the end of the month because the school has about $2.7 million in debt.

The cozy college, owned by the Congregational Methodist Church, has operated at its Mississippi 469 site, off U.S. 49, since 1972. Debt accrued from building a new dorm and a drop in contributions are the reasons the college is closing.

Registrar Charity Nielson said the college’s leaders learned of the closure Wednesday and have since notified students enrolled for fall classes. Nelson said the college plans to notify other students and alumni shortly.

The college has about 140 students per semester with 40 percent living on campus.

“We want to make sure our students are taken care of,” Nielson said. “We’re looking to make sure our students are placed.”

French back burka ban as only ONE MP votes against move to outlaw Islamic ‘walking coffins’ ~ 13th July 2010

French MPs today overwhelmingly voted to ban the burka after a senior minister described it as a ‘walking coffin’ and a ‘muzzle’.

Only one deputy opposed the bill in the National Assembly as 335 other politicians united to show their opposition to Islamic veils which cover a woman’s entire face.

The draft bill, proposed by President Nicholas Sarkozy’s government, will now pass to the Senate where it could be ratified as early as September.
United: Members of the French parliament voted 335-1 in favour of the burka ban

United: Members of the French parliament voted 335-1 in favour of the burka ban

It follows months of debate which saw Immigration Minister Eric Besson describe the burka as a ‘walking coffin’.

Prime Minister Francois Fillon accused wearers of ‘hijacking Islam’ and displaying a ‘dark sectarian image’.

Recent polls suggested that more than 80 per cent of French people wanted the burka banned, including members of the country’s five million-strong Muslim population.

eBay sued for $3.8 billion in PayPal patent case:

On Tuesday July 13, 2010 By Jonathan Stempel / Reuters

Meg / 2010!

BWAHAHHAHAHAHHAHAHHAHHAHAHAHHHHHHHHHHHHH!!! (fpss™)
&
BWAHAHAHicHAHAHicHAHAHAHAHicHAHAHic* (DennisN™)

Ho ho, hah hah, hehehehehehe, BwaHaHaAhHAHAHAHAHAHA!!! (Cantankerous Intellectual Bomb-thrower™)

“…eBay allegedly stole information shared in confidence by the inventors on XPRT’s own patents, and incorporated it into features in its own payment systems, such as PayPal Pay Later and PayPal Buyer Credit.

XPRT said that when eBay on April 30, 2003 filed a patent application titled “Method and System to Automate Payment for a Commerce Transaction,” it failed to tell the U.S. Patent and Trademark Office it knew of XPRT’s own patent applications.

By filing for a similar patent, eBay “admitted the patentability of the inventors’ claims,” the complaint said.

“This involves a trade secret theft, along with sheer patent infringement,” said Steven Moore, a partner at Kelley Drye & Warren LLP representing the plaintiff, in an interview. “It is bad enough to take someone’s technology, but it is a bit much to use it in your own patent application.”

EBay did not immediately return calls and an email seeking comment.”

Australian drunk survives attempt to ride crocodile ~ BBC

A drunk man who climbed into a crocodile enclosure in Australia and attempted to ride a 5m (16ft) long crocodile has survived his encounter.

The crocodile, called Fatso, bit the 36-year-old man’s leg, tearing chunks of flesh from him as he straddled the reptile.

He received surgery to serious wounds to his leg and is recovering in hospital, police say.

He had been chucked out of a pub in the town of Broome for being too drunk.

The man, who was not named by the police, climbed over a fence and tried to sit on the 800kg (1,800lb) saltwater crocodile.
Continue reading the main story

If it had been warmer and Fatso was more alert, we would have been dealing with a fatality

“Fatso has taken offence to this and has spun around and bit this man on the right leg,” Sgt Roger Haynes of Broome police told journalists.

“The crocodile has let him go and he’s been able to scale the fence again and leave the wildlife park.”
‘Right mind’

Malcolm Douglas, the park’s owner, said that the crocodile was capable of crushing a man to death with a single bite.

(gonna repost this on tomorrow’s thread)

so I’m at a happy hour for this guy that is leaving my company. I work for a company that is a microcosm of the housing collapse. i was at a happy hour for a young guy leaving my company. he was in the sexy “finance..deal guy group”.

me: cool man…what are your plans?

him: getting my MBA at the university of “not in the top 10″.

me: ummkay…what’s your emphasis gonna be? (i knew what i was gonna hear)

him: real estate

me: come on man…real estate’s dead for at least the next 10 years.

him: what? oh…in the U.S. you do realize that there are more markets than just the U.S.?

me: oh yes…(awaiting my enlightenment)

him: Canada is booming! (gives me a very dismissive expression)

me: yep…yep it is.

i guess i now know why i dont have many friends at work.

Banks repossess homes at record rates, average of 4,000 per month in South Florida
by Kim Miller
Condo Vultures is reporting an average of 4,000 South Florida properties per month were taken back by the bank during the first half of 2010, a trend seen also in monthly RealtyTrac reports on foreclosures and repossessions. (June’s RealtyTrac study will be released Thursday.)

In Palm Beach County, bank takeovers _ the final step in the foreclosure process _ jumped 112 percent compared to the same time last year

That means between 350 and 950 bank repossessions occurred per month in the first half of 2010.

According to Condo Vultures, if takeovers progress at the current pace, nearly 50,000 properties would be repossessed in South Florida in 2010.

“South Florida’s real estate market is at a crossroads,” said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures. “The number of bank repossessions in 2010 is higher than at any time in at least two decades. This additional bank-owned inventory will undoubtedly be coming onto the resale market in the near future as discounted REO product.

“The flip side is, the number of new foreclosure filings in South Florida is down 34 percent in the first half of the year, putting the region on pace for less than 70,000 actions in 2010 compared to 97,000 in 2009.”

My often-repeated HBB suggestion that lenders with derelict REO inventory should be charged a hefty fine if they don’t bother maintaining their properties is catching on in a big way (in LA, no less!):

Los Angeles cracks down on banks and lenders who let foreclosure property fall into disrepair
Monday, 12 July 2010

Los Angeles is getting tough on the owners of foreclosed properties who leave them empty and let them fall into disrepair by increasing fines. In particular officials are cracking down on financial institutions such as banks and mortgage companies that seize properties and leave them to fall into a state of disrepair.

It is the city’s largest attempt to date to deal with a neglected 27,000 foreclosed properties that become an eyesore and also bring down the prices of neighbouring real estate.

‘It is right that the banks should be held accountable to cleaning them up. A lot of vacant homes have become a nuisance because of the foreclosure crisis,’ said Betty Steele, one of several community activists who is encouraging residents to report problem properties via the city’s 311 hotline.

New rules mean that officials can hand out fines of up to $100,000 against financial institutions that seize homes and allow them to fall into disrepair. They also mean that lenders, who often don’t consider the properties their responsibility until the title is transferred, are now responsible as soon as they issue a default notice.

They also require lenders to register their inventory of properties which will make it easier for officials to identify bank owners because property records lag behind property transfers and the foreclosure market is very fluid. The new registry should allow inspectors to easily identify owners when constituents call in to complain about a property.

But the California Mortgage Bankers Association criticised the moves and said it creates unnecessary paperwork for lenders because property records already are publicly available. ‘Increased bureaucracy is not the answer. Lenders and banks have a vested interest in keeping up homes because the better condition the house is in, the more money they are going to recover when they sell that house,’ said spokesman Dustin Hobbs.

California is one of the worst hit states in terms of foreclosures and overall the number of foreclosures is still rising in the US and expected to continue doing to this year and into 2011.

Real estate foreclosures in the US reached a record for the second consecutive month in May, with increases in every state, as lenders stepped up property seizures, according to the latest report from RealtyTrac.

Bank repossessions climbed 44% from May 2009 to 93,777, while foreclosure filings, including default and auction notices, rose 1% to 322,920. One out of every 400 US households received a filing.

Senior vice president Rick Sharga warned that a quarterly record for home seizures is possible if June is anything like May. He predicted last month that another five million delinquent mortgages will end in foreclosure in addition to properties that had already been repossessed.

And it is nowhere near the peak. ‘The second quarter won’t be the peak. I’m not even sure 2010 will be,’ he said. He added that the total amount of individual filings could reach as high as 4.5 million in 2010, up from 3.9 million filings in 2009.
…

Two months of 0.6% price declines annualizes to a rate of
((1-0.006)^12-1)*100 = -7%.

Not clear how a 7% annual rate of decline equates to “unchanged”?

Residential property prices in UK record a further fall, according to the latest index to be publish
Friday, 09 July 2010

Residential property prices in the UK fell 0.6% in June on the back of a similar decline in May and in line with predictions from leading industry commentators. The latest house prices index from the Halifax shows that prices in the April to June quarter were largely unchanged compared with the first three months of the year. This continued the slowdown in house price growth since the beginning of the year following the moderate recovery in prices during much of 2009.

‘This pattern is in line with our view that house prices will be broadly unchanged over 2010 as a whole. A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year,’ said Martin Ellis, housing economist at the Halifax.
…

It seemed to me today like the Fed was dumping in liquidity to green up the markets. What else explains all asset classes except the dollar rising?

* POLITICS
* JULY 14, 2010

Fed Sees Slower Growth
Officials Debate How to Respond if Recovery Falters; Softer 2nd Half Is Seen

By JON HILSENRATH

Federal Reserve officials, who are likely to reveal Wednesday a cut in their assessment of the growth outlook, are divided on how aggressively the central bank should act if the economy slows further.

Fed officials still expect the U.S. economy to keep growing. But an updated forecast to be released Wednesday afternoon with the minutes of the Fed’s late-June policy meeting is likely to show that officials have trimmed their second-half forecasts—as have many private forecasters.

One topic under debate is the possibility that today’s already-low inflation may turn into a debilitating bout of deflation, a broad drop in prices across the economy.
Journal Community

How would you rate the risk of deflation as the recovery cools?

Fed officials disagree on the risk of deflation. A few see it as a threat; others call it very unlikely, Fed officials said in recent interviews.

For now, the Fed—and particularly its most-powerful member, Chairman Ben Bernanke, who has ultimate say—appears to be very much in wait-and-see mode. But differences among his colleagues are growing more evident. One problem: Having already cut interest rates to near zero, most of the Fed’s options for spurring growth aren’t very appealing.

Some policy makers, including Fed governor Kevin Warsh and Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, Va., are reluctant to revive Fed purchases of U.S. government bonds or mortgage-backed securities, the most forceful action the bank could take if it decides the economy needs more help.

Fed staff estimate that the purchase of $1.25 trillion in bonds in 2009 and early 2010 pushed down long-term interest rates by roughly half a percentage point.

But somes skeptics inside the Fed don’t believe the impact was that large and think a new round of purchases might have even less impact because markets are now on a more solid footing. Renewing the purchases would also leave the Fed with a bigger portfolio to shrink, when that time comes, and could backfire if it pushes expectations for future inflation sharply higher.

“We’re a long way away from needing to think about starting up asset purchases,” Mr. Lacker said in an interview. “The recovery will take time. We just have to be patient and manage it carefully. I don’t think this is a time to shift gears again.”

Other policy makers—among them Boston Fed President Eric Rosengren, New York Fed President Bill Dudley and, to a lesser extent, Atlanta Fed President Dennis Lockhart—see reviving the purchases as an option that needs to be kept alive, particularly if deflation becomes reality.
…

We in the West are economically hosed. Get used to it — the situation is likely to continue for the rest of your life.

The Financial Times
Three years and new fault lines threaten
By Martin Wolf
Published: July 13 2010 22:45 | Last updated: July 13 2010 23:04

It is nearly three years since the world became aware of the coming financial tremors. Since then we have experienced a financial sector earthquake, a collapse in economic activity and an unprecedented monetary and fiscal response. The world economy has now recovered. But this crisis is far from over.

As Raghuram Rajan of the University of Chicago Booth School of Business and former chief economist of the International Monetary Fund notes in a thought-provoking new book, the underlying “fault lines” are still with us.* More trouble may lie ahead. His voice is worth listening to: in 2005, he presented a controversial, yet now acclaimed, paper at the annual Jackson Hole monetary conference entitled “Has Financial Development Made the World Riskier?” His answer? Yes.

We already know that the earthquake of the past few years has damaged western economies, while leaving those of emerging countries, particularly Asia, standing. It has also destroyed western prestige. The west has dominated the world economically and intellectually for at least two centuries. That epoch is over (see charts). Hitherto, the rulers of emerging countries disliked the west’s pretensions, but respected its competence. This is true no longer. Never again will the west have the sole word. The rise of the Group of 20 leading economies reflects new realities of power and authority.

Yet this is far from the only change in the global landscape. The crisis has revealed deep faults within western economies and the global economy as a whole. We may be unable to avoid further earthquakes.

In his book, Prof Rajan points to domestic political stresses within the US. Related stresses are emerging in western Europe. I think of it as the end of “the deal”. What was that deal? It was the post-second-world-war settlement: in the US, the deal centred on full employment and high individual consumption. In Europe, it centred on state-provided welfare.

In the US, soaring inequality and stagnant real incomes have long threatened this deal. Thus, Prof Rajan notes that “of every dollar of real income growth that was generated between 1976 and 2007, 58 cents went to the top 1 per cent of households”. This is surely stunning.

“The political response to rising inequality . . . was to expand lending to households, especially low-income ones.” This led to the financial breakdown. As Prof Rajan notes: “ [the financial sector’s] failings in the recent crisis include distorted incentives, hubris, envy, misplaced faith and herd behaviour. But the government helped make those risks look more attractive than they should have been and kept the market from exercising discipline.”

The era of easy credit, much of it backed by housing, is now over (see chart). Meanwhile, in all western countries, the state supports the welfare of the individual. But the fiscal consequences of this crisis – a huge rise in deficits – will interact with pressures from ageing, to make fiscal stringency the theme of policy for decades. The long bear market in shares and prospects for a “jobless recovery” add further to these woes.

Global output

It is little wonder then that the politics of western countries and, above all, of the US have become discordant. President Barack Obama – a pragmatic centrist – is vilified. On the right, the call is to overthrow the modern government in an effort to return to the 18th century. This, then, is a crisis of government itself.
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I’m definitely an Austrian, and the Fed seems determined to prove our point.

The Financial Times
Leverage crises nature’s way of saying slow down
By Jamil Baz
Published: July 13 2010 16:05 | Last updated: July 13 2010 16:05

Much has changed in the world economy over the past three years, but then nothing has changed. In 2007, the ratio of total debt to gross domestic product was 350 per cent in the US. In the intervening period, we have seen the near collapse of the world financial system, followed by deep recession and ultimately recovery, fuelled by the biggest monetary and fiscal stimulus in history.

It is a fact that, despite this being a crisis of leverage, total debt to GDP remains at 350 per cent in the US, and at higher levels in many of the world’s leading developed economies, for example Japan and the UK. Over the longer term, the cost of deleveraging imposes a massive burden on a country’s finances, ensuring recovery will be anaemic at best.

Although there are no definitive answers, 200 per cent of total debt to GDP is a level consistent with healthy growth, based on pre-1995 conditions. A realistic assumption is that the world can cut back its debts by 10 percentage points of GDP a year, meaning that we face 15 years of low growth or no growth at all.

Under a less optimistic scenario, this striving is all in vain: if GDP stagnates, and tax revenues fall, and interest rates rise, leverage might rise after all, despite valiant attempts to chop it. This is what happened in numerous Latin America debt crises and what looks likely to transpire in Greece or Ireland. Both these countries are entering the first stages of what will be a long period of austerity, with uncertain prospects of returning to economic growth.

There are two schools of thought on how to respond. On the one hand, we have the new and unexpected coalition of monetarists and Keynesians. The so-called “Washington consensus” sees policymakers in the US pursuing a combination of fiscal expansion and monetary stimulus, thus uniting former ideological enemies in an attempt to reprime the world financial and economic system.

On the other, there is the Austrian school, which draws on the ideas of Ludwig von Mises, Carl Menger, Friedrich von Hayek and others, and is given expression in the restrictive monetary and fiscal policy favoured by the EU today. These economists are social libertarians who believe the role of the state in society should be limited. While this conjures up visions of Tea Party extremists and hillbillies decamping to Montana, their ideas have a substantial intellectual pedigree. They see governments as vehicles for expropriating citizens. They have a low opinion of money-printing central banks and money-creating fractional banking systems.

The Austrians believe that central bank intervention results in misallocation and ultimately the destruction of capital. Far from curbing the excesses of leverage, this policy is creating more intoxicating debt and sowing the seeds of further booms, busts and crises.
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Great art is always being produced. The problem is the large volume of “stupid money” produces large volumes of stupid art which drowns out the small volume of great art which is independant of money.

Too bad the financial reformer legislators ignored this guy.

‘Break up the banks, bust the trusts!’ exclaims Olbermann
David Edwards and Stephen C. Webster
Published: Friday March 20, 2009

Keith Olbermann used his Thursday Special Comment on MSNBC’s Countdown to lay out one of his most impassioned tirades yet, this time a diatribe against “the latest atrocity” from banks he feels the US should “break up” and regulate “to within an inch of their existences.”

Yelling several times, “Enough!” during his monologue, Olbermann recounted the recent history of Vikram Pandit, the CEO of Citigroup who vowed to reduce his salary to just $1 a year and accept no bonus in the face of his company losing over $5 billion and laying off over 9,000 people.

When he was first made CEO, Citigroup was already reeling from losses of between eight and 11 billion dollars.

“… what Mr. Pandit got was a new 10 million dollar executive suite for himself and his key associates,” said Olbermann. “… In fact, he then accepted a total compensation package for 2008 of 38 million dollars.”

“Mr. Pandit, you‘re probably just a good actor and a damned liar and a con man,” he continued. “But I’ll give you the benefit of the doubt and assume instead, that you just can’t tell the difference between one dollar and 38 million of them. That would certainly explain the maelstrom into which you, and your colleagues at Citi and your counterparts elsewhere, have gotten us, including the vast majority of us who are just innocent bystanders.

“… Mr. Pandit’s corporation should be cut up into little pieces. And when he and the other ultra-millionaires wonder what hit them, we should make sure they are easily reminded. Our representatives should entitle the legislation that ends their moral ponzi schemes, ‘The Punish Vikram Pandit Act of 2009.’”

Olbermann isn’t the only media figure with sharpened words for America’s bankers. On Thursday’s New York Times op-ed page, Simon Johnson and James Kwak posited an analogy between the current financial crisis and the executive “smokescreen” that drove the series of Asian market collapses in 1997.

Arguments made by their bankers, then, are quite similar to our bankers, today, they wrote.

“The leaders of Thailand and South Korea did not listen to such arguments, and thank goodness. Some of the leading Thai banks were taken over by the government. After the crisis, a civil servant in charge of one such bank noted that its bad loans were much bigger than had been indicated before the takeover, largely because of an internal coverup. Only when outsiders took over did the public discover the full scope of the losses.

“The South Korean government also demanded that the banks and the chaebols make a clean break. This generated a great deal of political noise — particularly when foreign managers were brought in, as when the Carlyle Group bought a stake in KorAm Bank in 2000 and Lone Star Funds purchased the Korea Exchange Bank in 2003.

“But these reforms made all the difference.”

“The far right in this country, without the slightest provocation or justification, screams ’socialism,’ and the sheep who follow that far right, and who do not know what the word means and do not know it is only being used because ‘communism’ now rings laughably hollow—in this cry of fire in a crowded unemployment line, there is outrage, to be sure,” said Olbermann.

“But there is also license. They think this is socialism? There is a million miles of reform left to go before we actually hit actual socialism. But if they’re going to call us names, whether they apply or not, let’s give them real reform.

“Break up the banks. Regulate the financial industries, to within an inch of their existences. Roll back corporate legal protections. Make liable the officers of corporations for their debts and for their deeds. Resurrect the rallying cry of a hundred years past: bust the trusts!”

This video is from MSNBC’s Countdown, broadcast Mar. 19, 2009.