The Housing Bubble

Dimon Says Mortgage Clash Swells as ‘Everybody Is Going to Sue’
(Bloomberg) 7-15-11

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said clashes over faulty mortgages may drag on as investors and regulators demand compensation for soured loans issued at the peak of the housing market.

“There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Dimon said during a conference call today. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.”

JPMorgan disclosed about $2.5 billion in second-quarter costs tied to faulty mortgages and foreclosures. The bank added $1.27 billion to litigation reserves, mostly for mortgage matters, and incurred $1 billion of expenses tied to foreclosures, according to a slide show accompanying today’s earnings report. Repurchase losses were $223 million, according to the company, which ranks second by assets among U.S. banks.

Banks are struggling to stanch losses tied to loans based on missing or wrong data about borrowers and properties and are facing probes of foreclosures that may have used falsified documents. Lenders led by Bank of America Corp. (BAC) have reimbursed investors for losses on mortgages, and New York-based JPMorgan said it has $3.3 billion in costs so far on repurchases from government-backed firms such as Fannie Mae.

JPMorgan’s additional litigation reserve may help cover “fees and assessments related to foreclosure delays and payments for other settlements,” including probes by the U.S. Department of Justice and the state attorneys general, the bank said. Litigation reserves also cover projected costs tied to so- called private-label mortgage bonds that may have contained faulty loans, the lender said.

Bank Delays May Push 1 Million U.S. Foreclosure Filings to 2012
(Bloomberg)

Lender delays in processing home- loan defaults will push as many as 1 million U.S. foreclosure filings from this year to 2012 or beyond, casting an “ominous shadow” on the housing market, according to RealtyTrac Inc.

The number of properties receiving a notice of default, auction or repossession plunged 29 percent in the first half of 2011 from the same period last year, the Irvine, California- based data seller said today in a report. About 1.17 million homes got a filing, or one out of every 111 households.

Procedural delays caused by a probe into bank documentation errors, combined with weak consumer sentiment and a jobless rate above 9 percent, are weighing on a property recovery by adding to a backlog of distressed homes, RealtyTrac said. A clogged foreclosure pipeline may prevent real estate prices from finding a bottom as the housing slump enters its sixth year.

“If you accept the premise that foreclosures are the black cloud hanging over the market, we’re not going to get price stability and people won’t leave the sidelines until that cloud is cleared away,” Nicolas Retsinas, professor of real estate at Harvard Business School in Cambridge, Massachusetts, said in a telephone interview.

U.S. home prices fell 33 percent from a July 2006 peak through April, according to the S&P/Case-Shiller index of 20 cities. Federal Reserve Chairman Ben S. Bernanke said in testimony to Congress yesterday that ongoing weakness in home values is reducing household wealth and limiting consumer confidence.

Muni Default Plunge Belies Whitney as Borrowers Shun Insolvency
(Bloomberg)

Time is running out for Meredith Whitney’s municipal-market default prediction to come true.

Defaults fell 60 percent in the first half of 2011 compared with the same period last year, including a $12.5 million Austin, Texas, apartment project that made a late payment in June, according to Distressed Debt Securities Newsletter.

Whitney, a bank analyst, predicted “hundreds of billions of dollars” of municipal defaults within 12 months in a Dec. 19 “60 Minutes” broadcast, fueling a wave of selling in the $2.9 trillion market. Instead, the number has fallen as cities slashed spending to balance budgets and state lawmakers stepped in to guard against insolvency and local bankruptcies.

“The data is not helping Meredith,” said Matt Fabian, a managing director at Municipal Market Advisors, a financial- research company based in Concord, Massachusetts. “It’s always been a possibility there would be a wave of defaults. You can’t say that it’s zero but it’s given no sign of starting.”

From January through June, defaults fell to 24 totaling $746 million, according to the newsletter from Miami Lakes, Florida-based Income Securities Advisor. That compares with 60 in the first half of last year, totaling $2.29 billion, and 144 in the first six months of 2009, at $4.89 billion.

Foreclosure delays could hold off housing rebound
USAToday

Foreclosure actions — including default notices, auction sale notices and bank repossessions — will be filed on about 2 million homes this year, 1 million fewer than there should be based on the number of delinquent loans, says market researcher RealtyTrac.

Delays occur for a variety of reasons, including mortgage servicing firms’ uncertainty about future foreclosure rules. Federal and state officials and the mortgage industry are negotiating a settlement that is likely to define those.

The delays mean borrowers get more time in homes without paying mortgages. They also have led to fewer distressed homes for sale, which has probably curbed price declines, says economist Mark Zandi at Moody’s Analytics.

Yet the delays extend the time to clear the housing market’s supply of distressed homes, which pull down prices of other homes.

“Foreclosures are getting delayed and that will delay the housing recovery, too,” says RealtyTrac Senior Vice President Rick Sharga.

Nationwide, more than 6 million home loans are delinquent or in foreclosure.

Home prices, down more than 30% from their 2006 peak, cannot rebound until there are fewer distressed home sales, says Stan Humphries, chief economist for real estate website Zillow.com. Current and future foreclosures and high unemployment are the two biggest drags on the U.S. housing market, he says.

In May, distressed homes accounted for 31% of existing home sales, selling at a 20% discount to non-distressed homes, according to the National Association of Realtors.

Foreclosures may pick up late this year or early next as uncertainty about new regulations subsides, says Jason Kopcak, a mortgage loan expert at Cantor Fitzgerald.

Companies have probably delayed foreclosures as they await the federal-state settlement, Sharga says. Major mortgage servicers submitted plans Wednesday to improve their processes that were mandated by federal banking regulators. Those plans will be reviewed by regulators and may change depending on the settlement with state and federal officials.

The foreclosure slowdown began last fall after revelations that tens of thousands of foreclosure cases may have been improperly handled.

Foreclosure filings through June were down 29% year-over-year, RealtyTrac says. Homes lost to foreclosure in the second quarter were in the foreclosure process for an average 318 days — 41 days longer than in the same quarter last year.

The falloff in foreclosures has been sharper in some states. In Connecticut, Maryland, New Jersey and New York, foreclosure sales are down more than 70% since September, says mortgage tracker LPS Applied Analytics. The average drop nationwide was 37%.

States that clear their foreclosures quickly will probably see prices increase faster than those that take longer to absorb foreclosure inventories, Zandi says.

Stranger moves into foreclosed home citing Texas law

FLOWER MOUND - A little known Texas law and a foreclosure could have a man in Flower Mound living on easy street.

Flower Mound’s Waterford Drive is lined with well-manicured $300,000 homes. So, when a new neighbor moved in without the usual sale, mortgage-paying homeowners had a few questions.

“What paperwork is it and how is it legally binding if he doesn’t legally own the house?” said Leigh Lowrie, a neighboring resident. “He just squats there.”

Lowrie and her husband said the house down the street was in foreclosure for more than a year and the owner walked away. Then, the mortgage company went out of business.

Apparently, that opened the door for someone to take advantage of the situation. But, Kenneth Robinson said he’s no squatter. He said he moved in on June 17 after months of research about a Texas law called “adverse possession.”

“This is not a normal process, but it is not a process that is not known,” he said. “It’s just not known to everybody.”

He says an online form he printed out and filed at the Denton County courthouse for $16 gave him rights to the house. The paper says the house was abandoned and he’s claiming ownership.

“I added some things here for my own protection,” Robinson said.

The house is virtually empty, with just a few pieces of furniture. There is no running water or electricity.

But, Robinson said just by setting up camp in the living room, Texas law gives him exclusive negotiating rights with the original owner. If the owner wants him out, he would have to pay off his massive mortgage debt and the bank would have to file a complicated lawsuit.

Robinson believes because of the cost, neither is likely. The law says if he stays in the house, after three years he can ask the court for the title.

He told News 8 his goal is to eventually have the title of the home and be named the legal owner of the home.

“Absolutely,” he said. “I want to be owner of record. At this point, because I possess it, I am the owner.”

Robinson posted “no trespassing” signs after neighbors asked police to arrest him for breaking in.

Flower mound officers say they can’t remove him from the property because home ownership is a civil matter, not criminal.

Lowrie and her neighbors continue to look for legal ways to get him out. They are talking to the mortgage company, real estate agents and attorneys. They’re convinced he broke into the house to take possession, but Robinson told News 8 he found a key and he gained access legally.

“If he wants the house, buy the house like everyone else had to,” Lowrie said. “Get the money, buy the house.”

Robinson said he’s not buying anything. As far as he’’s concerned, the $330,000 house is already his and he has the paperwork to prove it.

Jamie Dimon for president.
Rich people are job creators.

U.K. Rightmove House Prices Fall in July
(Bloomberg)

U.K. home sellers lowered asking prices in July for the first time this year as a mortgage squeeze deterred buyers, Rightmove Plc said.

Asking prices dropped 1.6 percent from the previous month, when they had gained 0.6 percent, the U.K.’s biggest property website said in an e-mailed statement today. Seven out of 10 properties listed in 2011 are still available for sale, which Rightmove described as a “sobering reflection” of the market.

“We expect further falls over the next few months as buyer momentum ebbs away due to a combination of seasonal factors and a continuing lack of both mortgage finance and buyer confidence,” Miles Shipside, commercial director of Rightmove, said in the statement.

Values are up 0.1 percent from a year earlier to an average 236,597 pounds ($382,000). The monthly decline is the first since December, when asking prices fell 3 percent.

Seven of 10 regions tracked by Rightmove showed declines in July from June, led by a 3.5 percent drop in East Anglia. Asking prices in London fell 1.4 percent to an average 432,641 pounds, though they are still up 2.5 percent on the year.

The capital “is a less price-sensitive location than other parts of the country,” Shipside said. Nevertheless, “many of its buyers still require finances and so are also susceptible to the tightening of mortgage lending, pressure on income and the rising cost of living.”

Consumer Comfort in U.S. Rose Last Week on Boost in Finances
(Bloomberg)

Consumer confidence in the U.S. rose last week as households became more upbeat about the state of their finances and optimism climbed among wealthier Americans.

The Bloomberg Consumer Comfort Index increased to minus 43.9 for the period ended July 10 from minus 45.5 the prior week. Even with the gain, which is within the survey’s 3-point margin of error, the gauge is lower than it was at the start of the year.

While cheaper gasoline prices since May helped stabilize optimism, Americans’ assessment of the U.S. economy soured to a 15-week low. The pessimism likely reflects employment gains in June that were the smallest in nine months, a possible risk to consumer spending that accounts for about 70 percent of the world’s largest economy.

“Consumers are feeling a little bit better about the fact that gasoline prices have come down materially over the last several weeks,” said Russell Price, a senior economist at Ameriprise Financial Services Inc. in Detroit. “But on the other side of the coin, the lack of any real traction in job growth” is also weighing on consumers.

Realtors Are Liars

“We have to keep all the options on the table. We don’t know where the economy is going to go”

~ Ben Bernanke

Return of the Gold Standard as world order unravels
By Ambrose Evans-Pritchard - The Telegraph UK.

As the twin pillars of international monetary system threaten to come tumbling down in unison, gold has reclaimed its ancient status as the anchor of stability. The spot price surged to an all-time high of $1,594 an ounce in London, lifting silver to $39 in its train.
gold nuggets and bars

On one side of the Atlantic, the eurozone debt crisis has spread to the countries that may be too big to save - Spain and Italy - though RBS thinks a €3.5 trillion rescue fund would ensure survival of Europe’s currency union.

On the other side, the recovery has sputtered out and the printing presses are being oiled again. Brinkmanship between the Congress and the White House over the US debt ceiling has compelled Moody’s to warn of a “very small but rising risk” that the world’s paramount power may default within two weeks. “The unthinkable is now thinkable,” said Ross Norman, director of thebulliondesk.com.

Fed chair Ben Bernanke confessed to Congress that growth has failed to gain traction. “Deflationary risks might re-emerge, implying a need for additional policy support,” he said.

The bar to QE3 - yet more bond purchases - is even lower than markets had thought. The new intake of hard-money men on the voting committee has not shifted Fed thinking, despite global anger at dollar debasement under QE2.

Fuelling the blaze, the emerging powers of Asia are almost all running uber-loose monetary policies. Most have negative real interest rates that push citizens out of bank accounts and into gold, or property. China is an arch-inflater. Prices are rising at 6.4pc, yet the one-year deposit rate is just 3.5pc. India’s central bank is far behind the curve.

“It is very scary: the flight to gold is accelerating at a faster and faster speed,” said Peter Hambro, chairman of Britain’s biggest pure gold listing Petropavlovsk.

“One of the big US banks texted me today to say that if QE3 actually happens, we could see gold at $5,000 and silver at $1,000. I feel terribly sorry for anybody on fixed incomes tied to a fiat currency because they are not going to be able to buy things with that paper money.”

China, Russia, Brazil, India, the Mid-East petro-powers have diversified their $7 trillion reserves into euros over the last decade to limit dollar exposure. As Europe’s monetary union itself faces an existential crisis, there is no other safe-haven currency able to absorb the flows. The Swiss franc, Canada’s loonie, the Aussie, and Korea’s won are too small.

“There is no depth of market in these other currencies, so gold is the obvious play,” said Neil Mellor from BNY Mellon. Western central banks (though not the US, Germany, or Italy) sold much of their gold at the depths of the bear market a decade ago. The Bank of England wins the booby prize for selling into the bottom at €254 an ounce on Gordon Brown’s orders in 1999. But Russia, China, India, the Gulf states, the Philippines, and Kazakhstan have been buying.

China is coy, revealing purchases with a long delay. It has admitted to doubling its gold reserves to 1,054 tonnes or $54bn. This is just a tiny sliver of its $3.2 trillion reserves. China’s Chamber of Commerce said this should be raised eightfold to 8,000 tonnes.

Xia Bin, an adviser to China’s central bank, said in June that the country’s reserve strategy needs an “urgent” overhaul. Instead of buying paper IOU’s from a prostrate West, China should invest in strategic assets and accumulate gold by “buying the dips”.

Step by step, the world is edging towards a revived Gold Standard as it becomes clearer that Japan and the West have reached debt saturation. World Bank chief Robert Zoellick said it was time to “consider employing gold as an international reference point.” The Swiss parliament is to hold hearings on a parallel “Gold Franc”. Utah has recognised gold as legal tender for tax payments.

A new Gold Standard would probably be based on a variant of the ‘Bancor’ proposed by Keynes in the late 1940s. This was a basket of 30 commodities intended to be less deflationary than pure gold, which had compounded in the Great Depression. The idea was revived by China’s central bank chief Zhou Xiaochuan two years ago as a way of curbing the “credit-based” excess.

Mr Bernanke himself was grilled by Congress this week on the role of gold. Why do people by gold? “As protection against of what we call tail risks: really, really bad outcomes,” he replied.

Note how TTT excludes himself in his comment, rightfully so I guess because he will never feel any pain economically.

-Timothy Geithner in an interview with NBC’s Meet the Press a few days ago:

“It’s going to feel very hard, harder than anything they’ve experienced in their lifetime now, for a long time to come.”

What Happened to the $2.6 Trillion Social Security Trust Fund?
WASHINGTON, DC - Forbes - Merrill Matthews

Here’s how President Barack Obama answered CBS’s Scott Pelley’s question about whether he could guarantee that Social Security checks would go out on August 3, the day after the government is supposed to reach its debt limit: “I cannot guarantee that those checks [he included veterans and the disabled, in addition to Social Security] go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”

And Treasury Secretary Timothy Geithner echoed the president on CBS’s Face the Nation Sunday implying that if a budget deal isn’t reached by August 2, seniors might not get their Social Security checks.

Well, either Obama and Geithner are lying to us now, or they and all defenders of the Social Security status quo have been lying to us for decades. It must be one or the other.

Here’s why: Social Security has a trust fund, and that trust fund is supposed to have $2.6 trillion in it, according to the Social Security trustees. If there are real assets in the trust fund, then Social Security can mail the checks, regardless of what Congress does about the debt limit.

President Obama’s budget director, Jack Lew, explained all this last February in USA Today:

“Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. … Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”

Notice that Lew said nothing about raising the debt ceiling, which was already looming, and it shouldn’t matter anyway because Social Security is “entirely self-financing” and off budget. What could be clearer?

Unconvinced, syndicated columnist Charles Krauthammer wrote a subsequent column questioning Lew’s assertions. “This [Lew’s] claim is a breathtaking fraud. The pretense is that a flush trust fund will pay retirees for the next 26 years. Lovely, except for one thing: The Social Security trust fund is a fiction. … In other words, the Social Security trust fund contains—nothing.”

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas.

“In an already lean budget year, Florida’s public schools are facing yet another challenge: Finding money to build badly needed new schools and fix crumbling old ones.

The state’s primary fund to help schools pay for construction, the Public Education Capital Outlay, dropped from $254.2 million last year to just $51.3 million in the 2011-12 school year.

And though legislators found enough money to bump that to $77 million, they decided not to give the state’s traditional K-12 public schools any of it.

So where is that money going? Charter schools, colleges and universities. Lawmakers earmarked about $55 million for just the charters…”

http://www.tampabay.com/news/education/k12/as-florida-school-construction-money-dries-up-charter-schools-are-the/1180581

Don’t know if this made the HBB earlier this week. From the Northern Virginia HBB:

“Northern Virginia’s June 2011 housing sales were down 18% YoY, and median prices were up 8%. The average days on the market increased by 24% to 51 days.”

Fifty-one days! In most areas the average DOM is probably five or more times that. In NoVA, buy now or be priced out forever.

Foreclosure filings on the rise again in SW Florida.

http://www.heraldtribune.com/article/20110714/ARTICLE/110719785/2416/NEWS?Title=Foreclosure-filings-on-the-rise-again-in-Southwest-Florida

Gawd I LUV public unions…

It is not as though it is real money - it is only taxpayer money.

—————————–

Dearborn Gives Four Problem Teachers $197K to Go Away
Michigan Capitol Confidential | 7/14/2011 | Tom Gantert

At the Dearborn Public Schools, the administration wanted to get rid of two teachers accused of sexual misconduct and two more that were accused of possession of illegal substances outside of school. The district ended up paying the four teachers a combined total of $197,353 to get them to quit their jobs.

Yet this outcome may have been the fiscally prudent one from the perspective of the local taxpayers. The district says its analysis of going through a costly and lengthy tenure process in each of those cases would have cost a total of nearly $400,000. They based this on the costs of two cases in which they did go through the tenure process.

“The perception is you are buying out a bad teacher. ‘Why are we paying these people?’” said Timothy Currier, the attorney who handles tenure cases for Dearborn Public Schools.

But Currier said it’s cheaper than going through the tenure process, which can cost the district more than $170,000 for two cases and take about 10 months.

…If you build it, they will come…! er, right..?

From todays Houston Business Journal
Bayport Cruise Terminal: Same fate as Astrodome?

Could the vacant $108.4 million Bayport Cruise Terminal become Houston’s next Astrodome?

That’s the question I posed to Harris County Judge Ed Emmett, as a follow up to my July 8 Houston Business Journal print edition story about cruise operators ignoring the Port of Houston Authority Port of Houston Authority

Emmett told me the empty facility reminds him more of San Antonio’s unsuccessful attempt to secure an NFL team by constructing the Alamodome.

The county judge said the terminal could become another empty edifice like the Astrodome in the long run, but if it does, it would be the Port’s problem, not the county’s.

He said many people confuse the Port Authority with Harris County because the county handles the Port’s tax collections. He said the only connection between the two is through Port Commission appointments. Harris County Commissioners Court appoints two people to the Port Commission and appoints the Port Chairman jointly with the city of Houston.

Emmett said the Port’s RFP ended up like he expected it would.

“Clearly, I wish it had gotten some responses,” said Emmett, who was not in county government when the terminal was proposed. “I didn’t really expect them to immediately get a response, but it was good for the Port to remind the cruise industry that it is there.”

The judge had higher hopes for the terminal in 2008, when he told the Houston Chronicle that he was not worried about landing a cruise line.

“I have confidence in the folks at the Port,” Emmett said at the time. “They will get a cruise line. I know everybody is a little frustrated at the delay.”

Currency guru,Chuck Butler, sez:

“Let me remind you that in August, there will be about $500 Billion in Treasuries come due… And with those maturities come interest payments that are due… So, let’s just say that the whole enchilada $500 Billion gets “rolled”, new issues get sold to pay off the maturing bonds… Where does the money come from to pay that ‘interest’? Ahhh grasshopper… Well, it either comes from the taxes that we pay, or it gets added to the debt… and that’s why the debt ceiling will get raised before those bonds come due!”

Citigroup posts 6th quarterly profit in 2Q
Citigroup records 6th quarterly profit as losses from failed loans decline
July 15, 2011

NEW YORK (AP) — Citigroup Inc. turned a profit for the sixth straight quarter as losses from failed loans declined.

The New York bank says losses from bad loans fell 35 percent during the quarter to $5.4 billion. That allowed the bank to release $2 billion from its loan loss reserves and count it as income.

Net income rose 24 percent to $3.3 billion, or $1.09 cents per share, on revenue of $20.6 billion. That compares to net income of $2.7 billion, or 90 cents per share, during the same quarter last year. The earnings per share was adjusted to account for a reverse split, where 10 Citi shares were exchanged for one this May.

I can hardly wait for QE-3! All us kooks that were buying Au&Ag 10 years ago are feeling just terrible about the stupid move we made.

Go B.B. Go mighty U.S. Dollar Print, baby print!

From Germany’s Der Speigel

“With no solution to the US debt crisis in sight, the rest of the world is starting to get nervous. German commentators urge congressional leaders to get their act together. A US default would have catastrophic consequences, they warn.”

- The only holdup to raising the debt ceiling is the jousting between Republicans and Democrats for position. They will strike a deal voters will find unappealing, so each side must try to come across as doing the least damage. Bottom line: American austerity lies ahead and the big trick is to postpone it until after election day, 2012.

President Obama meets the press this morning to discuss the impasse..

Manufacturing Gauge Slumps as Core Inflation Gains
15 Jul 2011 | By: Reuters

U.S. consumer prices fell slightly more than expected in June to post their biggest drop in a year on weak gasoline costs, but underlying inflation pressures remain elevated.

The Consumer Price Index fell 0.2 percent, the Labor Department said on Friday, the largest drop since June 2010, after rising 0.2 percent in May. Economists had expected prices to fall 0.1 percent.

But stripping out food and energy, core CPI rose 0.3 percent after a similar gain in May and above economists’ expectations for a 0.2 percent increase.

“We are getting a very, very sharp rebound in core inflation and much more than the Fed had bargained for. We will be at price stability and possibly through it before the end of this year,” said Eric Green, chief economist at TD Securities in New York.

Well, I’m off for more adventures around the globe.

Destination: Philippines.

Hold the fort down while I’m gone.

Nice to see oil heading back toward $100.00

Are Bank Examiners to Blame for Slow Job Growth?
The New York Times -SIMON JOHNSON- July 14, 2011

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

With unemployment back up to 9.2 percent, as reported last week, the hunt is on for an explanation of why job creation has been so slow since the financial crisis of 2008. Some House Republicans think they have found a specific culprit: bank examiners.

In the view of Representative Bill Posey of Florida and some colleagues on the House Financial Services Committee, bank examiners are clamping down on otherwise perfectly healthy banks - and forcing them, inappropriately, to classify some loans as “non-accrual” (meaning less likely to be paid back).

Mr. Posey has therefore introduced a bill that would direct examiners to regard all loans as “accrual,” as long as payments are still being made - and a hearing was held on July 8 to discuss the merits of the matter.

I testified at the hearing and was not supportive of the bill. On the subsequent panel of witnesses, representatives of the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, the relevant regulators, testified even more forcefully against the proposal.

George French, on behalf of the F.D.I.C., said in written testimony, “This proposed legislation would result in an understatement of problem loans on banks’ balance sheets and an overstatement of regulatory capital.”

The big issue is “regulatory forbearance” - whether regulators should look the other way when banks get into trouble, allowing them to be nicer to their borrowers and, in the optimists’ view, manage their way to recovery.The problem with such forbearance is that it has a long history of leading to much bigger problems. The savings and loan crisis of the late 1980s and early 1990s began as a relatively small problem at some Texas mortgage lenders.

Congress responded to the complaints of these institutions, which asserted that they had been poorly treated by various changes in rules, and the result was legislation that gave these savings and loans enough additional rope (and forbearance) to hang themselves.

In the end, a significant number of people went to jail and taxpayers had to pay nearly $150 billion to clean up the mess. (Recommended summer reading for all members of Congress and everyone else: “The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry,” by William K. Black.)

The core problem today is that while community banks were not the main driving force behind the financial boom and bust, in some states they made some very bad decisions. Among the members of Congress who spoke on Friday, I heard strong voices from Florida, as well as from New Mexico and Georgia. In all of these places, thinly capitalized community banks made very bad bets on real estate, often commercial real estate.

The regulators made it very clear in their testimony that the rules have not changed, and they continue to apply the same accounting principles as before. The principles are straightforward and reasonable: a loan cannot be classified as accrual if you do not expect it to be repaid in full.

Allowing banks to classify failing loans as accrual will overstate their financial results and make it look as though they have more capital — that is, greater shareholder equity — than they do. The problem is that some community banks do not have big enough loss-absorbing buffers — the role that bank equity plays.

If we had any kind of free market in banking, you would expect banks to have equity funding of at least 30 percent of total assets. But since the advent of deposit insurance in the 1930s, retail banks have been happy to have much less equity relative to debt, because the government is, in effect, providing a subsidy to debt.

Debt is the slavery of the free -Publilius Syrus, Sententiae, c 50 BC

July Consumer Sentiment Worst Since March 2009- Reuters

Consumer sentiment deteriorated in early July to the lowest level since March 2009 on increasing pessimism over falling income and rising unemployment, a survey released on Friday showed.

So long U.S.A. hello Mexico…

Fostoria plant closing after 24 years

FOSTORIA, Ohio (WTVG) — More than one hundred employees at InterMetro Industies in Fostoria are dealing with the cold reality that their jobs are heading out of the country. The plant has been a part of Fostoria for 24 years, but that’s about to change.

“I’m single with two kids so I cried.” said Kristina Loar who has been an employee at the plant for nearly seven years.

Dave Morlack, also an employee for seven years has experienced this before. “My other job got sent to Mexico. It’s getting harder and harder to find jobs in this area.” he said.

The company makes storage equipment for food service, health care and commercial product industries. During the next two years the one hundred and eight jobs at the Fostoria plant will be transferred to a new plant in Mexico.

“what else is going to be left here? Everything is you know made in the USA. It’s US, US but everything is leaving the US. ” said Loar.

Their sign says “we put space to work” but the Mayor of Fostoria isn’t too happy where that work is going. “the company doesn’t care about the American workers all they care about is the American dollar. They’ll send a plant down to Mexico and make an inferior product.” said Mayor John Davoli.

In a statement InterMetro Industries Corporation told 13abc, “This difficult decision is no reflection on the employees at this facility, who have served the company well. These changes are necessary to keep InterMetro competitive in a challenging global market for its products.”

But it’s hard for these employees to continue to dedicate themselves to their job knowing in a few months it’ll be gone.

“people are having a hard time coming to work and when they are here it’s why you know - meh.” said Loar.

“The Treasury security is viewed as the safest and most liquid security in the world, and the notion it would become suddenly unreliable and illiquid would throw shock waves through the entire global financial system,”

~ The Bernank

The Green Acres Bubble?

http://finance.yahoo.com/news/Down-on-the-farm-investors-apf-2437798760.html?x=0

Interesting story, shows where some of that loose money flows (no, not job creation - running up ag land). My fiance’s dad is a farmer, I’ll have to ask him what he sees at the auctions.

55% Oppose Tax Hike In Debt Ceiling Deal

As the Beltway politicians try to figure out how they will raise the debt ceiling and for how long, most voters oppose including tax hikes in the deal.

Just 34% think a tax hike should be included in any legislation to raise the debt ceiling. A new Rasmussen Reports national telephone survey finds that 55% disagree and say it should not.

There is a huge partisan divide on the question. Fifty-eight percent (58%) of Democrats want a tax hike in the deal while 82% of Republicans do not. Among those not affiliated with either major political party, 35% favor a tax hike and 51% are opposed.

Americans who earn more than $75,000 a year are evenly divided as to whether a tax hike should be included in the debt ceiling deal. Those who earn less are opposed to including tax hikes.

Voters remain very concerned about the debt ceiling issue. Sixty-nine percent (69%) believe that it would be bad for the economy if a failure to raise the debt ceiling led to government defaults. Only 6% believe it would be good for theeconomy. Fourteen percent (14%) believe it would have no impact and 11% are notsure. These figures are little changed from a few weeks ago.

At the same time, however, 52% believe it would beeven more dangerous to raise the debt ceiling without making significant cuts in government spending. Thirty-seven percent (37%) take the opposite view and believe a government default would be more dangerous.

Obama Singles Out Drug Companies for Savings
July 15 (Bloomberg)

Drug companies may be targets for Medicare spending cuts as U.S. lawmakers push to reach an agreement on a deficit plan ahead of an Aug. 2 deadline, President Barack Obama said.

“The drug companies, for example, are still doing very well through the Medicare program,” Obama said today at a news conference. “Although we have made drugs more available at a cheaper price to seniors who are in Medicare through the Affordable Care Act, there’s more work to potentially be done there,” he said in referring to the 2010 health-care overhaul.

The Pharmaceutical Research and Manufacturers of America, the drug industry’s Washington lobbying group, didn’t immediately respond.

Cuts to drugmakers weren’t among as much as $353 billion in Medicare and Medicaid cuts on a list produced by House Majority Leader Eric Cantor, a Virginia Republican. Medicare is the U.S. health insurance program for the elderly and disabled, and Medicaid is the federal-state health plan covering the poor.

Drug companies were targeted in Obama’s proposal this year that called for $200 billion in U.S. budget savings in a decade from the industry. Spending on drugs in Medicare totaled $55 billion in 2009, about 11 percent of the program’s total spending that year, according to the U.S Centers for Medicare and Medicaid Services.

Overall, if their numbers are right, I think this is a positive article:

http://www.cnbc.com/id/43609261

But I’m still trying to wrap my head around the following statement from the article:

“Twice as many Americans are saving more money today than they did before the recession, according to a survey conducted by America’s Research Group for CNBC.com.”

Huh?

You know damn well unions did not expect him to get Ram tough on their people.

U.S. News
Chicago mayor announces 625 layoffs July 15, 2011

CHICAGO, July 15 (UPI) — Mayor Rahm Emanuel said Friday 625 city employees will be laid off in an effort to close Chicago’s $30 million budget gap.

“It has been two weeks and despite ongoing talks, none of the changes have been addressed or agreed upon,” Emanuel said of the time he has given unions to close the budget hole, the Chicago Tribune reported.

Among those affected will be custodians, Water Department call-center operators and seasonal Transportation Department workers, the newspaper said.

Emanuel said he will do what it takes to close the entire budget gap created when a deal with City Hall labor unions for unpaid days off expired. He also asked unions for more concessions and introduced work rule changes, including the suggestion paid holidays be reduced from 12 to nine.

This one is a TB (True-Buffoon) when you got nothing, play the thread bare race card…

Jackson Lee: Congress complicating debt ceiling because Obama is black
By Josiah Ryan - 07/15/11 The Hill

Rep. Sheila Jackson Lee (D-Texas) on Friday strongly suggested that members of Congress are making it difficult for President Obama to raise the debt ceiling because of his race.

“I do not understand what I think is the maligning and maliciousness [toward] this president,” said Jackson Lee, a member of the Congressional Black Caucus. “Why is he different? And in my community, that is the question that we raise. In the minority community that is question that is being raised. Why is this president being treated so disrespectfully? Why has the debt limit been raised 60 times? Why did the leader of the Senate continually talk about his job is to bring the president down to make sure he is unelected?”

Earlier in her speech, Jackson Lee said Obama has been targeted unlike any other president.

“I am particularly sensitive to the fact that only this president — only this one, only this one — has received the kind of attacks and disagreement and inability to work, only this one,” said Jackson Lee from the House floor.

“Read between the lines,” she continued. “What is different about this president that should put him in a position that he should not receive the same kind of respectful treatment of when it is necessary to raise the debt limit in order to pay our bills, something required by both statute and the 14th amendment?”

Jackson Lee concluded by saying that she hoped someone would step up and say that what appears obvious to her is not in fact true.

“I hope someone will say that what it appears to be is not in fact accurate,” said Lee. “But historically it seems to be nothing more.”

Newt, she’s headed for the rhubarb!

OMG! Screw the country and it’s stupid debt ceiling this is what matters…

Jennifer Lopez and Marc Anthony Split |PEOPLE

After seven years of marriage, it’s over for Jennifer Lopez and Marc Anthony.

“We have decided to end our marriage,” they tell PEOPLE exclusively in a joint statement. “This was a very difficult decision. We have come to an amicable conclusion on all matters.”

“It is a painful time for all involved,” the statement continues, “and we appreciate the respect of our privacy at this time.”

Forgive me HBB’ers, for I have sinned.

I went to IKEA today and bought stuff.

On Thursday, two Republican candidates for President signed the “Marriage Vow” pledge issued by Iowa’s Bob Vander Plaats and the Family Leader. In response, dark horse GOP (non-Establishment) Presidential candidate Gary Johnson stated:

“Government should not be involved in the bedrooms of consenting adults. As a Republican, I am an advocate of liberty and the elimination of unnecessary government intervention into our lives.

“This pledge is offensive to those principles, and as far as I am concerned, it is un-Republican and un-American.”

To which Sammy says, Amen!

http://www.rutherford.org/articles_db/commentary.asp?record_id=718

VIPR Searches and the American Citizen: ‘Dominate. Intimidate. Control.’

“They’re trying to scare the pants off the American people that we need these things… Fear is a commodity and they’re selling it. The more they can sell it, the more we buy into it. When American people are afraid, they will accept anything.”–Kate Hanni, passengers’ rights advocate

“Uncontrolled search and seizure is one of the first and most effective weapons in the arsenal of every arbitrary government…Among deprivations of rights, none is so effective in cowing a population, crushing the spirit of the individual and putting terror in every heart.”– Justice Robert Jackson, chief U.S. prosecutor at the Nuremberg Trials