The Housing Bubble

Architect index shows big drop in new projects in July
Birmingham Business Journal

The Architecture Billings Index continued to reflect volatility in design firms in July, said the American Institute of Architects.

The industry association said the index scored at 47.9 in July, up from 46 in June but still below the 50 score that would indicate an increase in architectural billings at firms.

And its new project inquiry index dropped substantially to 53.1, from 57.7 in June, said a news release.

“Business conditions at design firms remain quite volatile,” said Kermit Baker, chief economist at the AIA. “While this recent uptick is encouraging, this state of the industry is likely to persist for a while as we continue to receive a mixed bag of feedback on the condition of the design market from improving to flat to being paralyzed by uncertainty.”

Schwarzenegger Orders Furloughs to Start

California Governor Arnold Schwarzenegger said 150,000 government workers must begin taking time off without pay starting Aug. 20 following a court ruling lifting an injunction temporarily blocking the furloughs.

The California Supreme Court, saying it would review the governor’s plan, stayed decisions by lower courts that had halted the furloughs. Schwarzenegger directed state workers to take three unpaid days off each month to save cash.

California began its fiscal year on July 1 without a spending plan after Schwarzenegger and Democrats who lead the Legislature remained deadlocked over how to fill a $19.1 billion deficit. The Republican governor on July 28 issued an executive order for the monthly furloughs until a budget is passed.

“The result of the Supreme Court ruling today means that the furloughs will continue until the court says otherwise,” Aaron McLear, a Schwarzenegger spokesman, said by e-mail.

A union for state engineers has sued to block the plan.

Gulf real estate sales suffer from BP oil spill aftermath
USA TODAY

In Grand Isle, La., this is typically a busy season for Realtor Beverly Curole. Interested buyers come to check out the available properties in this barrier island known for its July fishing rodeo, sandy beaches and vacation homes.

But since the Gulf oil spill sent a sheen of oil into the island’s bay, Curole’s buyers have fled. First, they put closings on hold. Then they canceled contracts. Now she’s hoping to get some money from BP for lost commissions.

The beach is now clean, she says, but sales are still suffering. “The buyers aren’t there,” she says. “I’m a sales agent, and there’s nothing to sell. Hopefully, now that it’s capped, it’ll be better, but we don’t know how long it’s going to last.”

Now this is something even the smart HBB crew couldn’t have seen coming as a result of the RE bust and recession. This man is a fool, you are ALWAYS suppose to have the girls take their clothes off FIRST!!!

2 women accused of extortion in Fairfax sex-for-rent case

Washington Post Staff Writer
Wednesday, August 18, 2010

In these tough economic times, Fairfax County police say it’s not unheard of for a tenant to offer a landlord sexual favors in exchange for a month’s rent. But when the scheme extends to blackmailing the landlord by threatening to tell his wife, people get arrested.

Fairfax police said that two 20-something women living in an apartment on Beekman Place, just off Route 1 near Fort Belvoir, called the landlord recently and informed him that they were unable to pay the rent. “The suspects suggested they would perform sexual acts in place of the rent,” according to an affidavit by Detective Mike Holland filed Tuesday in Fairfax Circuit Court.

“The victim agreed,” said Holland, who investigates financial crimes.

So the landlord went over to the apartment, in the Sacramento neighborhood, and was instructed to go into the bedroom and remove his clothing, which he did, Holland wrote.

One woman “then did a slow dance while removing some of her clothing” and jumped on the bed, “straddling the victim.” The other woman came into the room and snatched the man’s clothes and cellphone, according to Holland. The landlord got up, found his clothes and phone and left.

Next, police allege, the women called the landlord and told him that they had photos and video of the bedroom encounter. “Unless he gave them $500 per week and free rent,” Holland wrote, “they would give a copy of the DVD to his wife.” The women sent the landlord a photo of himself naked on the bed, according to Holland.

The man went to the police, and last week Holland had him make a call to the tenants. In that call, one of the women boasted to the man that “several recording devices were used to capture the event” and that recordings were “stored on several electronic devices within her residence,” Holland wrote.

But the woman made a new offer: If the man gave the women “$11,000 in cash, she would give him the recordings and go away,” according to the affidavit.

No deal, the man said.

On Tuesday morning, police raided the apartment, in the 8600 block of Beekman Place, and seized CDs, DVDs, a camcorder, a still camera and some marijuana, court records show. The women were arrested.

Jessica Testin, 23, and Rachel Beloff, 26, were both charged with a felony threat to extort money, which carries a possible prison sentence of as much as 10 years. Officer Bud Walker, a Fairfax police spokesman, said that the women were California residents and that he did not know why they were living in southern Fairfax.

Western profits wilt on China’s surging wages
Rising wage and production costs in China are eating into the profits of Western companies and may soon set off an exodus of multinational companies to cheaper locations. ~ Ambrose Evans-Pritchard

A report by Credit Suisse said the vast majority of US and European companies in China are expecting a “margin hit” over the next 12 months and fear they will not be able to pass on the costs to consumers, with the biggest worrries in electronics, clothing, and retail.

The bank said Footlocker, Liz Claiborne, and Office Depot would tip into outright loss in a worst-case scenario, defined as a 20pc rise in costs without any pass-through to customers.

“The US industrial giant General Electric raised eyebrows in May with plans to shift production of its hybrid water heater from China back to Kentucky next year after securing lower wages from US workers. The company cited the narrowing pay gap, lower transport costs, and shorter delivery times”.

Pinstripe protectionism at PIMCO
By: Timothy P. Carney
Examiner Columnist
08/18/10 12:30 PM PDT

“Protectionist” is an attack usually thrown at those who advocate tariffs or import restrictions. I use it more broadly to refer to those who call for government interference in order to preserve a current or recent economic arrangement.

For instance, President Bush’s 2008 bailouts were protectionism — pinstripe protectionism, to be precise.

This week, at President Obama’s housing summit, we saw some more pinstripe protection — this time from Bill Gross, head of PIMCO, the nation’s largest bond company.

In the Bloomberg interview below, Gross states that we need to make Fannie Mae and Freddie Mac government agencies because now Americans know that home value can go down, and if folks don’t forget that, “the private market will not function the same way as it has over the past 10 or 20 years.”

Imagine that — a market functioning differently in one decade than in another! Call in the government!

Ahmed Mouse?

Muslim employee: Disney banned her head scarf
By GILLIAN FLACCUS The Associated Press
Posted: 6:00 p.m. Wednesday, Aug. 18, 2010

ANAHEIM, Calif. — A Muslim woman who works as a hostess at a Disneyland restaurant alleged Wednesday the theme park would not allow her to appear in front of customers while wearing her head scarf.

Imane Boudlal, 26, appeared outside the resort’s Grand Californian Hotel after filing a complaint with the U.S. Equal Employment Opportunity Commission.

She said when she wore the hijab to work Sunday, her supervisors told her to remove it, work where customers couldn’t see her, or go home.

Boudlal, who wore the scarf in observance of Ramadan, chose to go home but reported to work for the next two days and was told the same thing.

“Miss Boudlal has effectively understood that they’re not interested in accommodating her request either in timing or good faith,” said Ameena Qazi, an attorney from the Council on American-Islamic Relations who is consulting with Boudlal.

Disneyland spokeswoman Suzi Brown said Disney has a policy not to discriminate. The resort offered Boudlal a chance to work with the head covering away from customers while Disneyland tries to find a compromise that would allow Boudlal to cover her head in a way that fits with her hostess uniform, Brown said.

“Typically, somebody in an on-stage position like hers wouldn’t wear something like that, that’s not part of the costume,” Brown said. “We were trying to accommodate her with a backstage position that would allow her to work. We gave her a couple of different options and she chose not to take those and to go home.”

Boudlal, who is a native of Morocco, has worked at the Storyteller restaurant at the hotel for 2½ years but only realized she could wear her hijab to work after studying for her U.S. citizenship exam in June, Qazi said.

* The Wall Street Journal
* REVIEW & OUTLOOK
* AUGUST 19, 2010

Barney to Fannie: Drop Dead
Wonder of wonders, miracle of miracles.

Barney Frank has been all over the airwaves this week with a clear and—we never thought we’d say this—perfectly sound message about Fannie Mae and Freddie Mac: “They should be abolished.”

Well, praise be. Two years ago next month, then Treasury Secretary Hank Paulson put the two government-sponsored mortgage-finance giants into conservatorship, and Congressman Frank declared himself pleased that there was a good chance, according to government bean-counters, that the rescue wouldn’t cost taxpayers a dime. Also at the time, Mr. Frank scoffed at the Bush Administration’s view that Fan and Fred should be wound down, saying it would never happen. One and a half trillion dimes ($149 billion) later, Mr. Frank appears to have seen the light.
…
We prefer no subsidy for homeownership, not least because the painful experience of the last 40 years is that such policies lead to boom and bust and awful economic harm. Canada has neither a Fannie Mae nor a mortgage-interest tax deduction, and yet its homeownership rate is higher than America’s. The homebuilder-Realtor-mortgage banker lobby will object, which is no doubt why Treasury chief Tim Geithner continued to call for some federal role in guaranteeing mortgages at his housing finance gabfest this week. But that road inevitably leads to the Son of Fannie.

The housing reform debate is only beginning, but for now we’ll associate ourselves with Mr. Frank’s view that if Congress wants to subsidize housing, it ought to do so directly out of annual appropriations, allocating dollars in open and transparent fashion against other priorities.

Coming to the house next to yours soon: Meet the Squatters!

http://www.orlandosentinel.com/news/local/breakingnews/os-ocoee-children-squatters-20100818,0,5548783.story

500k initial jobless claims: The jobless recovery is getting good.

SPOILER ALERT: Those familiar with U.S. ag policy are likely aware that every few years, a similar debate about reducing or eliminating government subsidies plays out in the ag policy arena. To great fanfare, politicians line up behind proposals to eliminate protectionist ag subsidies, noting that it will take quite some time to accomplish their proposal. A few years later, after almost all voters have forgotten the proposed subsidy reduction, nothing has changed regarding farm subsidies.

Don’t hold your breath waiting for govt housing subsidies to go away, as it is quite easy to muster the political will to start a large-scale federal subsidy program, while nearly impossible to end one.

The Atlantic Home
Thursday, August 19, 2010

Joshua Green - Joshua Green is a senior editor of The Atlantic and a weekly political columnist for the Boston Globe.

Making Big Government a Little Smaller
Aug 18 2010, 9:31 PM ET

For those not busy fleeing or fanning the flames of the Ground Zero mosque controversy, the week’s big political event was a conference at the Treasury Department about the future of housing finance. Washington will soon make some big decisions that will go a long way toward determining who gets to own a house and how much they’ll have to pay for it.

More than any other sector of the economy — even banking or automobiles–the federal government dominates housing. After the collapse two years ago, it rescued the housing market by essentially nationalizing the mortgage giants Fannie Mae and Freddie Mac at a cost to taxpayers of $148 billion and counting. Today, Wall Street is back on its feet and automakers like GM are turning a profit. But government agencies still back 95 percent of new mortgages.

That’s not ideal for anyone. Critics who prefer private markets fault the Obama administration for its continued involvement, while the bailout-weary White House would like nothing better than to satisfy them. But figuring out how government should extract itself and how the system should be remade is a challenge so daunting that it was left out of the financial reforms that President Obama recently signed into law. Along with difficult questions of policy, overhauling the $11 trillion mortgage market involves confronting the most charged political issue in Washington: the proper size of government and its role in the economy. This is what a group of luminaries from government, business, and academia undertook at the Treasury.

Ordinarily, liberals favor government and conservatives the free market, and it is along these ideological lines that the debate has played out on political and business cable channels. Since most conservatives would dissolve Frannie and Freddie, and most liberals would grudgingly allow them to, these agencies would not seem long for this world.

But at the conference, ideological purity yielded to practical self interest. It’s an indicator of just how damaged the housing sector remains that the expected roles were reversed. Shaun Donovan, secretary of Housing and Urban Development, insisted that government had to shrink its ”footprint,” and Treasury Secretary Timothy Geithner declared, ”This administration will side with those who want fundamental change.”

Meanwhile, any proposal entailing government’s rapid departure from the mortgage market aroused nervousness, and even alarm, in the assembled financiers. Bill Gross, co-founder of the bond fund Pacific Investment Management Company, implored the government to keep its mortgage guarantee in place and pass another round of fiscal stimulus to prop up housing prices. Without that guarantee, Gross warned, consumer rates would skyrocket as the risk of lending fell entirely on the market.

But the clearest glimpse of the long road ahead came during a discussion on how to manage the transition from the government-dominated market to a private one. No one could quite envision how such a transition would occur, but they did agree that it would take many years — some thought a generation.
…

Catching up on my HBB reading, I saw CIBT posted this the other day. For those that have seen “million dollar listing”, the agent on this deal is none other than the doofus with the stupid bowel haircut and the foo-foo dog Chad Rogers. The Hilton he works for is the father of Paris (and grandson of Conrad I believe). Its too early to do the math, but his commission on this shortsell is more than I will make for the next many years.

WSJ Blogs Developments Real estate news and analysis from The Wall Street Journal * August 17, 2010, 10:02 AM ET

Wells Fargo ‘Party House’ Sold at 30% Off
By Juliet Chung

Accessories creators Bruce Makowsky and his wife, Kathy, have paid nearly $15 million for the bank-owned Malibu beach house that made waves last year for allegedly being used as a party house by a Wells Fargo executive.

The purchase price is nearly 30% less than its original $21.5 million asking price last September. The most recent asking price was $18 million.
“The house is spectacular and it’s on a gorgeous, beautiful beach,” said Mr. Makowsky, who is co-president of Van Zeeland, Inc., which includes the B. Makowsky handbag and shoe brands available at retailers including Macy’s and QVC.

Mr. Makowsky said he and his wife closed within seven days of seeing the home. “There aren’t a lot of homes that become available in that area,” he said. The couple’s primary residence is in Long Island, N.Y.; they plan to use the Malibu property as a vacation home. The publicity surrounding the house didn’t impact their interest or decision to buy, Mr. Makowsky added.

Wells Fargo later fired the employee, Cheronda Guyton, who dealt with foreclosed properties; the home had belonged to Madoff victims.

The four-bedroom, contemporary home is located in the guard-gated Malibu Colony area and has walls of glass that look onto the Pacific. The roughly 3,800-square-foot home has a double-height living area, decks and terraces and an open floor plan on the first level. Chad Rogers of Hilton>/b> and Hyland, a Christie’s Great Estates affiliate, was on both sides of the deal.

The Associated Press August 18, 2010, 4:18PM ET
Fitch: Largest US banks could lose up to $42B
NEW YORK

Fitch Ratings said Wednesday the four largest U.S. banks could book losses of up to $42 billion if Fannie Mae and Freddie Mac force them to take back troubled mortgages they originated.

Fitch estimates that JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. could record $17 billion in losses if they repurchase a quarter of the mortgage giants’ seriously delinquent loans. In the worst case, they could lose $42 billion if the government-sponsored entities force them to buy back half of their bad loans.

Investors that buy loans from banks have the right to force lenders to repurchase them if there were lies on the loan applications. Recently, Fannie and Freddie have actively done this for $354.5 billion worth of bad mortgages. As a result, these banks have started to beef up their cash reserves recently to absorb the losses.

Fitch’s estimates only include Fannie’s and Freddie’s troubled loans and don’t account for private investors or mortgage insurers, which also could force loan buybacks.
…

“It’s not a housing subsidy, it’s a federal mortgage guarantee.”

With Government Mortgage Guarantees, Risk Retention Isn’t Needed
Aug 18 2010, 11:18 AM ET

At the Treasury’s Conference on the Future of Housing Finance yesterday, it was pretty clear that government guarantees for mortgages aren’t going anywhere. As mentioned before, it’s easy to figure out how this story ends. When affordable housing advocates, Main Street, and Wall Street are all on the same page, taxpayers don’t stand a chance. So as long as the government continues guaranteeing mortgages through some Fannie- or Freddie-like government-sponsored entity (GSE), it can dictate what kinds of mortgages it will accept. This makes bank risk retention unnecessary for those loans.
…

Did Romer perhaps see this coming?

U.S. ECONOMY
Initial claims tip 500,000

First-time filings for unemployment benefits deliver a surprise, returning to levels of last November.

Screw the initial claims figure — the Bundesbank has raised their GDP forecast. Go buy some U.S. stocks to celebrate!

INDICATIONS
Blindsided by claims jump

Increase in jobless claims erases bulls’ earlier hopes of extending Street’s win streak to three.

Indications

Aug. 19, 2010, 7:30 a.m. EDT
Stock futures move higher ahead of weekly jobless claims
By Aude Lagorce, MarketWatch

LONDON (MarketWatch) — U.S. stock futures pointed to a higher opening Thursday after Germany’s central bank unexpectedly hiked its domestic GDP growth forecast and as investors awaited earnings reports from tech giants Hewlett-Packard Co. and Dell Inc.

Futures on the Dow Jones Industrial Average (DJIA 10,416, +9.69, +0.09%) rose 48 points to 10,400 and S&P 500 (SPX 1,094, +1.62, +0.15%) futures gained 5.5 points to 1,092.20.

Nasdaq 100 futures climbed 9.5 points to 1,846.25.

U.S. stock futures got a boost after Germany’s Bundesbank lifted its domestic GDP growth forecast for the year and said it saw little chance of a double-dip recession in the U.S.

GDP will increase by about 3% in 2010, the Bundesbank said in its monthly bulletin. In June it predicted a 1.9% increase.

“The major drive this morning is definitely the Bundesbank raising their GDP forecast. It’s the kind of news that the market has been looking for, for a long time,” said Christian Tegllund Blaabjerg, chief equity strategist at Saxo Bank.
…

We NEEED banks/bankers and the corporate elite. We NEEEEEED them.

A colleague of mine was in Vegas a couple weeks ago. He reported back that the place was “dead” on the Saturday night he was there.

Somehow I don’t believe most of the posts here about businesses being dead, but I believe the ones who have no clear motive (or hope) that businesses are dead. So I believe my colleague.

Pension Fraud by New Jersey Is Cited by S.E.C.

Federal regulators accused the State of New Jersey of securities fraud on Wednesday for claiming it had been properly funding public workers’ pensions when it was not.

The Securities and Exchange Commission said the action was its first ever against a state, and only its second against any government over the handling of a public pension fund. The first was the city of San Diego. More may be in store; the agency announced in January that it had a special unit looking into public pension disclosures. The S.E.C. has been trying to assume more authority over municipal securities.

US Homeowner Confidence Drops in Second Quarter
19 Aug 2010

U.S. homeowners were less confident about the value of their homes in the second quarter, with one-third believing home prices had not yet reached a bottom, real estate website Zillow.com said on Thursday.

Nevertheless, a significant number of homeowners said they planned to put their home up for sale in the next six months if they saw signs of a real estate market turnaround.

Homeowners were more pessimistic about the short-term future of home values in their local market than they had been in the previous three quarters, according to the Zillow Second Quarter Homeowner Confidence Survey.

Goldman Sachs sues Natixis in London High Court

LONDON (Reuters) - U.S. investment bank Goldman Sachs (NYSE:GS - News) has sued French investment bank Natixis (Paris:CNAT.PA - News) in London’s High Court over three credit derivative transactions, Natixis’s law firm, Stephenson Harwood, said.

The dispute centers around whether French investment bank Natixis can cancel a deal on three credit default swaps with Goldman, which is claiming damages for breach of contract.

A Goldman Sachs spokeswoman said on Thursday it had no comment to make on the situation, while Stephenson Harwood said Natixis would defend itself vigorously.

“We are preparing our defense. We are surprised that Goldman is suing us,” a spokesman for Stephenson Harwood said.

T-shirt seen in Yosemite, CA 1970’s:

Front: Go climb a rock!
Back: image of El Capitan

T-shirt seen in Anywhere, CA 2010’s:

Front: Go scale a mortgage!
Back: …here’s a rope!

Budget analysts see 2010 deficit at $1.3 trillion- AP

Congress’ budget analysts are estimating that this year’s federal deficit will exceed $1.3 trillion, slightly below last year’s total but still a huge ocean of red ink.

News about my bank:

After 12-year hiatus, Click back in banking business

And I have a story about Mr. Click: Many years ago, I worked at one of southern Arizona’s largest nonprofit organizations. And this guy, who never passes up a chance to have his charitable activities publicized, was on our board.

Among us peons, the running joke was: “Will Jim come to this month’s board meeting?” He seldom appeared, but, boy he loved having his name on our stationery.

Now, this latest bit of bank news doesn’t have me wanting to move my money quite yet, but he has a history of selling his local, indie-banks to the Big Bailout-Getting Banks.

Speaking of bubbles, consider the bond market:

As Debate Over Bond Bubble Rages On, Gold Surges To Highest Since July 1

As more and more pundits, and amateurs, debate the endless futility of the bond bubble, as in does one exist or are nominal rates, in addition to swap spreads, going negative, the one real asset - gold - is surging to highs last seen in early July. Of course the bond debate is silly: it merely indicates a flight to safety in a time when stocks continue to live in a fantasy neverland of “timid” inflation, when the reality is accelerating deflation for levered goods, and rising inflation for goods “for the rest of us.” As for those who never see a bond auction failure (and no, explaining the dynamics of a ponzi dutch auction is neither necessary nor sufficient), they will be absolutely correct- until they are wrong. And since we have gotten to a quantized state where even a rise in rates (due to the Fed’s stance on liquidity) is virtually equivalent to a failed auction, the distance from the base orbital to the energized level, to keep the quantum analogy, is far closer than most believe. But such is the way in a ponzi non-gold standard system, in which endless credit is chasing extremely finite cash flows. Ssince we have now moved past the point where incremental debt creation can fund viable, cash flow generating assets, any incremental debt serves no role save for window dressing. Whether or not there is a formal announcement by the UST of a failed auction is irrelevant. In the meantime, gold is brushing all these pointless discussions aside and doing its thing. However, gold likes to keep it complicated, and has once again inverted its 120 day correlation with stocks, hitting the lowest level since March 2009. In other words, if stocks are correlation to inflation, gold is now a deflation benefiting asset. Which is also wrong, as gold merely is seen increasingly as an alternative to the great alchemy experiment in the bottom of the 9th being conducted by the Central Banks of the world, which is the last hope to preserve the status quo. In other words, gold is merely the hedge to whether either side in the bond bubble debate is right.

From Zero Hedge

Internet recently seems to be concentrating on reporting on the dumbing down of Americans! Here’s a couple of items:

Poll: Growing number of Americans thinkg Obama (incorrectly) is a Muslim

Most US students think Beethoven is a dog

Exactly how are American’s taught these days? I can understand ignorance being passed down within families, but what happened to the school system?

You’ve Entered the Twilight Zone: Barney Frank Is Right, Bill Gross “Wildly Incorrect” About Fannie + Freddie

http://finance.yahoo.com/tech-ticker/you%27ve-entered-the-twilight-zone-barney-frank-is-right-bill-gross-%22wildly-incorrect%22-about-fannie–freddie-535338.html?tickers=FNM,FRE,XLF,XHB,HD,BAC,WFC

A blast from last year covering Obama’s form of Bill Gross Socialism.

http://www.forbes.com/2009/04/26/obama-bush-paulson-ayn-rand-opinions-columnists-tea-parties.html

Obama Loves The Rich
04.27.09, Forbes
The president is no socialist. If anything, he’s an oligarch.

Are America’s most productive citizens being asked to care for the dispossessed? Are the winners forced to part with the spoils so that the society’s losers can coast through the recession? Is work being punished, are achievements scorned? Do we all have to revert into precocious high-schoolers and go back to underlining and dog-earing Ayn Rand novels and annoying our ex-hippie mothers?

No, no we don’t. Obama’s no socialist. An observer from Mars would think the man’s a downright oligarch. While the “angry white men” movement assembles into tea parties, the real anger should be felt by those on the left who have so far watched the president continue to follow an economic rescue plan that was outlined by George Bush and Hank Paulson. The only thing that Obama has socialized are the losses incurred by Wall Street’s major banks like Citigroup ( C - news - people ) and Bank of America

The yet to be launched Public Private Investment Partnership program, by which large institutional investors will use non-recourse loans from the U.S. taxpayer in order to buy toxic mortgage assets from struggling banks, is just another example of the oligarchy wrought by our so-called socialist president. Bill Gross, fund manager at PIMCO, helped design the darned program just months after PIMCO announced, in August 2008, that it was raising a $5 billion fund to buy mortgage securities.

But a few months later, Gross came up with a better idea–use public money to protect PIMCO against losses while reaping the spoils of investments that go well. Why are we giving PIMCO, a subsidiary of German life insurance company Allianz ( AZ - news - people ), a break? Maybe Angela Merkel should get Germany’s taxpayers to pay for this money manager welfare scheme.

If Obama’s recovery plan works, the winners will be the executives at the richest and most powerful financial institutions in the world. There’s so much ire about the idea that one taxpayer might be asked to subsidize the failing mortgage of another but, in truth (and in the best case scenario) all taxpayers should look back at Obama’s actions in a few years and realize that what they really subsidized were the profits and ambitions of a radically wealthy elite. New Orleans hasn’t been rebuilt, but the government is hard at work on Greenwich, Conn., and Abu Dhabi.

Speaking of excess:

http://www.nytimes.com/2010/08/19/garden/19aqua.html?src=me&ref=general

You have to get to the third page to get the HBB connection, but here is a little tease, “The aquarium is no longer in use, he added, as a bank has since foreclosed on the house.”

Hrm…slow morning on here.

So, talked to my mom last night and was asking about my brother. He moved from Atlanta to Chicago after losing his job (well, he quit after they stopped paying him), and rather than sell his house, decided to rent it out. Of course I advised against it, but no one ever listens to me….

Mom told me that he hasn’t received the August rent check yet, and the renters don’t return his phone calls. Yikes!

Being a long-distance landlord - ain’t it a b*tch?!

I got another sad email last night. A friend from school is selling a house in San Mateo county (SF bay area). She and her DH bought it in 2007 for $900K, tore it down and built a nice new house on the lot, and put it on the market now for $1.5 million.

Zillow says the other houses on the block are worth about $800K.

This isn’t going to end well.

The difference between a house and a hose is “U”.

Luckily, the labor, housing and stock markets are decoupled now. Otherwise the weaknesses in the labor and stock markets might be worrisome for future housing prices.

* AUGUST 19, 2010, 12:15 P.M. ET

US Stocks Tumble As Jobs Data Adds To Economic Woes

By Kristina Peterson Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–U.S. stocks tumbled Thursday as fresh evidence of a stagnant jobs market reignited concerns about a slowdown in the U.S. economic recovery.

The Dow Jones Industrial Average dropped 179 points, on pace to put an emphatic end to its two-day winning streak. An unexpected surge in jobless claims startled investors, eclipsing Intel’s announcement that it will acquire McAfee.

The week’s uptick in deal activity and the stream of weak economic data sent conflicting messages to the stock market. Recent downbeat data have shown stagnant hiring, sluggish consumer spending and a rebound that has yet to take hold. That has punished the stock market.

The major benchmark indexes are now in the red for the week, month and year, leaving investors dejected about the market’s prospects as the recovery continues to stall.

“We’ve gone nowhere in eight months,” said Alan Valdes, director of floor trading at Kabrik Trading, who said the unexpected jump of jobless claims to 500,000 depressed hopes for both hiring and consumer spending. “Five hundred thousand is a bad number–you can’t put any good spin on it,” he said. “This is a country that’s powered by consumer spending, but if they’re not working, they’re not spending.”
…

Refinancing homeowners are going short
Many customers take 30-year loans down to 15 or 20
~ MSNBC

After being blindsided by a job loss last spring, sales exec Ren Chirakos didn’t need his new MBA degree to calculate the scary numbers: The math got simple real fast.

Zero income + new COBRA bills + a house payment = something had to give in the Chirakos family budget. The answer: refinancing his 30-year home loan to a shorter mortgage that tapped into the trend of ever-shrinking interest rates.

“I needed to keep my house,” said Chirakos, who since has found work at a different company in Cuyahoga Falls, Ohio. His wife is a stay-home mom who cares for their two daughters. “It forces you to look at ‘OK, where is our money going?’ You start looking for ways to shave fixed expenses. It really gives you cause to think.”

Chirakos was paying 5.375 percent on a 30-year loan before he became a victim of downsizing at toolmaker Snap-on Inc. As rates sank and slipped over the summer, he watched and waited. Then he pounced, locking in a 20-year, fixed-rate loan at 4.3 percent and slashing $140 off the monthly bill for his $220,000 home. With excellent credit and little debt, the re-fi cost him $900, so will pay for itself in about six months. “Every little bit helps,” he said.

Workplace fatalities plunge 17 percent to lowest level in nearly 2 decades

WASHINGTON (AP) — The number of workers who died on the job fell by 17 percent last year to the lowest level in nearly two decades, as workers logged fewer hours during the recession, the Labor Department said Thursday.

The 4,340 workplace fatalities recorded in 2009 was the smallest total since the Bureau of Labor Statistics first began tracking the data in 1992. It’s the second straight year that fatal work injuries have reached a historic low, following a 10 percent drop in 2008.

High unemployment and layoffs in more dangerous industries like construction played a major role in the decrease, the agency said. The construction unemployment rate is 17.3 percent, nearly double the overall jobless rate of 9.5 percent.

City Employees asking the Mayor of Seattle to cut senior level positions.

http://seattletimes.nwsource.com/html/politicsnorthwest/2012658144_city_employees_urge_the_mayor.html

“A large group of City of Seattle employees confronted Mayor Mike McGinn in his office lobby at noon to ask him to lay off senior-level employees instead of targeting the rank-and-file.

The group delivered hundreds of postcards to the mayor. “On your first day in office, you issued Executive Orders recognizing that the City is top heavy and relies too heavily on contracting out,” they wrote. “With revenue shortfalls and a lack of follow through on your orders, employees are being laid off and City services are being jeopardized.”

The mayor promised during his campaign he would cut senior-level employees. After he was sworn in in January, he began taking steps to cut 150 senior-level positions, but he backed off after managers organized to fight his proposal.

Now his office says he is “committed to reducing the number of senior positions” but won’t say by how many. The mayor points out that 35 percent of the staff members cut during mid-year budget reductions were senior-level employees, even though those employees make up only 9 percent of the workforce.”

Death of the ‘McMansion’: Era of Huge Homes Is Over
19 Aug 2010 CNBC

They’ve been called McMansions, Starter Castles, Garage Mahals and Faux Chateaus but here’s the latest thing you can call them — History.

In the past few years, there have been an increasing number of references made to the “McMansion glut” and the “McMansion backlash,” as more towns pass ordinances against garishly large homes, which are generally over 3,000 square feet and built very close together.

What sets a McMansion apart from a regular mansion, according to Wikipedia, are a few characteristics: They’re tacky, they lack a definitive style and they have a “displeasingly jumbled appearance.”

Well, count 2010 as the year the last nail was hammered into the McCoffin: In its latest report on home-buying trends, real-estate site Trulia declares: “The McMansion Era Is Over.”

Just 9 percent of the people surveyed by Trulia said their ideal home size was over 3,200 square feet. Meanwhile, more than one-third said their ideal size was under 2,000 feet.

Coming to a state near you

One of the many looming financial crises in the United States is the horrendous budget shortfall faced by many states.

James Altucher, managing director at Formula Capital, floats an innovative solution to this problem.

Instead of raising taxes, cutting spending, or going even deeper in debt, Altucher says, states should sell off some assets.

What assets?

Assets like roads, bridges, state parks, public transportation systems, and universities.

Bullard Favors More Treasury Purchases Should Inflation Fall
Aug 19, 2010

The Federal Reserve should purchase more U.S. Treasury securities and expand its balance sheet if the weakening U.S. economy shows signs that inflation is slowing, St. Louis Fed President James Bullard said.

“Should economic developments suggest increased disinflation risk, purchases of Treasury securities in excess of those required to keep the size of the balance sheet constant may be warranted,” Bullard said today in the text of slides for a speech in Rogers, Arkansas.

Bullard supported the Fed’s decision last week to keep its bond holdings at $2.05 trillion by reinvesting the proceeds from maturing mortgage-backed securities into Treasuries. The Federal Open Market Committee, seeking to spur economic growth, held the main interest rate unchanged at zero to 0.25 percent, where it’s been since December 2008, and affirmed a pledge to keep rates low for “an extended period.”

Obey the speed limits in Connecticut, folks:

Connecticut may have just a week’s worth of cash

“NEW YORK (Reuters) - Connecticut this autumn probably would have just a little more cash than it needs to pay a week’s expenses unless it issues $520 million of debt, according to the state treasurer.

If the planned offering of general bond obligations were delayed until 2011, “This coming fall the state would likely have just over a week’s worth of expenses in the bank — a level lower than advisable,” Napier wrote in an August 13 letter…”

“…Spence says he sees the Great Stagnation as a profound crisis of identity for America. For years, the problem was cushioned and partially hidden by the availability of cheap debt. Middle-class Americans were actively encouraged to withdraw equity from their homes, or leach from their retirement funds, in the confidence that ¬property prices and stock markets would permanently defy gravity (a view, among others, promoted by half the world’s Nobel economics prize winners, Spence not included). That cushion is now gone. Easy money has turned into heavy debt.”

Futurama, baby

“Great Stagnation” - love that term.

So who “owns” the job and sets the rules? The company or it’s employees?

Muslim employee sues US Disneyland over headscarf ban
Aug 19

A Muslim woman is suing Disneyland, accusing the company’s California theme park of discrimination for telling her she could not serve customers if she chose to wear a headscarf.

Imane Boudal, 26, asked her employers at Disneyland’s Grand Californian Hotel several months ago whether they would permit her to wear a headcovering while working as a hostess, a spokeswoman for a worker’s union said.

But when no reply was forthcoming, she decided to don the headscarf anyway, timing her decision with the beginning of the Muslim holy month of Ramadan, Leigh Shelton, a spokesman for the UNITE HERE Local 11 union said.

“Disney told Boudlal that if she wanted to work as a hostess she had to remove her hijab because it did not comply with the ‘Disney Look,’” Shelton said in a statement.

“Disney further advised Boudlal that if she refused to remove her hijab, she could either work a back-of-the-house position where any customers would not see her, or else go home.”

Boudlal refused the compromise and is now bringing Disney before the US Equal Opportunity Commission, a federal agency that handles claims of workplace discrimination.

“Their offer to put me in the back is humiliating,” she said in a statement. “They’re saying because I’m Arab, because I’m Moroccan, because I’m Muslim, they don’t want to see me in the front.”

Economic Report

Aug. 19, 2010, 10:19 a.m. EDT
Leading indicators show slowing U.S. economic growth

By Steve Goldstein, MarketWatch

WASHINGTON (MarketWatch) — The U.S. economy looks set to grow at a slower pace than earlier this year, the Conference Board said on Thursday as it reported its leading economic index rose 0.1% in July.

The index is essentially flat since March, the Conference Board added, though it’s still well above pre-recession levels. Economists polled by MarketWatch had expected a 0.2% advance.

Separately, the Philadelphia Fed’s August index slumped to -7.7 from positive 5.1 in July, which the Fed says suggest that regional manufacturing activity weakened in August, after two months of slowing activity.

The simultaneously released reports hit U.S. stocks hard.
…

Bad jobs report helps send stocks tumbling
News that mid-Atlantic manufacturing was down also weighs on markets

Image: Banc of America Specialist Peter Giacchi
Henny Ray Abrams / AP

Banc of America Specialist Peter Giacchi might agree with one analyst who says “The jobs number was bad, but not as far off the mark as the Philly number.”

NEW YORK — Stocks tumbled Thursday after two disappointing economic reports renewed investors’ concerns about the pace of the recovery.

The Dow Jones industrial average fell about 160 points in late afternoon trading. Broader indexes fell by more than 1.5 percent. Interest rates also fell sharply as investors flocked to the safety of Treasury bonds.

The Labor Department said claims for unemployment benefits rose unexpectedly last week and the Federal Reserve of Philadelphia said manufacturing activity in the mid-Atlantic region has dropped during August.

“The Philly Fed number was just awful,” said Randy Frederick, director of trading and derivatives at Charles Schwab. “The jobs number was bad, but not as far off the mark as the Philly number.”

Would you good folks out there in Kalifornia just send your state gubmint mo money! They are doing the best they can on so little. Remember the chidrens please.

California close to issuing IOUs - again.

NEW YORK (CNNMoney.com) — California is once again running out of money and may have to issue IOUs within a few weeks.

The state’s financial crunch stems from the fact that it does not have a budget for the current fiscal year, which began July 1. The governor and lawmakers continue to squabble over how to close an estimated $19 billion shortfall.

State Controller John Chiang said Wednesday that the state could have to issue IOUs in two to four weeks to keep the state solvent. He estimates there are $2.2 billion in expenses — mainly to social service agencies, vendors and schools — that will go unpaid in August.

The data releases over the past couple of weeks have been bad enough to send a permabear into a depression.

Stocks drop on trifecta of bad reports
By Annalyn Censky, staff reporter
August 19, 2010: 2:58 PM ET

NEW YORK (CNNMoney.com) — Investors were hit with a triple whammy of bad economic news Thursday: manufacturing still stinks, more people are jobless and confidence in the future is less than hoped.

As a result, stocks were sharply lower: the Dow Jones industrial average (INDU) tumbled 172 points, or 1.7%, and the S&P 500 (SPX) slipped 20 points, or 1.9%. The tech-heavy Nasdaq (COMP) composite fell 40 points, or 1.8%.

Stocks were coming off two days of gains, driven by solid earnings outlooks from retail giants Wal-Mart, Home Depot and Target. But even during this week’s earlier rallies, traders were saying they were remaining cautious given fears about a double-dip recession - or at least, a slower recovery.

Thursday’s disappointing numbers on weekly jobless claims, manufacturing in the Philadelphia region and leading indicators just fanned the flames on those gloom-and-doom fears.

“Today’s news on the U.S. economy has been nothing but awful,” Paul Ashworth, senior economist with Capital Economics said in a note to investors.

A report that showed manufacturing activity in the Philadelphia region slowed to a 13-month low “suggests the industrial recovery is teetering on the brink,” he said.
…

I new this was going to happen. Woo Hoo! Look out below fellow (Aspberger) Palo Altoids:

Bay Area July Home Sales Down Sharply; Median Price Slips From June - http://www.dqnews.com/Articles/2010/News/California/Bay-Area/RRBay100819.aspx

Housing Double Dip is Not Just Tax Credit Hangover
http://www.cnbc.com/id/38774985

buh bhu bhu but, we’re too smart for this to happen!

Boy That felt good Have fun feeding your Real Estate habit. Now you’re “priced in forever.” HA! Gloat off.

Groundhog Day!

The Financial Times
California faces issuing IOUs again
By Matthew Garrahan in Los Angeles
Published: August 19 2010 19:11 | Last updated: August 19 2010 19:11

California will be forced to issue IOUs to public workers and other creditors in lieu of cash in the next two months if a budget deadlock cannot be broken, the state’s financial controller has warned.

America’s most populous state faces a repeat of 2009, when a slumping economy and its failure to agree a budget caused an unprecedented fiscal crunch and the issuing of $2.6bn of IOUs, which damaged California’s credit rating and forced it to scrap some social programmes.

John Chiang, California’s controller, told the Financial Times that the state was once again flirting with IOUs because of a budget stalemate between Arnold Schwarzenegger, its governor, and the state government. The budget is two months late.

“If the governor and the legislature act responsibly and pass a budget then we won’t have to issue IOUs – it’s as simple as that,” said Mr Chiang.

However, Mr Schwarzenegger and the state legislature do not appear to be close to agreeing a new financial plan for California, which issues more municipal debt than any other US state. The governor has outlined drastic spending cuts to close a $19.1bn deficit, which many in the state legislature have opposed.
…
EDITOR’S CHOICE
Budget office warns over extending tax cuts - Aug-19
New jobless claims in US hit half-million mark - Aug-19
US house mortgage arrears mount - Aug-16
Lex: US government bonds - Aug-17
Opinion: US needs to make bad jobs better - Jul-05
Analysis: America: States of distress - Aug-08

The Financial Times
Fresh US recovery fears hit risky assets
By Telis Demos in London
Published: August 19 2010 09:45 | Last updated: August 19 2010 20:27

Thursday 19.40 BST. The US labour market remains in a slump, and factory activity is slipping, prompting a fresh sell-off of US and European stocks and further low yields for government bonds.

The S&P 500 index is down 1.8 per cent, on track to close at its lowest level since July. The FTSE All-World stock index is down 1.3 per cent as European shares also tumble after rising earlier on stronger local economic data. Gold is rising, and oil is falling.

US jobless claims rose to the psychologically significant 500,000 level last week, above the forecast of 476,000, and bringing the four-week moving average up by 9,000 claims.

“This report indicates that the pace of firings and layoffs has increased and is a negative signal for the employment report in two weeks’ time,” said Michael Gapen, economist at Barclays Capital.

And the drumbeat of bad US news kept on. The Philadelphia Fed’s gauge of factory activity fell to its lowest level in a year, and the Congressional Budget Office projected that the US’s 2014 budget deficit would reach $1,300bn, slightly higher than its forecast in March.

Government bond yields are falling further into uncharted territory. The US Federal Reserve also announced its first purchases of Treasuries, buying $3.6bn.

The yield of 10-year US Treasuries hit a new 11-month low of 2.57 per cent. Yields on 30-year US bonds were down a whopping 10 basis points, to 3.64 per cent, and German 30-year bond yields were at a fresh all time low, just below 2.98 per cent.

“The current low levels of bond yields would be consistent with the prospect of a very long period of near-zero, short-term interest rates, low or negative inflation, and lacklustre returns on riskier assets that increase demand for the safety of government bonds,” said Julian Jessop, chief international economist at Capital Economics.
…
EDITOR’S CHOICE
US stocks fall on jobless data - Aug-19
Cautious comment limits London - Aug-19
German forecasts boost European equities - Aug-19
Asia boosted by Mumbai 30-month high - Aug-19
Short View: Bond bubble - Aug-18

At least they aren’t moving to Mexico…

Overhead Door Closing Athens Plant.

ATHENS, Ga. (AP) — Overhead Door Corp. says it’s closing its
plant in Athens and moving the work to a facility in Pensacola,
Florida.

The announcement Wednesday means the elimination of 111 jobs in Athens, where the company has been making doors for 45 years.

Ken Mahlke, Overhead’s vice president of human resources, says the move will start immediately, and layoffs will begin Oct. 15.

Mahlke says the Pensacola plant offers more modern equipment
than the Athens facility and is in a better location for the
company’s business.

Overhead Door will retain its sales and service office in Athens.

Pratt & Whitney to Cut 129 Jobs in Cheshire, Conn.

Officials from Pratt & Whitney have told union workers that the company will be eliminating 129 hourly jobs at the Cheshire Engine Center, union officials said.

The company attributed the cuts to a reductions in work performed at the Cheshire facility.

“The reduction is in full compliance with the current collective bargaining agreement and the court’s ruling,” company officials said in a statement released on Thursday. You can read more on the court ruling here.

Local union officials said the machinists union has questions about the planned job cuts and that hourly employees have been working 10 hours a day, instead of the normal eight-hour shift, and have been asked to come in on Saturdays as well. Some people have also been asked to work on Sundays, officials from IAM District 26 said in a statement released on Thursday.

Mexico’s Peso Drops Most in Week as U.S. Jobless Claims Rise Unexpectedly
By Andres R. Martinez - Aug 19, 2010 8:09 AM PT

Mexico’s peso dropped the most in a week as the U.S., the nation’s largest trading partner, said initial jobless claims rose unexpectedly.

The peso fell 0.6 percent to 12.7022 per dollar at 11:01 a.m. New York time, from 12.6315 yesterday. The drop pared the peso’s gain against the U.S. dollar this year to 3 percent, the third-best performer among the 16 major currencies tracked by Bloomberg, after Japan’s yen and Singapore’s dollar. The decline was the largest since Aug. 11.

“We are reminded of how soft the recovery is stateside and this really does put the pressure on those U.S. satellite economies, such as Mexico,” said Mike Moran, a currency strategist at Standard Chartered Bank in New York.

Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, exceeding all estimates of economists surveyed by Bloomberg. The U.S. purchases about 80 percent of Mexico’s exports.
…

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

Diamonds: The Missing Commodity Derivative:

Investopedia / Topics: Investing Ideas & Strategies
James E. McWhinney, On Thursday August 12, 2010

“…The derivative market is often larger than the market for the actual commodity. This is because speculators don’t want to take physical delivery of the commodity, they want to trade contracts and make money.

“Companies in India and China may be supporters of the effort, as the demand for jewelry in these two countries exceeds the demand of most nations. Middle-Eastern countries are also possible buyers. Initial efforts are apt to focus on derivative contracts that do not result in physical delivery.”

Buy Owner service is in liquidation

By Kimberly Miller Palm Beach Post Staff Writer
Posted: 4:35 p.m. Thursday, Aug. 19, 2010

The Buy Owner broker-free real estate firm, known for its familiar “Thanks, Buy Owner” advertisements, has filed for liquidation as the housing market continues to struggle.

The Deerfield Beach-based company will continue to operate with a reduced staff as a buyer is sought for its assets, which could include the purchase of the firm in its entirety, minus its debt.

“The phones, as far as people interested in the service remain very active, and we are signing up new clients everyday,” said Philip J. von Kahle, managing director for Michael Moecker & Associates, which is the assignee for Buy Owner. “There is still a very valuable core business here.”

Buy Owner president and CEO Scott A. Eckert lives in Boca Raton.

The company filed last month for an assignment for the benefit of creditors in Broward County, which is similar to a Chapter 7 federal bankruptcy but in state court.

As assignee, the Fort Lauderdale-based Michael Moecker & Associates, is responsible for maximizing the assets of the company so creditors can get paid.

Von Kahle said the combination of a down real estate market and a large Bank of America loan that recently required payment led to the liquidation filing.

According to court documents, Buy Owner owes about $3.9 million to Bank of America, and $1.2 million in back pay to its executives, including Eckert. It has 33 shareholders.

Buy Owner, founded in 1984, charges fees to sellers based on how much exposure they want on its website, and what features, such as custom fliers or talking yard signs, they choose. It is free to buyers.

The company has franchises in Atlanta, Chicago, Dallas, Jacksonville, New Orleans, Orlando, Philadelphia and Tampa.

“I don’t think the company could scale down quick enough because it got so big,” said von Kahle. “It appears to me the loan from Bank of America was the straw that broke the camel’s back.”

A 2009 Florida Realtors report found about 10 percent of homes sold last year did so without the help of a Realtor.

Leyza Blanco, an attorney with Miami-based GrayRobinson, P.A. who is representing Michael Moecker & Associates, said she has filed a motion to allow for liquidation of the business as a whole, rather than its parts. Because Buy Owner is a service-based company, that could maximize profits, Blanco said.

“There’s not a lot of tangible assets that you can just take apart and sell,” she said.

Creditors have until Nov. 23 to file claims against the company.

Perp walks finally coming down the pike?

* The Wall Street Journal
* WRITING ON THE WALL
* AUGUST 19, 2010

In Search of Justice for Wall (Street)
Judges Are Finally Questioning Wall Street Settlements

* By DAVID WEIDNER

What oxymorons make you smile? A few of my favorites include military intelligence, death benefits, Internet etiquette and market discipline.

But there’s one that’s more frustrating than funny: Wall Street justice.

From Rudolph Giuliani’s empty pursuit of insider traders to Eliot Spitzer’s showboating, to the recent settlement with Goldman Sachs Group Inc. over misleading investors, punishment for fraud and misconduct on Wall Street has been as harsh as the ending of a Disney movie.

But dare we say it; this brand of pseudo justice may actually be in danger of disappearing. Two judges, Jed S. Rakoff and Ellen Segal Huvelle, have rejected settlements related to the financial crisis in the last year on the grounds they are too weak and punish shareholders.

Another, U.S. District Judge Emmet G. Sullivan, threatened but ultimately accepted Wednesday a $298 million settlement with Barclays PLC stemming from alleged altering of financial records to hide the movement of funds into the U.S. from Iran, Cuba and other prohibited countries. Judge Sullivan had called the settlement a “sweetheart deal.”

Still, in rejecting pacts between prosecutors and Bank of America Corp. and Citigroup Inc. the bench has disrupted the tried-and-true practice of sue-and-settle preferred by our regulatory watchdogs.

Maybe it’s because the banks in question received the lion’s share of taxpayer bailouts. Or perhaps the judges were simply fed up with benign penalties. Whatever the reason, there is a glimmer of hope that punishments may come closer to fitting the crimes.

“I look at this and say, ‘Why would I find this fair and reasonable?’ ” Judge Huvelle told both sides at a hearing Monday. “You expect the court to rubber-stamp, but we can’t.”
…

* The Wall Street Journal
* HEARD ON THE STREET
* AUGUST 20, 2010

Government Still Housing Foundation
By PETER EAVIS

Don’t be fooled: Housing’s grip on government policy isn’t getting any weaker.

For decades, politicians, banks and homeowners have participated in a system of subsidies that not only pushed house prices to artificial highs, but also sucked capital away from more productive investments. It was therefore long-term bullish for the U.S. economy to see the Treasury and other key policy makers recently voice support for an eventual wind down of Fannie Mae and Freddie Mac.

Also, with residential mortgage delinquencies falling, the foreclosure wave could subside by the end of next year, reducing cries for intervention. Even if the economy were to double dip, foreclosures should continue falling, because it appears that poor lending—not economic sluggishness—was the biggest driver of defaults.

That said, it is hard to see the government actually retreating from the housing sector. Right now, government entities back nearly all new mortgages, and banks hold on to almost none. The banks would likely hold floating-rate, shorter-dated products that have solid down payments. But few borrowers will take out such loans when government entities are offering 30-year fixed-rate loans at low rates, which can be refinanced at will. In theory, government entities could be told to stop offering such loans, to create room for private-sector lenders. The Treasury likely wouldn’t take such measures as long as it fears another drop in house prices.

However, for a housing recovery to be sustainable, it must draw in large participation from private banks or bond investors. That may not happen till Fannie and Freddie are scaled back and the housing market has been allowed to clear properly.

Even if the foreclosure crisis subsides, the housing-financial complex is still likely to get in the way.

* AMERICAS NEWS
* AUGUST 19, 2010

Mexico Under Siege
Business Heads Plead as Drug Gangs Terrorize Wealthy City

By NICHOLAS CASEY

MONTERREY, Mexico—A surge of drug violence in Mexico’s business capital and richest city has prompted an outcry from business leaders who on Wednesday took out full-page ads asking President Felipe Calderón to send in more soldiers to stem the violence.

‘Es momento de hacer un alto y decidir sobre la mejor forma de responder a las bandas de criminales que … buscan establecer un nuevo parámetro de terror.’

‘It’s time to stop and decide the best way to respond to criminal bands … looking to establish a new boundary of terror.’

– Excerpt from newspaper ad by Mexican business leaders

Soldiers secure a crime scene where the body of the mayor of a tourist town near Monterrey was found Wednesday.

The growing violence in Monterrey, long one of Mexico’s most modern and safe cities, is a sign that the country’s war against drug gangs is spreading ever further from poorer battlegrounds along the border and into the country’s wealthiest enclaves.

Residents opened their newspapers Wednesday morning to find the ads taken out by Mexican business leaders, begging the government to send more military into the city. “Enough already,” said the notice that ran in national and local papers, criticizing what it said was a slow response of police against “criminal bands that in every act look to establish a new boundary of terror.”

Later that day, the body of Edelmiro Cavazos, mayor of the Monterrey suburb of Santiago, was found beside a highway. Mr. Cavazos had been abducted Sunday night, the latest in a string of attacks against politicians in Mexico’s north.

His killing is another incident in a terrifying spell for Monterrey residents that began Saturday when armed gangs set up more than a dozen roadblocks on key boulevards of the city, paralyzing traffic for hours. The next day, a grenade was lobbed at the offices of an important television broadcaster. On Tuesday night, grenades were also hurled at several small businesses on the city’s outskirts.

Mexico’s Drug Killings

Nearly 23,000 people have died in drug-related violence since 2006, according to the government, with northern border states experiencing the worst of the violence.

“The security environment in Monterrey has turned, in just a few months, from seeming benevolence to extreme violence,” U.S. Ambassador to Mexico Carlos Pascual said at a recent conference on drug trafficking in El Paso, Texas.
…

I can’t wait to see this thing crash:

Low Jumbo Mortgage Rates Helping California’s High Priced Home Markets
Posted By: Rosemary Rugnetta | August 19, 2010 at 10:00 am

August 19, 2010 (FreeRateUpdate dot com) – While California may have been one of the top states with foreclosures during the housing meltdown, it is now leading the way in the recovery of the high priced home market. With jumbo mortgage rates at their lowest since 2003, buyers are taking advantage of this opportunity to purchase or trade up to a bigger home. Low jumbo mortgage rates are helping California’s high priced home markets recover from their three year slump that practically made them obsolete.
…

I wonder if this would work in America?

Emerging Markets Report

Aug. 20, 2010, 1:38 a.m. EDT
China developers hoarding land may face sanctions

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) — Chinese real-estate developers found hoarding land will be barred from receiving bank loans, China’s top land regulator said Thursday, according to a report in the state-run China Daily.

Liao Yonglin, a senior official at the Ministry of Land and Resources, said developers found flaunting land-hoarding rules would be reported to relevant departments.

He said the sanctions were meant to prevent runaway housing prices by ensuring steady supplies.

“In order to control housing prices, we will release information on any real-estate developer who tries to hoard land in any way to financial supervision and administration departments, making bank loans impossible for those developers,” Liao was cited as saying in the report.
…

Is anyone up for a lovely Mexico vacation?

Kidnapped Mexican Mayor Found Dead
Aug. 19, 2010

Security forces find the body of a mayor days after he was abducted by hit men in the latest attack on a public official by increasingly bold drug gangs. Video courtesy of Reuters.