The Housing Bubble

Markets up 7 days straight. Ready to make it 8.
Dow 12K is still my prediction for 2010. Almost got there in June, we’ll get there by Dec.

U.S. homes repossessed by banks set to hit record 1 million this year
Washington Times

The number of American homes repossessed by banks hit a record high in the second quarter of the year, putting the number of foreclosures on track to hit a record 1 million by the end of 2010.

Bank repossessions increased 5 percent from the previous quarter and 38 percent from the second quarter of 2009 to 268,962, according to data released early Thursday by RealtyTrac, an Irvine, Calif., firm that tracks the foreclosure market.

But while the number of homes in the final stage of the foreclosure process increased, the number of new filings fell. Both default and auction notices were down on a month-over-month and year-over-year basis.

The combination of bad news and good news can be explained by two seemingly contradictory trends that are the result of Obama administration efforts to encourage with lenders to help homeowners in distresss.

Over the past few months, lenders have been clearing out a backlog of homes that had been temporarily saved from foreclosure thanks to prevention efforts in 2009. And at the same time, they have been delaying foreclosure proceedings on homeowners with delinquent payments and instead trying to work with more aggressive loan modification strategies or to accept a short sale.

Oh well Didn’t get the 1 day a week job at another internet radio station…they wanted a button pusher and not someone who wants to be in radio.

A seacoast food pantry says the cupboards are bare yet decides to pay twice as much rent for a location with better physical layout to improve workflow.

I’m sorry but this is what is wrong with America. When she tells us they’ve always had beans, a food pantry staple and now they don’t even have beans and even their secret stash room is now empty shouldn’t it scream out to her they can’t afford to double the rent?

America, you can’t afford it!!!!! Make due.

http://www.seacoastonline.com/articles/20100715-NEWS-7150402

Homes lost to foreclosure on track for 1M in 2010
By ALEX VEIGA, AP
7 hours ago

LOS ANGELES — More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.

Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.

“That would be unprecedented,” said Rick Sharga, a senior vice president at RealtyTrac.

By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.

The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.

The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.

The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.

In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.

Foreclosure notices posted monthly declines in April, May and June, but Sharga said one shouldn’t read too much into that.

“The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market,” he said.

On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.

Assuming the U.S. economy doesn’t worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.

And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn’t improve fast enough to lift home sales.

The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.

“The downward pressure from foreclosures will persist and prices will be very weak well into 2012,” said Celia Chen, senior director of Moody’s Economy.com.

She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.

Lenders are offering to help some homeowners modify their loans. But many borrowers can’t qualify or they are falling back into default. The Obama administration’s $75 billion foreclosure prevention effort has made only a small dent in the problem.

More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification program have dropped out. That compares with about 27 percent who have received permanent loan modifications and are making payments on time.

Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.

Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.

Buy your next home from Uncle Sam
As a result of rising foreclosures, some Americans will buy their next home from the U.S. government.
By Eric Fox of Investopedia

Americans who are brave enough to buy a home despite persistent predictions of a double dip in housing may want to contact the federal government, as the recession and financial crisis have turned Uncle Sam into one of the largest owners of real estate in the United States.

Rising foreclosures
The housing bust has led to an unprecedented number of foreclosures in the U.S. In May, 322,920 foreclosure notices were filed against homeowners, and more than 3 million homes have been seized over the last five years from delinquent borrowers.

While most homebuyers may assume that banks are the only source of foreclosures, the U.S. government also owns many residential properties because of its role in buying and guaranteeing mortgages. Many of these properties are held because of the conservatorship established in 2008 over the government-sponsored enterprises popularly known as Freddie Mac and Fannie Mae.

Fed: Should consider more easing if outlook worsens.

(Reuters) - Federal Reserve officials felt last month they should be ready to consider additional steps to boost the U.S. economy if an already softening outlook took a noticeable turn for the worse.

“As a result of the change in financial conditions, most participants revised down slightly their outlook for economic growth,” minutes of the June 22-23 meeting of the Fed’s policy panel released on Wednesday said.

“The committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably,” they said.

At the same time, the Fed should continue to test ways to withdraw some of the massive amounts of credit it has pumped into the financial system, officials at the central bank agreed.

President Obama has appointed a national debt commission to report after the November midterm elections on ways that the federal deficits can be brought under control.

“The heads of the panel told the National Governors Association Sunday that everything needs to be considered including curtailing popular tax breaks, such as the home mortgage deduction”.

“The debt is like a cancer,” Democrat Erskine Bowles told the governors. “It is going to destroy the country from within.”

JPM earnings better than expected.

How can the results of a rigged game surprise anybody?

Just wondering.

ScienceDaily (July 14, 2010) — A new study from the University of Leicester Department of Economics reveals that highly educated people make wrong assumptions about their political leanings — they are more likely to think they are left wing when they are more likely to be relatively conservative. The study suggests that some people may end up voting for left of centre parties because they hold the mistaken belief that they are left wing.

The research by Dr James Rockey, a lecturer in Economics, used data from the World Values Survey and described the opinions and characteristics of 136,000 individuals, in 82 countries, over a period of over 20 years.

HOT DOGS, PEANUTS, POPCORN, GETCHA FORRECLOSURES HERE! RED HOTS, WE GOTCHA RED HOTS!

“Still, long lines of attorneys signing in, searching for the other party in the case - sometimes by shouting a name - and lingering in the hallway can appear chaotic.”

Glut of foreclosed homes expected to depress prices
By Kimberly Miller Palm Beach Post Staff Writer
Posted: 5:27 a.m. Thursday, July 15, 2010

Hank Fishkind, president of Fishkind & Associates, an Orlando-based financial and real estate consultant firm, likened the foreclosures to a rabbit moving through the digestive system of a snake.

“The lump is carrying through, and now we will get huge volumes of distress sales,” Fishkind said. “Sales will go up but prices will go down.”

Palm Beach County’s median price for a single-family home in May was $235,200, already down $155,800 from May 2006.

“The bank takeovers are painful now,” said Fishkind, whose company has offices in Naples and Port St. Lucie.

Some of that pain is illustrated Monday through Thursday mornings on the 11th floor of the Palm Beach County Courthouse, as attorneys jostle for uniform motion calendar hearings in front of foreclosure Judge Meenu Sasser.

Once held in a smaller fourth-floor courtroom, the housekeeping-type hearings moved to a more spacious area upstairs because of their volume. Still, long lines of attorneys signing in, searching for the other party in the case - sometimes by shouting a name - and lingering in the hallway can appear chaotic.

S.C. foreclosures jump; Midlands hardest hit. Jul. 15, 2010

Homeowners in South Carolina are entering foreclosure at a faster rate than last year – and Columbia is faring worst out of all the major metropolitan areas, a new report says.

The number of homes that received a foreclosure notice in S.C. during the first six months of the year jumped 34 percent from the same period in 2009, the report from RealtyTrac says, and nearly every metro area saw an increase.

Foreclosure filings rose 53 percent in the first half of the year, but held steady compared with the second half of 2009.

“I’m shocked. I didn’t think it would be that high,” said longtime Columbia real estate agent Jay Graham.

“This is a sign of the times we’re in.”

The real estate and foreclosure crisis hit South Carolina’s coast much earlier and harder than other metro areas. Investors in places like Myrtle Beach sent home prices skyrocketing during the real estate boom in 2005. But the area saw sharp drop-offs in home sales and prices at least a year earlier than Columbia.

But the problem in the Midlands has prompted real estate companies to start training many of their agents in recent months in how to deal with foreclosure properties. Real estate experts say foreclosure sales are going to be a significant part of the market at least for the next couple of years.

I hadn’t looked at the hometown listings in a while. Now that the tax credit is done prices are once again getting hammered. I would say that my hometown once again knows “affordable” housing. I think it will go down lower but it makes me feel better that one area seems to have the common sense to let prices drop to where they should be.

If the economy free falls all bets are off. For now real families can buy real houses. I can’t say that about this area. They are still mainlining the REIC powder in Jersey and NYC.

Pension Funds Flexing Some Muscle on Foreclosures

Today, the Comptroller of the City of New York along with the presidents of several large unions sent a letter to some of the biggest banks in the foreclosure mess and told those banks to get their acts together and start making mortgage modifications.

In a press conference in lower Manhattan, Comptroller John Liu, Michael Mulgrew, President, UFT, George Gresham, President, 1199 SEIU, John Samuelsen, President, TWU Local 100, and New York Communities for Change announced a letter sent to Citigroup, JPMorgan Chase, Bank of America and Wells Fargo demanding that the banks do “everything possible” to avert foreclosures.

The heft and power of these entities as depositors and investors is such that they expect the banks to sit up and take notice. The banks have a deadline of September 1st or 45 days to respond with a plan.

While the City and the pension funds have not outright threatened to take their business elsewhere if the banks don’t start doing modifications, the implication is clear.

Further, this public action could inspire other municipalities and large pension funds to follow suit.

DOD needs moolah fast, or they won’t be able to pay the troops! 33bn, or the well will run dry.

http://www.reuters.com/article/idUSTRE66D5DD20100714?type=politicsNews

The stimulus met expectations… HURRAY!

————-

White House: Stimulus funded 3 million jobs

NEW YORK (CNNMoney.com) — Despite groans from Republicans about high unemployment and the growing national deficit, President Obama’s administration continues to say the $787 billion stimulus is working.

In its latest stimulus report released Wednesday, the White House’s Council of Economic Advisers said the Recovery Act has already saved or created about 3 million jobs.

But the administration’s figures are highly criticized by some economists and Republicans in Congress who point out it’s derived from mathematical formulas, not an actual headcount of people who’ve received jobs funded by stimulus money.

She said the actual number of jobs created by stimulus is likely much lower than the Administration reports.

“The administration’s new stimulus jobs ’saved and created’ claim lacks a basis in reality,” said Oversight and Government Reform Committee Ranking Member Darrell Issa, R-Calif., who also pointed to the unemployment rate, which currently stands at 9.5%.

In January 2009, Romer predicted that the stimulus, if passed, would keep the unemployment rate around 7% at the end of 2010

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Avg unemployment check is $310 per week.
$310/40 hours = $7.75 per hour… so, why would anyone try to get a minimum wage position when you can get the same amount of money by sitting in your sofa?
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Editorial: Unemployed, not lazy

Tom Corbett should see all the jobless people not sitting at home.

In April, the SugarHouse Casino held an informational job fair. At least 8,000 people showed up for 800 jobs. They began arriving at 6 a.m. By noon, the line stretched two blocks.

It’s not just casinos attracting 10 times as many job applicants as positions available. When Wegmans opened a new grocery near Collegeville last October, about 6,000 people applied for 550 jobs

Yet Attorney General Corbett, the Republican nominee for governor, says some unemployed people aren’t working because they don’t want to give up jobless benefits. “The jobs are there,” he said. “But if we keep extending unemployment, people are going to sit there.” He apologized Tuesday for a poor choice of words.

The average unemployment check in Pennsylvania is $310 per week. When pressed to name companies hurt by this unfair competition, Corbett couldn’t cite any.

That’s the beauty of an ideological anecdote - the fewer facts, the better. But Corbett’s clueless and inept comments serve a useful purpose. They’re another reminder that the recession hasn’t ended for many people, and that government needs to do more to help families get through these prolonged harsh economic times.

Foreclosure Update: Three More Years Of Pain For Housing

1 million households are on track to lose their homes this year as the nation continues to dig out of the decade’s real estate boom and bust. RealtyTrac reported that while month-over-month and year-over-year foreclosure fillings are decreasing, the nation is on pace to set a record in foreclosure filings (including default notices, auction sales and bank repossessions) this year at 3.2 million. Last year, lenders foreclosed on more than 900,000 homes and the historic average is 100,000 annually.

In the first half of the year, lenders repossessed nearly 528,000 homes and about 1.7 million homeowners got a foreclosure-related warning — that represents one in 78 American homes. The numbers are startling, but this process is necessary after the massive housing and credit booms. As is the case with manias, the aftermath is messy and painful.

Unfortunately, due to the lengthy process involved in unwinding a bad home investment (versus, say a bad internet stock that takes 5 seconds to sell) the hangover period will persist for some time. RealtyTrac CEO James J. Saccacio said that while the foreclosure problem appears to be improving, we shouldn’t be too confident, because “a massive number of distressed properties and underwater loans continues to sit just below the surface, threatening the fragile stability of the housing market.”

Housing experts believe that it will take three more years to clear out the overhang of housing. There’s a certain symmetry to that notion. From the years between 2000-2006, housing prices nationally doubled and it will likely take the seven years between 2007-2013 to rectify that aberration.

Speaking of a single-wide on 10 acres in ANZA:

http://www.youtube.com/watch?v=wZpg8No8cUw

WASHINGTON (Reuters) – The Pentagon said on Wednesday it may be forced to take extreme measures — like not paying salaries - - if Congress fails to pass a $37 billion defense spending bill before lawmakers begin an August recess.

A senior Democratic aide said lawmakers would find a way to get it done. “We will pass it this work period. We have to,” the aide said.

Worthless housing….. worthless worthless housing. Worth less and less with each passing day.

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

Is a city manager worth $800,000?:

By Jeff Gottlieb and Ruben Vives, Los Angeles Times / July 15, 2010

In addition to the $787,637 salary of Chief Administrative Officer Robert Rizzo, Bell pays Police Chief Randy Adams $457,000 a year, about 50% more than Los Angeles Police Chief Charlie Beck or Los Angeles County Sheriff Lee Baca and more than double New York City’s police commissioner. Assistant City Manager Angela Spaccia makes $376,288 annually, more than most city managers.

Top officials have routinely received hefty annual raises in recent years. Rizzo’s contract calls for 12% raises each July, the same as his top deputy, according to documents obtained under the California Public Records Act.

Rizzo, who has run Bell’s day-to-day civic affairs since 1993, was unapologetic about his salary.

“If that’s a number people choke on, maybe I’m in the wrong business,” he said. “I could go into private business and make that money. This council has compensated me for the job I’ve done.”

Spaccia agreed, adding: “I would have to argue you get what you pay for.”

The district attorney is investigating Bell over the hefty compensation of its City Council members — about $100,000 a year for part-time positions. Normally, council members in a city the size of Bell would be paid about $400 a month, Demerjian said.

The council has increased its compensation by paying members for serving on a variety of city agencies, including the Community Redevelopment Agency, the Community Housing Authority, the Planning Commission, the Public Financing Authority, the Surplus Property Authority and the Solid Waste and Recycling Authority.

Demerjian said city records show each council member receives $7,873.25 per month for sitting on those boards

Records indicate that the boards of those agencies perform little work and that board meetings take place during council meetings, though the names of some of the agencies seldom appear.

Hi y’all update from the beatiful Oregon Coast where I have a part time tutoring gig thanks to a troubled teen whom the district owes hours of instruction and I am the only one who seems to be willing to even try to work with this particular speciman. Trying to pay the bills, even thought this gig is keeping me from my wife who works part time in Central Oregon.

Our health insurance premiums have suddenly increased, to $1600 per quarter for wife and two kids. Mine is $1000 per quarter.
This means premiums are $10,000/year, but the insurance does not kick in until we meet our deductible($1000 per head).
My medication, for pain, heavily advertised for the pain condition that my doctor has prescribed me, although we carry 50% medication coverage, is not covered. That runs $2500/year.
So our insurance/meds/doctor bill will be over 15k this year. I make about 15k as a substitute teacher, hard to work with chronic pain but I do, albeit 3.5 hours this summer and about 20 hours per week in the school year, livin in a trailer away from family, but hey, at least my deployment is not overseas!
My summer job consists of tutoring. Seems a 15 year old kid got himself locked up for being involved in a small murder, but his friend pulled the trigger. My student has been arrested several times
His father has been released from 14 years in the mexican pokey for shooting at border patrol. He calls him about every three months and my student wants to go live with him. His mother has an abusive stepfather boyfriend who has also threatened her. My tutoring student also threatened to take a gun to school and shoot his teacher, a guy I know. He buys laced marijauna from Victor and steals cigarettes from his mother, who always is working.

The workers at the camp where I am working are deadheads. They have section 8 housing, 4 kids on Oregon health plan, food stamps, and also have all meals provided from the center under federally funded meals program. All they need from their jobs is money for weed. And I am in a relatively safe area on the Oregon coast.

Just some “minor” gang stuff that gets worse as you get closer to the 5 corridor. But the guys from the opposing town dont like the local guys, so there is the occasional murder.

We don’t qualify for any assistance, don’t want it, but dont make enough money to pay for stuff even though my wife and I are working and have a paid off house. Although we have another in my wife’s name that we can no longer afford to pay the mortgage.

So I guess its a strategic default, because we keep paying the health care premiums. If we drop our coverage, we may be eligible for state health care, prerequisite is that you do not have coverage to get it.

But I have a beautiful family, who are standout students, socially adept, and yesterday I saw a momma bear and one of her two cubs. Other cub was behind me, but mom decided to run when she saw me. Ahansen may testify that dropping health care would be a bear. Surfing is a fun pastime, we are taking the students at the kids club/afterschool program/ summer daycamp to the beach on Friday, although I can surf every day, I love acting as a surf instructor and stoking the little ones out who are needy foster kids,

My tutor guy has on of the most intact families, cuz he knows where his dad is (AZ) free from prison and caring grammas, one in the hospital, one an alcoholic with narcolepsy who smokes. She likes to get behind the wheel when she can cajole the keys. The carpet in their home is covered with cigarette burns from when granny falls asleep with a smoke. Kids have fun on their own time playing hot potato with gas soaked tennis balls lit on fire. Oh, grammy in hospital needs operation, with a tumor on her heart.

But I am just belly achin, never felt financially poor, but with my wife and I both working, albeit under employed, we dont have enough money for life expenses. gotta get real poor before we look for government handouts, but someday it may happen?

I would like a stable job with group insurance, that would be helpful.
But their are plenty of applicants for each job so it will take time although I am papering Oregon with applications and I do get the occasional interview.
Subbing and surfing will have to suffice, thinking about trying to tutor home-school kids with parents shaky on higher math/composition/spanish classes. Yeah thats the ticket??

Arizona heads to court with a 1.2 million dollar war chest, money flowing in from donors all over the country.

http://www.csmonitor.com/USA/Justice/2010/0715/Arizona-immigration-law-heads-to-court-with-1.2-million-war-chest

You go, Arizona! A state that deserves to survive, after all, it’s given us Ben Jones and this blog.

READ ALL ABOOOOOUUUUUUUUT IIIIIIIIIIIIIIIIIIIIIT!!!

http://tinyurl.com/i-fluked-the-taxpayers

“Retired FDNY Lt. John McLaughlin has literally run off with a fat, tax-exempted disability pension — despite being known as “Iron Man” in the Long Island hometown where he regularly trains and competes as a triathlete, The Post has learned…”

Finally got around to reading the latest from Joe Bageant. I never agree with everything he says, but he always brings up some good points. Sounds like he’s been reading a lot of HBB and CFN lately.

This is passing for salesmanship today. The kid doing the selling looks to be 25 or so. The home’s highest and best use is that of chicken coop. A $5000 box at most.

http://gallery.me.com/tylershouse#100031

Since the Senate bill passed, I have had a number of conversations with key members of the administration, Senate leadership and the conference committee that drafted the final bill. Unfortunately, not once has anyone suggested in those conversations the possibility of strengthening the bill to address my concerns and win my support. People want my vote, but they want it for a bill that, while including some positive provisions, has Wall Street’s fingerprints all over it.

In fact, reports indicate that the administration and conference leaders have gone to significant lengths to avoid making the bill stronger. Rather than discussing with me ways to strengthen the bill, for example, they chose to eliminate a levy that was to be imposed on the largest banks and hedge funds in order to obtain the vote of members who prefer a weaker bill. Nothing could be more revealing of the true position of those who are crafting this legislation. They had a choice between pursuing a weaker bill or a stronger one. Their decision is clear.

On this bill, like the others that preceded it, the biggest financial interests have won.

RF

Not sure why filters are not letting this stuff through

Shortly after I came to the U.S. Senate we considered a national interstate banking bill, the Riegle-Neal Interstate Banking and Branching Act of 1994, which accelerated the concentration of financial assets, and the creation of “too big to fail” firms. I was one of only four senators to oppose that legislation. Five years later, I was one of only eight Senators to oppose the Gramm-Leach-Bliley Act, the bill that repealed Glass-Steagall and paved the way for this disastrous recession, which has been an economic nightmare for so many Americans.

Those two measures — the 1994 law and the 1999 law — accelerated the trend toward increased concentration of financial assets, aggravating the problem of “too big to fail.” Before those two laws were enacted, the six largest U.S. banks had assets equal to 17 percent of our GDP. Today the six largest U.S. banks have assets equal to more than 60 percent of our GDP.

Russ Feingold, one of the few in gov I have respect for. Also voted against patriot act and warrantless evesdropping despite massive pressure to do otherwise.

T-bond yields from 1-yr out are screaming a double-dip recession signal. They clearly want to invert, but just simply can’t when the Fed has the 6 mo plastered against the ZIRP barrier:

Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
06/30/09 0.17 0.19 0.35 0.56 1.11 1.64 2.54 3.19 3.53 4.30 4.32
06/30/10 0.17 0.18 0.22 0.32 0.61 1.00 1.79 2.42 2.97 3.74 3.91

Bloomberg breakdown of the bailout (I can’t see a date on it, but it’s pretty big, so I think it might be more recent?)

http://www.bloomberg.com/apps/data?pid=avimage&iid=i0YrUuvkygWs

Perhaps it is unfair to pass judgment without first reading the 2,300 page bill, but I smell a regulatory disaster in the making for the aftermath of financial reform.

There is a silver lining, as this should be a boon to attorneys who specialize in financial regulation.

* The Wall Street Journal
* REVIEW & OUTLOOK
* JULY 14, 2010

The Uncertainty Principle
Dodd-Frank will require at least 243 new federal rule-makings.

So Republicans Scott Brown, Olympia Snowe and Susan Collins now say they’ll provide the last crucial votes to get the Dodd-Frank financial reform through the Senate. Hmmm. Could this be Minority Leader Mitch McConnell’s secret plan to take back the Senate, guaranteeing another year or two of regulatory and lending uncertainty and thus slower economic growth?

Probably not, but that still may be the practical effect. This week White House aides leaked to the press that President Obama may seek a review of regulations that are restraining business confidence and bank lending. Yet Dodd-Frank, with its 2,300 pages, will unleash the biggest wave of new federal financial rule-making in three generations. Whatever else this will do, it will not make lending cheaper or credit more readily available.
…

KKR is going public
Anyone want to buy a company with a pile of debt??

Before you answer look at Blackstone BX stock over the last 5 years.

May as well rack up those CC’s and stop being frugal and planning for your future, the credit card bailouts are sure to be on the US agenda. When will this madness stop?

————
Signs of Risky Lending Emerge

By RUTH SIMON and JESSICA SILVER-GREENBERG

Shirley Davis, a 66-year-old retired phone-company administrator who lives in Brooklyn, N.Y., is more than $33,000 in debt, earns just $2,414 a month and filed for bankruptcy in June. Shortly before that, she ripped open an envelope from Capital One Financial Corp., which pitched her a credit card even though it sued her in 2006 to recover $4,470 she owed on a different card from the bank.

Ruth Simon discusses why some financial institutions are weakening lending standards and wooing borrowers who might not be able to pay.

“At some point we lost you as a customer and we’d like to have you back,” the letter said. Ms. Davis said she was stunned. “Even I wouldn’t give me a credit card at this point,” she said.

Even as lenders struggle to pull themselves out of the credit crisis, signs of a new and potentially dangerous infatuation with risky borrowers are emerging. From credit cards to auto loans to mortgages, the hunger for new business as the crisis ebbs is causing some financial institutions to weaken lending standards and woo borrowers who mightn’t be able to pay.

A spokeswoman for Capital One said customers who “fully settled” their old debts might get a credit-card solicitation “with appropriately conservative spending limits.” The spokeswoman said, however, that doesn’t mean “that a consumer will receive a card.”

Capital One won a court judgment against Ms. Davis for the money owed and she repaid it.

Fannie Mae, seized by the U.S. government in 2008 to avert the mortgage company’s failure, launched an initiative in January that allows some first-time home buyers to get a loan with a down payment of as little as $1,000. Securities firm Morgan Stanley Smith Barney, a brokerage operation jointly owned by Morgan Stanley and Citigroup Inc., is offering some clients home-equity credit lines of as much as $2.5 million.

Credit-card issuers mailed 84.8 million offers of plastic to U.S. subprime borrowers in the first six months of this year, up from 43.7 million a year earlier, estimates research firm Synovate. Nearly 8% of loans for new cars in the latest quarter went to borrowers with the lowest range of credit scores, up from 6.2% in 2009’s fourth quarter, according to J.D. Power & Associates and Fair Isaac Corp.

Lenders said they learned their lesson when the real-estate bubble burst and are being careful as the credit spigot is loosened.

“Everyone here is very mindful of the financial disruptions we’ve all come out of and making sure we follow appropriate standards,” says Gina Proia, a spokeswoman for Ally Financial Inc., the auto lender formerly called GMAC Financial Services.

John D. Hawke Jr., chief U.S. regulator of nationally chartered banks from 1998 to 2004, said an increase in lending to less-credit-worthy borrowers isn’t necessarily bad as long as financial institutions manage the risk properly.

“What got us into this mess was that underwriting was not based on the conventional approach of a borrower’s capacity to pay,” said Mr. Hawke, a partner at law firm Arnold & Porter LLP. “The most important question becomes: Are lenders resorting to flawed underwriting practices of the past?”

Kathleen Day, a spokeswoman for the Center for Responsible Lending, said the consumer group is “seeing banks re-enter the subprime market at a steady clip and make loans to borrowers who don’t have the ability to repay.”

There is no doubt that the credit supply still is tight, especially in mortgages, despite prodding by government officials to increase lending. Subprime borrowers got just 9%, or $44 billion, of all consumer loans in the fourth quarter, the latest period for which figures are available, according to Experian PLC and Oliver Wyman. That is down from 18% in 2007’s second quarter.

But some lenders are starting to take more chances on consumer loans. Many financial institutions that survived the credit crisis and resulting recession are desperate for earnings growth, but loans to businesses amount to less than 20% of all outstanding loans, said Frederick Cannon, co-director of research at investment bank Keefe, Bruyette & Woods Inc.

Another strong lure: Fewer borrowers are falling behind on payments. Excluding mortgages, about 5.5% of consumer loans were at least 30 days past due at the end of the second quarter, down from the year-earlier 6%, according to Equifax Inc. and Moody’s Analytics.

Some lenders said they are willing to stretch because borrowers who take on credit in the early stages of an economic recovery often are less risky and thus more profitable than those who borrow later. Federal Reserve Bank of St. Louis economist Williams Emmons said some credit loosening is normal given the U.S. economy’s growth since the end of the recession.

Financial institutions also claim they are getting smarter about who deserves a loan.

Experian recently began working with large banks it won’t identify to analyze borrowers who stopped paying their mortgages when home prices tumbled. The goal is to determine which borrowers are most likely to keep paying their other bills, and should be offered more credit.

“Everyone is looking a little to the edges of their current underwriting landscape,” said Steven Wagner, president of Experian’s Consumer Information Services unit. Still, some borrowers that ran into trouble when the economy slumped find it hard to believe that lenders are interested in them again.

Malissa Peloquin, 40, of Bolingbrook, Ill., said she has received six credit-card offers since she and her husband emerged from bankruptcy in June. She still owes more than $73,000 in student loans.

“All these offers say…’You qualify,’ ” she said. “No, I don’t.”

Hyundai Motor Co.’s Hyundai Motor America unit said about 15% of the auto loans from its in-house financing arm are being made to subprime and “near-prime” borrowers, up from 10% in 2009. Dave Zuchowski, Hyundai’s vice president of sales, said many “near-prime” customers are good credit risks and had “one-time problems” that besmirched their records.

Subprime auto lender AmeriCredit Corp. recently told investors that loan originations could total as much as $900 million for the fiscal fourth quarter ended June 30, up from $175 million a year earlier. Loan volume remains well below peak levels.

The thawing securitization market for auto loans is helping AmeriCredit increase its loan staff and dealer network. The company declined to comment.

Morgan Stanley Smith Barney said its home-equity loan offers of as much as $2.5 million are made “on a careful and judicious basis” to high-net-worth clients that the company knows “extremely well,” said a spokesman for Morgan Stanley.

The offer is part of a push to build a private-banking operation, and the credit lines represent “a tiny fraction” of the unit’s $19 billion in outstanding loans, he said.

Still, Terry Weberman, an accountant in Plainview, N.Y., said he was flabbergasted when he opened a letter touting the loans as a “flexible source of credit to fund major purchases, finance a home or meet an upcoming tax liability.” He wasn’t interested. “I am amazed this is still going on,” he said.

Fannie Mae said its low down-payment initiative requires borrowers to put down $1,000 or 1% of the purchase price, whichever is greater. The mortgage company said it faces limited financial risk because the loans are made through state agencies, which have a solid underwriting history and are on the hook to buy back certain loans that go bad.

Kate Venne, a spokeswoman for the Wisconsin Housing and Economic Development Authority, said borrowers must meet strict underwriting requirements and complete a home-buyer education course. The agency has made $50 million in loans through the program since March, and an additional $68 million are in the pipeline.

Cigarette makers aren’t going to enhance their battered public image with this latest bit of news: Tobacco giant Philip Morris International has been using captive child labor in Central Asia to harvest tobacco.

I’ll bet this is making the rest of the CEO class jealous

Memphis’ Loss is Mexico’s Gain for Cummins Jobs ~ The Daily News

Cummins Inc. is cutting 100 jobs from its engine remanufacturing plant in Memphis and transferring the work to a facility in Mexico.

The layoffs will begin by the end of the month, said Mark Land, executive director of corporate communications for the global supplier of service engines and related technologies. The company is based in Columbus, Ind.

About 300 people currently work at the remanufacturing plant on Pershing Avenue, but the company employs about 1,400 people in Memphis either directly or indirectly. It operates a distribution facility here and has a joint venture with Cummins Mid-South LLC.

That work will be transferred to a Cummins facility in the Mexican state of San Luis Potosi.

Okay, all of you growling bears, it’s time to cheer up. Here’s your feel-good story of the day:

Active Duty Students Juggle Military, Academics, Family

Should be the same path for Blockbuster…

Movie Gallery Files Proposed Chapter 11 Liquidation Plan in Virginia
Jul 15, 2010

Movie Gallery Inc., the video-rental chain that began shuttering its stores in February, filed a bankruptcy liquidation plan that would wipe out shareholder value, a key step in winding up the business.

Under the Chapter 11 plan filed July 13 in U.S. Bankruptcy Court in Richmond, Virginia, general unsecured creditors would receive a pro rata share of a $5 million liquidating trust in cash. The filing didn’t include a disclosure statement further detailing the proposal.

Movie Gallery sought bankruptcy protection on Feb. 2, the second time since 2007, and subsequently closed all of its about 2,600 stores. The Dothan, Alabama-based chain, which is liquidating the last 1,028 locations, got approval this month to sell warehouse inventory.

The company listed debt of $500 million to $1 billion and assets of as much as $50 million in Chapter 11 documents.

Architect Lucien Lagrange retiring, firm files Chapter 11

(Crain’s) — Architect Lucien Lagrange is retiring as his firm files for bankruptcy protection.

One of the city’s most active designers for more than two decades, Mr. Lagrange, 69, says the firm filed for Chapter 11 protection from creditors Wednesday as a way to wind up its affairs and prevent him with being saddled with company debts after he stops working.

The bankruptcy petition is another reminder of how the dramatic downturn in development, particularly condominium towers, has hurt the design industry, which has suffered from layoffs. The filing is seemingly an ignominious chapter in a career that includes such high-profile projects as the Park Tower hotel/condo skyscraper, 800 N. Michigan Ave.; the 840 N. Lake Shore Drive condo building, and Elysian Hotel & Residences, 11 E. Walton St., which opened last year.

“No matter one’s stylistic preferences, Lucien is a major figure, not just in Chicago, but internationally,” says architect Stanley Tigerman, a principal in Chicago-based Tigerman McCurry Architects. “Of the type that does upscale condos, can you think of a better architect?”

AIG, Citigroup Tell SEC They Classified Some Repos as Sales
Jul 15, 2010

American International Group Inc. and Citigroup Inc. joined Bank of America Corp. in saying they classified more than $25 billion of repurchase agreements and securities lending transactions as sales since 2007.

AIG said in a letter to the Securities and Exchange Commission released today that accounting rules forced it to classify the agreements as sales. Citigroup told the SEC that it misclassified the transactions and that the errors were unintentional and “not material.” Bank of America said last week that it unintentionally misclassified transactions.

The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world. After all, what corporation in their right mind is going to pay an American worker 10 times more (plus benefits) to do the same job? The world is fundamentally changing. Wealth and power are rapidly becoming concentrated at the top and the big global corporations are making massive amounts of money. Meanwhile, the American middle class is being systematically wiped out of existence as U.S. workers are slowly being merged into the new “global” labor pool.

What do most Americans have to offer in the marketplace other than their labor? Not much. The truth is that most Americans are absolutely dependent on someone else giving them a job. But today, U.S. workers are “less attractive” than ever. Compared to the rest of the world, American workers are extremely expensive, and the government keeps passing more rules and regulations seemingly on a monthly basis that makes it even more difficult to conduct business in the United States.

So corporations are moving operations out of the U.S. at breathtaking speed. Since the U.S. government does not penalize them for doing so, there really is no incentive for them to stay.

What has developed is a situation where the people at the top are doing quite well, while most Americans are finding it increasingly difficult to make it. There are now about six unemployed Americans for every new job opening in the United States, and the number of “chronically unemployed” is absolutely soaring. There simply are not nearly enough jobs for everyone.

Many of those who are able to get jobs are finding that they are making less money than they used to. In fact, an increasingly large percentage of Americans are working at low wage retail and service jobs.

But you can’t raise a family on what you make flipping burgers at McDonald’s or on what you bring in from greeting customers down at the local Wal-Mart.

The truth is that the middle class in America is dying — and once it is gone it will be incredibly difficult to rebuild.

He ain’t just whistling dixie. What’s worse is that money controls gov so along with the death of the middle class comes the death of democracy in this country, and the death of free markets. The large fish will manipulate gov and keep the small fish from ever seeing the light of day. Eventually the vast majority of manufacturing and resource extraction will be controlled by a handfull of people. Even if you have money,your rights as a stock holder will be ignored.

Former real-a-tor turned scam artist…

Woman accused in cancer scam pleads guilty to felony theft.
Perouty-Leone faces up to 15-year prison term in Baltimore Co. case
June 15, 2010 The Baltimore Sun

In the beginning, she fooled everyone.

When Dina Perouty-Leone began telling friends and acquaintances that she had terminal stomach cancer and that she needed help paying for treatment because she had no health insurance, there was little reason to doubt her word.

“She was very kind, sweet and pleasant,” Jennifer Lasek, a former classmate in Dundalk who donated thousands of dollars, recalled on Tuesday. “She kept saying, ‘I love you. No one helps me like that.’ ”

But Lasek and others in Perouty-Leone’s circle were deceived, according to Baltimore County prosecutors, who charged the former real estate agent with four theft counts. She never had cancer, Assistant State’s Attorney Adam Lippe said, and had created an “elaborate scheme to obtain money from her friends to fund her lifestyle and not because of an illness.”

On Tuesday, Perouty-Leone, 37, pleaded guilty to a single count of felony theft. A 1990 graduate of Dundalk High School and the mother of two teenagers, she faces a maximum of 15 years in prison. Baltimore County Circuit Judge John G. Turnbull II ordered her jailed until she is sentenced Aug. 31.

“I’m sorry,” the tearful defendant said as she turned toward Lasek and another woman she admitted deceiving, Jennifer Lynch, and both avoided her gaze. Perouty-Leone, looking tanned, removed her jewelry and handed it to a bailiff before being led from the courtroom. As she left, she looked at her sister, who was crying, and called out, “Take care of my kids.”

Guy, permit the Palmster a little shouting. CNN is reporting:

BP: NO OIL FLOWING INTO THE GULF OF MEXICO FOR THE FIRST TIME IN MONTHS AS PART OF TEST OF RUPTURED WELL.!!!!!!!!!!!!!!!

Whew, let’s hope it stays that way. I was just looking at the live feed of the test, of course I have no idea what I’m looking at, but all those robotics sure are interesting. It’s a real cliffhanger watching the robotic claw try to grasp the handle of that cap. It’s like trying to thread a needle.

But it looks like they got the cap over the riser.

Of course, as has been said, even if this works, it’s just the end of the beginning. Years of mitigation, remediation ahead.

Palmetto, I understand your feelings. I was born in Tampa and raised in Florida, but now live in Atlanta. All of my childhood memories are from Florida, swimming in the ocean, guava tree in the backyard, eating mangoes on the way home from school, breaking coconuts on the street, orange groves, fishing, and all the beautiful tropical flowers and just the beauty of so many places in Florida. I love Florida and I’m worried about this oil spill and what will happen to Florida. I love to visit Florida, but how long will I be able to visit and enjoy swimming in the ocean?

Companies Piling Up Cash But Not Adding Jobs
Washington Post: If Corporations Are Sitting On So Much Money, Why Aren’t They Hiring More Workers?

Corporate America is hoarding a massive pile of cash. It just doesn’t want to spend it hiring anyone.

Nonfinancial companies are sitting on $1.8 trillion in cash, roughly one-quarter more than at the beginning of the recession. And as several major firms report impressive earnings this week, the money continues to flow into firms’ coffers.

Yet all the good news from big business hasn’t translated into much promise for jobless Americans, leading many to wonder: If corporations are sitting on so much money, why aren’t they hiring more workers?

The answer to that question has become a political flash point between the White House and big business groups such as the U.S. Chamber of Commerce, which held a jobs summit Wednesday and accused the Obama administration of dumping onerous regulations on businesses. That has created an environment of “uncertainty,” which is causing firms to hold back on hiring as the unemployment rate has hovered near 10 percent, the Chamber said.

The White House countered that companies are wary of hiring not because of new regulations but because they’re still waiting for consumer demand to return. The administration also claimed credit for 3.5 million jobs created by the stimulus bill from last year.

Freeway cameras set to turn off tonight
Phoenix Business Journal

Arizona’s foray into speed cameras on freeways will end at the stroke of midnight.

Redflex Traffic Systems will flip the switch at 11:59 p.m. July 15, the last minute of its contract with the Arizona Department of Public Safety. It will begin taking down signs warning drivers of impending speed traps after midnight.

The cameras are likely to remain well past Labor Day, as Phoenix-based Redflex has to coordinate possible freeway closures with the Arizona Department of Transportation to remove the equipment, said Shoba Vaitheeswaran, director of communications for Redflex.

The company plans to disperse the equipment — 40 vans and 36 stationary cameras — among its 250 other contracts.

Goldman to pay $550M to settle civil fraud charges

WASHINGTON – Goldman Sachs & Co. has agreed to pay $550 million to settle civil fraud charges that accused the Wall Street giant of misleading buyers of mortgage-related investments.

The deal calls for Goldman to pay the Securities and Exchange Commission fines of $300 million. The rest of the money will go to compensate those who lost money on the investments.

The investments at the center of the charges were crafted with input from a Goldman client who was betting on them to fail. The securities cost investors close to $1 billion while helping Goldman client Paulson & Co. capitalize on the housing bust.

The civil charges the SEC filed April 16 were the most significant legal action related to the mortgage meltdown that pushed the country into recession.

Gollum settles for $550 million slap on the wrist. Where are the perp walks???

Bloomberg
Goldman Sachs to Pay $550 Million to Settle SEC Fraud Lawsuit
July 15, 2010, 4:56 PM EDT

A nice little facebook exchange I had with some friends:

DUDE
OK, I’m gonna catch flack for this, could someone tell me what the benefit to society is of having low down financing available for home buyers?

http://www.ritholtz.com/blog/wp-content/uploads/2009/06/case-shiller-updated.png

DUDE
The link provides a clue as to why I think 3% down FHA financing is an evil to society.

NATALIE
Well, if we hadn’t gotten zero down on our house we would most likely never ever be able to afford one. Ever. It may not be a benefit to society, but it’s been a benefit to us.

DIERDRE
I see what you mean, though, some people,-not all-, get in over their heads. THEN it becomes hard on society when every other house on the block is in forclosure and then decreases the value of the neighborhood.

DUDE
OK, for the individual which is better, a $200K loan with 3% down, or a $100K loan with 6% down?

DEIRDRE
definitely the $100K…each % is 6,000, but naturally you have less to pay off. Is that what you mean?

DUDE
Dierdre, getting in over one’s head is only part of the problem. If you look at the chart I linked you can see a huge spike in home prices at the end of WW2. Most people attribute that to demand due to the returning veterans. IMHO it was due to the veterans, but the demand went hand in hand with the ability to purchase with 0% down as part of the GI bill. The government guaranteed (subsidized) the loan, so more money was made available.

When more money is available to purchase a fixed quantity of goods, what happens to the price of those goods? It rises until equilibrium is established. The same thing happened in 1977 with the passage of the Community Reinvestment Act and in the early 90s with important revisions to same. All those legislations made it easier to purchase a home with little or no money down, and thereby inflated the price of housing.

The largest distortion, however, was not caused by government, at least not directly. The creation of mortgage backed securities in the late 90s made it possible for banks to pass on their risk in lending to another third party, meaning that if they could sell someone on the idea that 0% down was adequate, then that was all it took to get a loan done. That was shown to be a bad idea since it was found that a strawberry picker earning $16K/annum just can’t pay for a $600K house. (actual case)

Hopefully that makes sense, and explains my position. Housing is much more costly than it should be, much of the cost difference between today and pre WW2 is due to government subsidies, and the lion’s share of the labor we do to pay for our inflated housing goes to?

The bankers.

Just got back from Foodtown… Hey guys what do you make of the Food Stamps EBT cards not working? they were frozen due to the budget problem in Albany……hmmmm

* The Wall Street Journal
* POLITICS
* JULY 15, 2010

Senate VIP Loans Mount
Countrywide Dealt With More Lawmakers and Staffers Than Previously Known

By JOHN R. EMSHWILLER
Angelo Mozilo, former Countrywide Financial chairman

U.S. senators or Senate employees received 30 loans—far more than had previously been known—under a controversial lending program at Countrywide Financial Corp. that provided cut-rate terms to favored borrowers.

The information is contained in a letter sent to the Senate Select Committee on Ethics by Rep. Darrell Issa (R., Calif.), who has been spearheading the House Oversight and Government Reform Committee’s investigation into Countrywide’s so-called VIP mortgage program.

No specific loan recipients were named in the letter. But Mr. Issa’s letter said borrowers on a dozen loans listed their place of employment as the office of “Senator Robert Bennett.” Available public records don’t indicate that Sen. Bennett, a Utah Republican and member of the Senate Banking Committee, received a Countrywide home loan.

Sens. Christopher Dodd (D., Conn.) and Kent Conrad (D., N.D.), have previously been identified among the high-profile individuals who received such loans. Both senators have denied wrongdoing. Until the Issa letter, no other senators or their staff members had been linked to the VIP loan program.

A spokeswoman for Sen. Bennett didn’t respond to questions. Sen. Bennett recently lost his primary election battle and will be leaving the Senate in January after 18 years.

A spokesman for the Senate Ethics panel declined to comment. A spokesman for Bank of America Corp., which in 2008 acquired Countrywide, said the company had cooperated with the investigation by the House committee.

The VIP program operated during the housing boom earlier this decade, often writing mortgages with terms more favorable than those available to the general public. An estimated 28,000 loans were made, mostly to private parties such as Countrywide employees or their friends and relatives.

The House Oversight panel, where Mr. Issa is the ranking Republican member, is probing whether such loans were issued to public officials in an attempt to influence them. Last year, the committee subpoenaed VIP loan records from Bank of America.

In his letter dated July 13, Mr. Issa wrote that on seven loans not tied to Mr. Bennett’s office, the borrowers listed their place of employment as “U.S. Senator.” Another 11 listed the “U.S. Senate.” In response to questions, a spokesman for Mr. Issa said the House committee didn’t receive the names of the borrowers from Bank of America.

More than one loan could have gone to the same person, such as a mortgage and a separate home-equity line of credit. Mr. Conrad received four Countrywide loans, a spokesman for the senator said. Mr. Dodd reportedly received at least two. Their loans were presumably included in the 30.

Mr. Issa’s letter said that many of the 30 loans were made in 2002 and 2003, at the beginning of a national “mortgage boom” that helped make Countrywide for a time the nation’s biggest home lender. Increasing problems in its loan portfolio led to Countrywide’s takeover and contributed to the widespread economic upheaval that hit the country in 2008.

The letter said the House committee’s investigation had found that Countrywide used the VIP loan program to “build relationships with government officials.”
…