The Housing Bubble

AP Exclusive: Mortgage ‘robo-signing’ goes on
AP Exclusive: ‘Robo-signing,’ at center of foreclosure probe last year, is still rampant

Mortgage industry employees are still signing documents they haven’t read and using fake signatures more than eight months after big banks and mortgage companies promised to stop the illegal practices that led to a nationwide halt of home foreclosures.

County officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as “robo-signing,” remain widespread in the industry.

The documents have come from several companies that process mortgage paperwork, and have been filed on behalf of several major banks. One name, “Linda Green,” was signed almost two dozen different ways.

Lenders say they are working with regulators to fix the problem but cannot explain why it has persisted.

Last fall, the nation’s largest banks and mortgage lenders, including JPMorgan Chase, Wells Fargo, Bank of America and an arm of Goldman Sachs, suspended foreclosures while they investigated how corners were cut to keep pace with the crush of foreclosure paperwork.

Critics say the new findings point to a systemic problem with the paperwork involved in home mortgages and titles. And they say it shows that banks and mortgage processors haven’t acted aggressively enough to put an end to widespread document fraud in the mortgage industry.

“Robo-signing is not even close to over,” says Curtis Hertel, the recorder of deeds in Ingham County, Mich., which includes Lansing. “It’s still an epidemic.”

Realtors Are Liars

More Shoppers to Delay Their Back-To-School Spending
(Bloomberg)

Retailers will be biting their nails this back-to-school shopping season as consumers are expected to put off purchases until nearly the last minute, according to a new report.

A study by NPD shows consumers will be shopping later, looking for value and searching out lower-priced options.

According to a study of consumer purchasing plans conducted by market researcher NPD Group, the majority of shoppers are planning to spend about the same as they did last year on their back-to-school shopping.

About 40 percent of consumers said they plan to spend the same amount, 38 percent expect to spend less, and 22 percent said they would spend more, NPD said. That’s the same breakdown that occured in last year’s NPD survey.

The study also asked consumers when they would begin their shopping. About 60 percent said they would start by Sept. 1, about 35 percent said they would start by Aug. 1, and the remaining 5 percent said they wouldn’t start until after Sept. 1.

This is an acceleration of the number of consumers who are putting off their shopping until closer to the start of school.

“The consumer is holding on, but it is an indication that consumers remain cautious about their spending,” said Marshal Cohen, chief industry analyst at NPD.

There can be a number of reasons consumers will wait to buy. Sometimes, it is as simple as a child wanting to wait to until they go back to school and see what their friends are wearing.

But other times, it speaks to a need to put off a purchase until money is saved or until it is needed. Some consumers also expect they will get a better deal the longer they wait.

First it was 5,000 then 10,000 now it’s 11,500…

Cisco Plans to Cut Workforce by 11,500 to Slash Costs
By: Reuters with CNBC.com

Cisco Systems plans to cut its workforce by 11,500 employees as part of its plan to cut annual expenses by $1 billion and revive its business.

Cisco said Monday that it would cut 6,500 employees. Of those, 2,100 employees will take early retirement.

The company also plans to sell its manufacturing facility in Juarez, Mexico, to Foxconn and transfer 5,000 employees to the contract manufacturing company as part of the deal.

Analysts had predicted thousands of job cuts after Cisco said in May that it planned to reorganize the company which has been losing ground in the network equipment business.

The company announced more cuts than some analysts expected.

Here in central S.C. all of our old soda shops are gone. There was nothing like getting to sit on the soda fountain counter stool while the soda-jerk fixed a coke float when I was a kid. Oh well, things change.

Elliston Place Soda Shop Closing After 72 Years

NASHVILLE, Tenn. - A Midtown Nashville mainstay that has been around for more than 70 years will close its doors this weekend. The Elliston Place Soda Shop is slated to serve its last meal on Saturday.

The restaurant has been in business since 1939.

“We’re the oldest, continuous operating restaurant in Nashville, and if it goes away, it’s just going to be a shame,” said manager Janet Melton.

The restaurant has become famous for its nostalgic feel and its milkshakes. The owner blamed a dispute over rent with the building’s landlord for the closing.

Jim Gibbs had no idea the Elliston Place was shutting down when he brought his granddaughters in Monday afternoon.

“There’s not too many soda shops around these days. There’s a lot of ice cream shops, but there’s not too many soda shops in the way I grew up with them. So I thought I’d bring them downtown here and introduce them to Elliston Place,” Gibbs explained.

Melton has worked at the soda shop for the last 17 years.

“It’s very upsetting. I’ve fought tears all day. It’s very upsetting. What are we all going to do? What’s going to happen to the soda shop?” Melton asked out loud.

There is a slight chance the soda shop could move to another location in the area, but Melton said that is a very slight chance.

The best chance to save Elliston Place Soda Shop is if the owner and the landlord can come to an agreement on rent.

“I think it’ll be sad for everybody in Nashville that enjoy old pieces of Nashville history that this isn’t going to be around. It’ll be sad,” Gibbs said.

Five people will lose their jobs when the soda shop closes its doors on Saturday.

Bayou La Batre’s mayor says federal government may close some areas to shrimping. ~ Steve Alexander Reporter

BAYOU LA BATRE, Alabama - Shrimpers in our area are upset about a proposal by the federal government to close shrimping areas and put turtle excluder devices on skimmer boats.

Among those not happy: Bayou la Batre’s mayor.

Shrimpers are hoping for a good season after the oil spill.

But now, Bayou La Batre Mayor Stan Wright said new proposals from the National Oceanic and Atmospheric Administration, or NOAA, could cause more problems.

Wright said, “They (NOAA officials) were calling a public hearing today to consider permanently closing some bottoms to shrimping. ”

And, also, putting turtle excluder devices on in-shore skimmers.

Wright said, “All you’re doing is cutting a big hole in your net to let these so-called species out, and you really don’t catch them anyway. Its like putting a hole in your milk bucket when youre trying to milk the cow.”

He said enough is enough.

Wright said, “I dont know what else can be blamed on the commercial fishermen. I guess they’re the ones who killed Jimmy Hoffa.”

Others said don’t blame commercial fishermen for dead sea turtles, because the oil spill prevented them from shrimping last year.

Avery Bates with the Organized Seafood Association of Alabama said, “Something killed the turtles, but I dont think it was boats tied to the dock.”

Shrimper Bill Sessions said, “I think that’s crazy. I don’t think they’re catching enough turtles out here for that.”

Wright is asking commercial fishermen to sign a letter to Senator Richard Shelby asking NOAA to drop the proposals.

He said, “He’s on the committee that funds NOAA. I’m going to ask that he cut their funding.”

Wright is also going one step further.

He said, “I’m asking Shelby to fire everyone of them, or send them to Wal-Mart to work. They want to run immigrants off? Put these people to work in the fields picking watermelons and strawberries.”

POLITICO
David Catanese

Warren will think about Senate race at home

Consumer advocate and liberal heroine Elizabeth Warren did her best to sidestep questions about a potential Massachusetts Senate candidacy Monday.

But a parsing of her words made clear she’s contemplating it.

After standing beside the president during his appointment of Richard Cordray to lead the Consumer Financial Protection Bureau, Warren told MSNBC’s Andrea Mitchell she would think about waging a challenge to freshman Sen. Scott Brown from her home in Massachusetts.

“Massachusetts does beckon, in that it’s my home,” Warren said when asked about the prospect of a campaign. “I need to do that thinking from home . . . not from Washington.”

With Democratic leaders in Washington unimpressed with the current slate of Democratic candidates, a growing amount of attention has turned to Warren as the sliver-bullet solution.

“Paul Wellstone used to say he could use ten more progressives in the Senate — ‘or one Elizabeth Warren.’ Like Paul Wellstone, Elizabeth Warren is a bold progressive icon. And it’s fitting that she’d be the one to win back Ted Kennedy’s seat from Republican Scott Brown in 2012,” wrote PCCC’s Stephanie Taylor in an e-mail to supporters.

Not many houses are coming to the market. In the past 3-4 months I’ve seen only a few townhouses in 5 zip codes that came for selling. It has never been this slow. At least banks should list the houses at whatever price they wish. Our area is the eastern panhandle of WV.

DC metro has houses but the townhouses get snatched by investors even today. They don’t stay more than a 4-5 days in the market and are sold. I tried in Vienna, Fairfax, Ashburn, Reston and Herndon. Not to mention that they are still priced very high as compared to rent you can get. If rent is $1800, price is 450K. Doesn’t make financial sense.

BofA Needs $50 Billion Cushion as Mortgage Expenses Swell
(Source: Bloomberg)

Bank of America Corp. (BAC) may have to build its capital cushion by $50 billion and renege again on Chief Executive Officer Brian T. Moynihan’s pledge to raise the firm’s dividend as mortgage losses drain funds.

Expenses tied to soured home loans may total $20.4 billion in the second quarter, pulling the bank further from capital ratios demanded under new international standards, the Charlotte, North Carolina-based company said June 29. The gap may equal 2.75 percent of risk-weighted assets starting in 2013 — at about $18 billion for each percentage point — crimping Moynihan’s ability to raise dividends and repurchase shares.

“They are likely to be in capital-building mode for longer than previously anticipated,” Jason Goldberg, a Barclays Capital analyst, said in an interview. For now, he said, “I’m hard-pressed to see meaningful capital redeployment.”

Moynihan, 51, has booked about $30 billion in settlements and writedowns to clean up mortgage liabilities at the biggest U.S. bank since succeeding Kenneth D. Lewis last year. As the costs mounted, Bank of America’s stock declined 27 percent this year, the worst showing in the 24-company KBW Bank Index. The company reports second-quarter results tomorrow and has told investors to brace for a loss of as much as $9.1 billion.

“The charges have had the effect of reducing mortgage uncertainty but have pushed dividend increases further into the future,” Richard Staite, an analyst with Atlantic Equities LLC, said in a June 30 note. Staite and Goldberg both estimate that Bank of America needs to raise $50 billion to comply with the new capital requirements, designed to build a buffer against losses and avert a repeat of the 2008 financial crisis.

If the payment don`t fit you must acquit.

“The evidence will show that we were defrauded,” said Jill Segal.

This is a Remix but I just love a Flock of Segals.

Squatter Nation: 5 years with no mortgage payment
By Les Christie June 12, 2011: 9:23 PM ET

These cases can go on and on. Nationwide, it takes an average of 565 days to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the “robo-signing” issue is particularly combative, it’s 807.

If they want to fight evictions hard, borrowers can remain in their homes even longer while their cases are being worked through.

The Segals have been doing that — in court. They bought their home in 2003 with an adjustable rate mortgage. After a few years, their monthly payments tripled to $3,000, just as their home-inspection business was cratering.

The Segals want the bank to modify the mortgage so payments are affordable, and they think the court will agree that their lender put them into a toxic loan.

“The evidence will show that we were defrauded,” said Jill Segal.

http://money.cnn.com/2011/06/09/real_estate/foreclosure_squatter/index.htm - 62k -

Baby sloth yawning: Watch now or never see it!

http://www.youtube.com/watch?v=sL5mAbwUYpM

It’s soooooooooooooooooo cute.

United Spiral Pipe warns of 83 layoffs in Pittsburg,
Steel mill could avert layoffs or reduced hours if orders pick up
Contra Costa Times

For the second time this year, employees at United Spiral Pipe in Pittsburg face job cuts or reduced hours due to sluggish orders for the East Bay steel mill.

The company has filed an official notice with state labor officials to cut up to 83 employees out of approximately 100.

That doesn’t mean all these jobs will be lost, though.

“A decision has not been made yet about layoffs,” Michael Connally, manager of human resources with United Spiral Pipe. “There is a potential of layoffs based on business conditions.”

United Spiral makes big steel pipes for the energy and water industries.

In December 2010, the company disclosed it was planning to lay off about 110 employees. But while those employees were able to keep their jobs, they didn’t escape unscathed. The company cut their hours in January from 40 a week to 32, effectively a 20 percent pay cut.

“We didn’t lay off anyone,” Connally said. “But we reduced the hours and kept people.”

Under normal circumstances, wages range from $17 to $26 an hour, company officials said in late 2009 when the plant opened.

The sour economy is the big problem that haunts the steel mill.

“Business has yet to improve,” Connally said. “The entire pipe industry is facing pretty much the same thing.”

At the time United Spiral opened its doors it employed roughly 150 people. The company now has about 100.

There has never been a better time to buy Gold(enman)!

Goldman hits 52-week low

Financial-sector earnings grab Street attention, with Goldman Sachs shares hitting lowest level in a year after missing mark. Bank of America swings to a loss in the quarter, but investors look on bright side.

Stick a fork in the gold bubble. Bubbling overconfidence is a key factor in popping every bubble. We saw it in the parabolic phase of the housing bubble circa 2005-2006, and we are there now in the shiny yellow PM.

The nice thing about the popping of this bubble: The pain will be very broadly distributed, as hordes of Asians are long gold.

July 19, 2011, 12:01 a.m. EDT
Gold’s run is almost over
Commentary: Excitement in the gold market has reached fever pitch
By Mark Hulbert, MarketWatch

CHAPEL HILL, N.C. (MarketWatch) — Brace yourself, gold traders.

Bullion’s extraordinary run is fast running out of steam. Don’t be surprised if gold pulls back in coming sessions.
…

Keller ISD Approves Pay-To-Ride School Bus Program

KELLER,Tx. (CBSDFW.COM) – The Keller ISD school board approved a plan Monday night to make parents pay for students who wish to ride the bus.

Under the plan, parents or guardians will pay $185 a semester for one child to ride the bus and $135 for a second child. Students who get free and reduced lunches will have to pay $100.

“There will be buses,” superintendent James Veitenheimer told parents after initial worries that there wouldn’t be bus service during the school year. “They just won’t be free.”

Students will now carry identification cards that will track if they have paid the fees. There is no monthly payment plan; the fees must be paid up front.

“Had we known there was not going to be an option to get our kids to school we’d have bought a house right next to the school,” said Jennifer Rosenthal, one of the 100 parents who came to the board meeting Monday.

Buses have always been a necessary part of getting to school for the Rosenthal family. Her children travel two miles to Keller Middle School and just over three miles to Bear Creek Intermediate.

But that’s no longer a guaranteed service: Each year Keller spends between $260 and $360 per student on school bus transportation. District officials say when Keller voters rejected a 13-cent increase in the property tax rate they were left to find other ways of generating money.

During the 2010-2011 school year the district provided about 120 school bus routes. During the next school year, there will be just 72 stops. Routes will be released Thursday.

But, there will still be 40 routes for special needs children, which a state mandate.

I’d agree with this guy, except for one thing:

When you get down to it, only the top 1%ers matter anyway, right?

July 19, 2011, 12:01 a.m. EDT
1 reason Obama can lose in 2012
Commentary: President made single, critical mistake with economy
…
Blame as much of the problem on his predecessor as you like, the fact is Obama hasn’t come up with a solution. In fact, he’s made things worse by filling his top economic posts with banking-friendly interests, status-quo advisers and milquetoast regulators.

And if there’s one reason Obama loses in 2012, it’ll be because he failed to surround himself with people willing to take drastic action to get the economy moving again.
…

Bubble naysaying is making a comeback:

James Altucher’s
This is Insane!
July 18, 2011, 3:43 PM ET

Today I opened up a business section of a random newspaper and it said: “We’re heading into a bubble.” This is so far from the truth it doesn’t even make me laugh. It makes me angry. In other words, all talk of bubbles are insane (other than the suggestion I have at the very end of this article).
…

I don’t actually understand why a debt default would automatically lead to higher interest rates; couldn’t the Fed simply pass QE3 and start buying more bonds? If anyone thinks they understand the ‘debt default will lead to higher bond yields’ argument, please explain.

Perhaps the discussion is moot, as I believe the Republicans have realized they stand to lose big time if the debt ceiling is not raised.

July 19, 2011, 12:01 a.m. EDT
Perils of a default
Commentary: Without a debt deal, we will all suffer
By Irwin Kellner, MarketWatch
…
In most years since the founding of the Republic, spending has exceeded revenues. The result was that the government had to borrow to make up the difference.

Not surprisingly, Washington’s yearly deficits far exceeded whatever surpluses it managed to run on an annual basis, resulting in a growing accumulation of debt.

Even though the Congress was largely responsible for this debt, it decided to limit how much the government could borrow by enacting a debt ceiling back in 1917.

Inevitably the ceiling had to be raised. This provided an opportunity for the party that did not control the White House to criticize the one that did. It was as if the president alone had crafted the budget and was trying to convince a tight-fisted Congress to spend.

Now you would think that, after having raised the debt ceiling nearly 100 times since 1917, the politicians, confronted with the need to raise the ceiling again, would be content to pontificate, score their points against the opposition, and then vote to raise the ceiling.

After all, most of today’s debt outstanding is the result of the actions of past Congresses and administrations — not just simply reflecting the past couple of years. In other words, the government has already spent the money, and now it has to come up with the funds to pay its bills.

But the debate appears to be particularly fierce this time.

Unlike past episodes, a political standoff has developed over such basic issues as the size of government. The two parties have dug in their heels, suggesting the very real possibility that the debt ceiling will not be raised in time to allow the government to borrow enough to meet its obligations.

And while it may have enough funds coming in to pay interest on its debt and even to redeem bonds that come due, at least for a while, the inability of Washington to borrow would shock the financial markets, leading to all sorts of repercussions.

First of all, the nation’s credit rating would be downgraded for the first time in our history. This would cause foreign investors to demand higher interest to buy our bonds, sending rates up across the board and making it more difficult for consumers and business to get loans.
…

Coca-Cola Earnings Increase 18% as Sales Gain
(Bloomberg)

Coca-Cola Co. the world’s largest soft-drink maker, said second-quarter profit rose 18 percent as sales in Latin America and Asia gained.

Net income advanced to $2.8 billion, or $1.20 a share, from $2.37 billion, or $1.02, a year earlier, the Atlanta-based company said today in a statement. Excluding some items, profit was $1.17 a share, topping the $1.16 average of 14 analysts’ estimates compiled by Bloomberg.

Chief Executive Officer Muhtar Kent has built new plants in emerging markets and pushed more profitable package sizes overseas to help offset limited U.S. pricing gains this year. Second-quarter net operating revenue climbed 13 percent in Latin America and 15 percent in Coke’s Eurasia and Africa division.

“The surprise is not that international markets grew but the rate at which they grew,” Philip Gorham, a senior equity analyst for Morningstar Inc. in Chicago, said today in an interview. “Coke is investing in distribution in emerging markets and gaining points of sale.”

Inside Job part 1/8
http://www.youtube.com/watch?v=iFfTcAcGjcU

Video shows enraged Chihuahua attacking robbers

AP – 3 hrs ago

ALTADENA, Calif. (AP) — Los Angeles County sheriff’s deputies have released a video of a barking Chihuahua angrily chasing off robbers at an Altadena smoke shop.

The video, released Monday, shows two hooded men, one armed with a rifle, running into the Ace Smoke Shop on July 7 and demanding money.

As the store owner begins putting money in a backpack carried by one of the men, the owner’s Chihuahua begins barking incessantly and jumping at the men, chasing them out of the store and down the street.

At one point, one of the men even points his rifle at the Chihuahua, but the dog is undaunted.

Neither the store owner, nor the dog was injured.

http://news.yahoo.com/video-shows-enraged-chihuahua-attacking-robbers-054806171.html - -

Bill to curb California college execs’ pay raises
Nanette Asimov, Chronicle Staff Writer -SF Gate - July 19, 2011

Days after California’s public universities handed lucrative new pay and bonuses to three executives and a chancellor while raising student tuition, a state senator has introduced a bill to make such pay increases illegal in tough economic times.

The bill, filed Monday by state Sen. Leland Yee, D-San Francisco, would prohibit executive pay increases at the University of California and California State University in years when the state does not raise its allocation to the schools.

This year, California slashed $650 million from each university system. In response, the UC regents and CSU trustees raised tuition last week, both for the second time in less than a year. CSU tuition is 23 percent higher than it was last fall. UC tuition is 18 percent higher.

At the same time, CSU trustees approved a $400,000 salary for Elliot Hirshman, incoming president of the San Diego campus, that is $100,000 higher than his predecessor. The campus foundation will pay for $50,000 of it.

On Friday, UC regents gave a 24 percent raise to Associate Vice President Santiago Muñoz, from $201,400 to $250,000. Taxpayers pay 40 percent. They approved a 10 percent increase for Vice President Patrick Lenz, from $272,500 to $300,000, all from taxpayer funds. And they gave Mark Laret, who runs the UCSF Medical Center, a $195,300 raise, to $935,000, with a retention bonus of $1 million over four years. His pay is from medical center revenue.

The approvals were appalling, Yee said in a statement. “UC and CSU are public institutions, not Wall Street banks.”

Former Gov. Arnold Schwarzenegger vetoed a similar bill from Yee in 2009.

Gov. Jerry Brown’s position on the new bill isn’t known, but in a letter last week he urged CSU trustees to reject the new salary for the San Diego president.

Assemblyman Luis Alejo, D-Watsonville, wrote UC President Mark Yudof that the regents’ decision “reveals a shocking misalignment of priorities.”

Some HBB posters can’t seem to post stories unless they’ve been linked off of Drudge, most of which are just non-news sensationalistic right wing garbage that seeks to inflame the allegedly righteous indignation of its readers.

On that note, here’s one you missed, from political hack site the Daily Caller:

Stress-related condition ‘incapacitates’ Bachman; heavy pill use alleged

“She carries and takes all sorts of pills. Prevention pills. Pills during the migraine. Pills after the migraine, to keep them under control. She has to take these pills wherever she goes.”

The stress of “curing” all those homosexuals would probably give me a headache too.

Clipped from a NYT article:

An extraordinary amount of personal income is coming directly from the government.

Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government.

By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year.

In terms of economic impact, that is slightly less than the spending cuts Congress enacted to keep the government financed through September, averting a shutdown.

Unless hiring picks up sharply to compensate, economists fear that the lost income will further crimp consumer spending and act as a drag on a recovery that is still quite fragile. Among the other supports that are slipping away are federal aid to the states, the Federal Reserve’s program to pump money into the economy and the payroll tax cut, scheduled to expire at the end of the year.

In Arizona, where there are 10 job seekers for every opening, 45,000 people could lose benefits by the end of the year, according to estimates from the state Department of Economic Security. Yet employers in the state have added just 4,000 jobs over the last 12 months.

~MSNBC

SunPower is thinking big — even more so after French oil giant Total S.A. acquired 60 percent of the solar energy firm this spring. The company followed up its recent launch of the most efficient mass-produced solar cell in the world with an announcement that it will soon start construction of the biggest solar roof in North America. SunPower has entered into a contract for a 1.1 million square-foot solar installation atop the Gloucester Marine Terminal in Gloucester, N.J. The company’s primary competitors include First Solar, Suntech Power and China-based Yingli Green Energy Holding Company.

Showcasing SunPower’s capabilities …
The Gloucester Marine Terminal near the Walt Whitman Bridge on the Delaware River is owned by the Holt family. The installation will use 27,528 photovoltaic rooftop solar panels from SunPower, and will have a power generation capacity of 9 megawatts. The electricity generated — sufficient to power 1,500 homes — will account for as much as 80 percent of the power needs of the terminal, a shipping facility that boasts the largest refrigerated capacity of any terminal in the United States.

The $42 million privately funded project is already under way, and will be completed this fall.

State Street takes 850 IT staff off the payroll
State Street is to sack 530 IT staff and transfer 320 other tech personnel to IBM and Wipro under an enterprise-wide technology
IBM Financial Services

The lay-offs are part of a major cost-cutting programme first announced by the US bank in December last year. The restructuring, which will incur up to $450 million in charges, comes as the company struggles to realise returns in a low interest rate environment.

At the time, the bank said it was prepared to make “sustained investments” in its technology platform, with a view to moving to lower-cost operating models through the development of private processing clouds. The first stage of this ambition was realised in June, when State Street rolled out a private cloud environment to provide clients with access to data and analysis in real time.

In step with these initiatives, the company is expanding its relationships with IBM and Wipro to “support components of its technology infrastructure and application maintenance and support systems”.

State Street says 320 non-client facing IT positions will be transferred to IBM and Wipro, and a further 530 positions will be eliminated over the course of the next 12-18 months. The cuts will come from the bank’s North American operations, removing approximately 20% of its 4000-strong IT workforce off the payroll.

From LulzSec’s twitter feed:

“Arrest us. We dare you. We are the unstoppable hacking generation and you are a wasted old sack of sh*t, Murdoch. ROW ROW FIGHT THE POWER!”

Q:
Is there a way to read the blog that I can see only new postings and not the old ones. I’ve to scroll everytime on this page and look for new ones. I’m sure there is some application people are using to see the comments in a different format. Thanks.

No insider information, I will stay cash….. From ZeroHedge.

Earlier today we saw what happens to investment banks when the Fed no longer clearly telegraphs its intentions vis-a-vis which asset has to be frontran (see Goldman post earlier). It is not just banks. In the absence of the Fed semaphore, it turns out even such “legendary” hedge funds as Soros’ $25 billion Quantum are about as clueless as everyone else. Bloomberg reports that “the fund is about 75 percent in cash as it waits for better opportunities, said the people, who asked not to be identified because the firm is private.” The reason: ““I find the current situation much more baffling and much less predictable than I did at the time of the height of the financial crisis,” Soros, 80, said in April at a conference at Bretton Woods organized by his Institute for New Economic Thinking.

Chrysler UAW workers caught drinking, smoking pot during lunch – for the third time

Submitted by Patrick Rall on Thu, 07/14/2011 - 18:21

This time the Jefferson North plant isn’t involved but once again, Chrysler workers have been caught by Fox 2 Detroit drinking alcohol and smoking marijuana – this time while on lunch break from the Trenton Engine Facility. Not only are they so brazen as to drink and use illegal drugs out in public in broad daylight – but they are parking in a lot directly behind the local UAW hall while doing this. Chrysler spoke on the segment about this problem with Fox 2 Detroit, assuring the public that they were working to identify the employees caught on tape and once they did, the employees will be “suspended indefinitely”. We can assume that if Chrysler can positively identify these workers, these folks will have plenty more time to spend their afternoons smokin’ and drinkin’, as they will most likely (and deservingly) be excused from their duties. Considering the amount of unemployment in this area and how many auto workers are out of work, you would think that those who DO have a job wouldn’t be so stupid as to get drunk and high during and before work but the videos show us otherwise.

http://www.torquenews.com/106/chrysler-uaw-workers-caught-drinking-smoking-pot-during-lunch-%E2%80%93-third-time - 47k -

Brazil (Bubble?) Bulletin

Figures just in. Rio’s apartment prices have almost doubled in 3 years. Here are the median monthly rent vs buy costs for 3 bedroom apartments in 3 Rio neighborhoods. (Priced in US dollars $/Source: O Globo Newspaper)

Ipanema: (Rich/Beach close-in neighborhood)
Cost to buy: $1.3 million
Cost to rent: $7K

Copacabana: (middle/upper middle class/Beach close-in neighborhood)
Cost to buy: $592K
Cost to rent: $2.6K

Meier: (Middle class, distant suburb with no beach & surrounded by slums )
Cost to buy: $154K
Cost to rent: $700

I think interest rates are about 9% here for 20 year loans. 20-30% down and mostly cash deals are typical. Based on rent/buy costs is this a bubble?

Federal workers more likely to die than lose jobs
By Dennis Cauchon, USA TODAY

Federal employees’ job security is so great that workers in many agencies are more likely to die of natural causes than get laid off or fired, a USA TODAY analysis finds.

Death — rather than poor performance, misconduct or layoffs — is the primary threat to job security at the Environmental Protection Agency, the Small Business Administration, the Department of Housing and Urban Development, the Office of Management and Budget and a dozen other federal operations.

The federal government fired 0.55% of its workers in the budget year that ended Sept. 30 — 11,668 employees in its 2.1 million workforce. Research shows that the private sector fires about 3% of workers annually for poor performance, says John Palguta, former research chief at the federal Merit Systems Protection Board, which handles federal firing disputes.

The 1,800-employee Federal Communications Commission and the 1,200-employee Federal Trade Commission didn’t lay off or fire a single employee last year. The SBA had no layoffs, six firings and 17 deaths in its 4,000-employee workforce.

When job security is at a premium, the federal government remains the place to work for those who want to avoid losing a job. The job security rate for all federal workers was 99.43% last year and nearly 100% for those on the job more than a few years.

HUD spokesman Jerry Brown says his department’s low dismissal rate — providing a 99.85% job security rate for employees — shows a skilled and committed workforce. “We’ve never focused on firing people, and we don’t intend to start now. We’re more focused on hiring the right people,” he says.

San Francisco State University management professor John Sullivan, an expert on employee turnover, says the low departure rates show a failure to release poor performers and those with obsolete skills. “Rather than indicating something positive, rates below 1% in the firing and layoff components would indicate a serious management problem,” he says.

The government laid off 385 people in reorganizations last year — a 0.02% rate, or one in every 6,000 employees. No comparable private sector layoff rate is available.

If you had a Chia Pet you were a farmer.

Meeting set over USDA loan bias

By Susan Salisbury Palm Beach Post Staff Writer
Posted: 10:32 a.m. Tuesday, July 19, 2011

WEST PALM BEACH — Hispanic, female, black and native American farmers and ranchers may be eligible for claims under several alleged discrimination agreements reached with the U.S. Department of Agriculture.

The topic will be addressed at 6 p.m. today at Exhibit Hall A, Clayton Hutcheson Center, 559 N. Military Trail, near West Palm Beach.

Deputy Assistant Secretary for Civil Rights, Frederick Pfaeffle is scheduled to speak. Farmers in groups who were denied equal access to USDA loans during certain time periods may be entitled to awards of up to $50,000.

UnitedHealth 2Q Profit Soars With Enrollment
July 19, 2011 | FOXBusiness

UnitedHealth (UNH) reported on Tuesday stronger-than-expected second-quarter profit as customers continued to enroll in its many offerings, leading the company to lift its fiscal view.

The largest U.S. health insurer booked net earnings of $1.3 billion, or $1.16 a share, compared with $1.12 billion, or 99 cents a share, in the same quarter last year, and ahead of average analyst estimates polled by Thomson Reuters of 94 cents.

Revenue for the Minnetonka, Minn.-based company was $25.2 billion, up 8% from $23.26 billion a year ago, matching the Street’s view.

“We are achieving strong and consistent growth as customers respond to our focus on consistent fundamental execution and solutions-oriented innovation around their needs,” UnitedHealth chief executive, Stephen Hemsley, said in a statement.

Well Mr. respective mayor, I can tell you one thing that will happen if you tax each bullet a dollar. Bullet sales will plummet, however there will still plenty purchased, it will just not be in Baltimore.

‘Bullet Tax’ Proposed By Mayoral Candidate - WBAL TV

BALTIMORE — A city mayoral candidate’s plan to reduce violence in Baltimore includes a “bullet tax” that he said will increase the cost of committing a crime.

Otis Rolley said he would, if elected, propose a $1 per bullet tax on all bullet purchases in the city. He also said he wants to improve recruitment standards and training for the Baltimore City Police Department, work closely with the media to increase awareness of wanted suspects, and reduce the number of vacant properties.

The Rolley Plan To Reduce Crime In Baltimore

Rolley released his plan Tuesday. He cited recent holiday violence at the Inner Harbor and the city’s reputation as one of the most violent in the country as reasons for change.

“It is unacceptable that too many of us feel unsafe in own city, own neighborhoods, even in our own homes,” he said.

As for the bullet tax, Rolley said the measure would cause a decrease in “random firings that too often happen around holidays” and put a high price tag on the cost of committing a crime.

“While the courts have consistently ruled against significant gun control legislation, there is still a way to decrease crime: substantially increase the cost of its commission,” Rolley’s plan states.

“Increasing the cost of guns won’t work, because many criminals don’t purchase new guns, and they can be borrowed or even rented in some areas,” his plan states.

Ex-trader admits threatening to kill U.S. regulators

NEW YORK (Reuters) - A former commodities trader pleaded guilty on Monday to threatening to kill more than 40 financial regulators, including the heads of the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission.

Vincent McCrudden, 50, admitted in court that he posted the threats on his company’s website last December, asking for help executing his plan. His guilty plea came the day testimony was to begin in his federal trial, said his lawyer Bruce Barket.

McCrudden pleaded guilty in U.S. District Court in Central Islip, New York, to two counts of transmission of threats to injure.

His posts included the names of current and former officials including SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler, as well as officials at the National Futures Association and the Financial Industry Regulatory Authority.

“These people have got to go! And I need your help, there are just too many for me alone,” McCrudden wrote in one post, according to the indictment.

He also sent an email last September to Daniel Driscoll, the executive vice president and chief operating officer of the NFA, that said: “It wasn’t ever a question of ‘if’ I was going to kill you, it was just a question of when.”

McCrudden faces up to 10 years in prison. His sentencing is scheduled for December 5.

McCrudden worked on Wall Street for more than 20 years, specializing in commodities, derivatives and foreign exchange, according to his biography on the website of his company, Alnbri Management LLC.

“This defendant crossed the line when he directly threatened to kill public officials who were working to keep our financial markets fair and open, and invited others to join him,” Loretta Lynch, U.S. Attorney for the Eastern District of New York, said in a statement.

Barket, of law firm Quadrino Schwartz, said McCrudden apologized in court when he entered his plea. He called his client “a talented, decent guy who will find other work.”

Hotel occupancy rate hits 3-year high
charlotteobserver.com

Charlotte’s hotel industry is showing signs of strength, according to figures released last week by the Charlotte Regional Visitors Authority.

May’s occupancy rate was 66.1 percent, the highest rate in three years. In addition, the CRVA said 664,309 hotel rooms were sold in May, the most since October 2007.

The Charlotte, N.C. hotel market went into steep dive during the first two years of the recession, with occupancy rates and revenue falling faster than the national average, and faster than the city’s 13 peer cities, which include Tampa, Atlanta, St. Louis, Greensboro and Raleigh.

But in the past year, Charlotte hotel business has improved.

The Charlotte area’s occupancy rate for the first five months of the year is 61 percent, compared with 58 percent for the peer cities. The revenue per room in Charlotte is $51, compared with $53 in the peer cities.

The upswing began in the winter and spring of 2010, and has continued.

“We have come back to a degree,” said Mark Schwantner, general manager of the Renaissance Charlotte Suite Hotel. “Our corporate business is a little bit better than expected.”

Schwantner said occupancy and other measures are a few percentage points higher than in 2010.

“We’re not back to the heyday yet,” he said, referring to 2007 and 2008, before the recession.

Goldman Sachs Targets 1,000 Layoffs

NEW YORK (TheStreet) — Goldman Sachs(GS_) might layoff as many as 1,000 employees globally as it copes with a more difficult operating environment, management said during the analyst conference call on Tuesday.

The investment bank offered little details on the nature of the layoffs, saying it would be broad-based, but that it was unlikely to be significant in its growth markets where it continues to invest.

Goldman is targeting $1.2 billion in compensation and non-compensation expenses this year, the effects of which are likely to be fully realized only next year, CFO David Viniar said.

Management is focused on the dollar savings rather than the “number of heads”, meaning that layoffs could be both at the senior and the junior level, Viniar added.

Compensation expenses declined 16% year on year in the second quarter to $3.20 billion or 44% of total revenues.

Analysts have been expecting investment banks to reduce headcount in order to drive profitability as revenues remain under pressure. Goldman already said in a filing recently that it would cut 230 employees in the New York region this year.

The DOW is loving all the strong profit reports today! Hammering it’s way to 13,000. If wall street is happy them everyone should be happy!

Man accused of hacking millions of papers at MIT

BOSTON (AP) — A Harvard University fellow studying ethics has been accused of using the Massachusetts Institute of Technology’s computer network to steal nearly 5 million academic articles.

A federal indictment released Tuesday accused 24-year-old Aaron Swartz of stealing the documents from JSTOR, a subscription service that offers digitized copies of articles from more than 1,000 academic journals.

Prosecutors say Swartz hacked into MIT’s system between September and January after breaking into a computer wiring closet on campus. The indictment says Swartz was a fellow at Harvard’s Center for Ethics at the time. Prosecutors say he intended to distribute the articles on file-sharing websites.

Swartz was released on $100,000 unsecured bond after pleading not guilty at his arraignment Tuesday to charges including wire fraud. He faces up to 35 years in prison if convicted.

Consumers are consuming Apple!

Investors Ready for Another Blowout Apple Quarter- Reuters

Apple Inc likely will dazzle investors with another round of strong quarterly results on Tuesday, propelled by demand for its iPhone and the new iPad 2 tablets.

Man the pumps…

IMF: Debt threatens to engulf Europe

NEW YORK (CNNMoney) — The debt crisis engulfing Europe poses a significant risk to the global economy and the European Union must take decisive action to stop the spread of contagion, the International Monetary Fund said Tuesday.

In a review of euro zone financial policies, the IMF said the economic recovery is “solid” in most EU nations.

But the fund warned that unresolved fiscal problems in Greece, Ireland and Portugal could “spill over” into other nations and threaten the global economy.

“There was shared concern that the sovereign tensions could spill over into the core economies via the financial system with large adverse regional and global implications,” the report states.

The report comes ahead of a key meeting in Brussels on Thursday. European leaders are set to hammer out the terms of a second bailout for Greece and discuss the intensifying debt crisis as it threatens to spread to Italy and Spain.

“The crisis in the periphery is not fully addressed yet,” said Luc Everaert, a division chief in the IMF’s European Department. “And the directors think this should be done very urgently.”

This is a tried and true way to boost sales, raise your prices…

Nissan Boosts Leaf Price, Expands Sales
(Bloomberg)

Nissan Boosts Leaf Price, Expands Sales

Nissan Motor Co., the top-seller of electric cars in the U.S., is lifting the price of the battery- powered Leaf as much as 10 percent and expanding sales to nine more states, mostly in the South.

A 2012 SV grade Leaf will cost $35,200, or 7.4 percent more than the 2011 SV’s $32,780 price, while the 2012 SL version rises to $37,250 from $33,720, Nissan said in a statement today. The increase covers new standard equipment, said Brendan Jones, Nissan’s U.S. sales manager for Leaf.

“There’s a higher content level on the cars, including a cold-weather package that’s now standardized for both grades,” and fast-charge capability for the SL that allows it to be recharged in as little as 30 minutes from a high-voltage charger, Jones said in a phone interview. The price increases aren’t related to sales volume, he said.

Nissan, Japan’s second-largest automaker, sold a record 1,708 Leafs to U.S. drivers in June and 3,875 in 2011’s first half, topping General Motors Co. (GM)’s rival plug-in Chevrolet Volt by more than 1,000 cars. The Yokohama-based company has been working to accelerate deliveries after initial snags left some U.S. customers waiting more than a year to get their cars.

Fed Bank Directors Expressed ‘Heightened Caution’ on Outlook for
Bloomberg - Jul 19, 2011

Directors at the Federal Reserve’s regional banks expressed “heightened caution” about the pace of improvement in the economy, according to minutes of Board of Governors’ meetings in May and June.

The directors of the 12 banks “generally noted that recent economic data had been weaker than expected, and they expressed a heightened caution about the likely pace of improvement in the economy over coming quarters,” according to the minutes released in Washington today, which summarize discussions at the regional banks.

The minutes show that directors of the Fed’s regional banks shared Fed Chairman Ben S. Bernanke’s view in a press conference last month that some of the “headwinds” facing the economy, such as weakness in housing, “may be stronger and more persistent than we thought.”

“Several directors attributed the slower pace of recovery, in part, to factors that were likely to be transitory, but they expected the recovery would only be moderately strong even after those factors had dissipated,” according to the record of the meetings.

Previous summaries of discount rate meetings included the sentence that “most directors recommended that the current accommodative stance of monetary policy be maintained.” Today’s release said instead that “most directors recommended that the current primary credit rate be maintained.”

Fine by me.

Postmaster: Saturday mail delivery could end soon
By John Bacon, USA TODAY

Saturday mail delivery could end soon and in 15 years “we’ll be talking about delivering mail three days a week,” Postmaster General Patrick Donahoe told the USA TODAY Editorial Board today.

USA TODAY staffer Carly Mallenbaum reports that Donahue forecasts an $8.3 billion loss in the fiscal year that ends Sept. 30 as the nation’s drift from paper to electronic communication continues to hammer the Postal Service. Even first-class mail, which had been the top moneymaker, stopped turning a profit when the recession hit, Donahoe says.

Donahoe told the board that eliminating Saturday mail delivery could happen soon, but stopped short of calling it “likely.” He did cite a USA TODAY/Gallup Poll from 2010 that showed more than half of Americans had no problem with dropping Saturday mail delivery.

USPS also is reviewing 3,600 post offices for potential elimination. Donahoe says the Postal Service will conduct customer meetings and make final decisions next spring.

Relaxation drinks see energetic growth in U.S.

(Reuters) - People have been guzzling energy drinks for the last 10 years — maybe it’s time to relax.

Sales of “relaxation drinks” with names like Vacation in a Bottle, Dream Water and Just Chill, while small, are growing.

“There is clear potential for further growth in the coming years,” said Cecilia Martinez, market analyst at UK-based beverage research group Zenith International.

Relaxation drinks help the body chill out by relieving muscle tension and reducing levels of cortisone, the main stress hormone, according to a report that Martinez wrote about the drinks earlier this year.

The drinks, which evolved in Japan as far back as 2005, contain no alcohol but some have melatonin, a hormone that can cause drowsiness.

The biggest relaxation brands include Innovative Beverage Group’s Drank, Purple Stuff and Jones GABA. Another called Slow Cow is up and coming. Their names provide a marked contrast to engine-revving energy drinks such as Red Bull, Hansen Natural’s Monster and Dr Pepper Snapple Group’s Venom Energy.

Monroe mattress-pad maker Perfect Fit to lay off 123
charlotteobserver.com

Perfect Fit Industries Inc. of Charlotte, maker of mattress pads and bed pillows, notified the state this week that the company will lay off 123 employees at its manufacturing location in Monroe in September. The layoffs are expected to be permanent. The number of workers at the facility wasn’t available.

The Monroe plant, at 201 Cuthbertson St., was established in the early 1950s. The company recently upgraded the plant through a $2 million investment from its new owners, Michigan-based Anderson Group. The upgrade boosted production capacity to more than 20 million pillows annually. Daniel Hammer, Perfect Fit Industries president and CEO, called Monroe “the pillow capital of the United States” at the ribbon cutting.

Perfect Fit, with its corporate office in Charlotte and other manufacturing facilities in New Hampshire and California, supplies bedding products to Target, Kmart, Bed Bath & Beyond and JCPenney.

UMATILLA: Chemical depot closure means job cuts in east Ore.
The Associated Press

Hermiston About 1,000 people will lose their jobs when the Army finishes work at the Umatilla Chemical Depot, and Eastern Oregon is poised to feel the economic fallout.

The East Oregonian reports an Army demilitarization contractor is expected to finish destroying chemical munitions at the depot in November.

After that, security guards, military leaders, clerks and contractors will likely be looking for work.

Oregon State economist Bruce Sorte says the total economic loss will be about $17 million.

Sorte says about 685 jobs will be lost in Umatilla and Morrow counties.

Not being able to be on HBB during the day sucks!

Must.Have.Blog.

The is my target house… now, the price…

http://www.zillow.com/homedetails/13891-75th-Ave-Seminole-FL-33776/47223840_zpid/

I guess so long as you don’t use a gun, bank robbery is destined to remain legal going forward? Heckuva job, Eddie and Joey, and friends!

Can you even imagine any other industry raising hordes of money to be used in fighting the basic legal protections which most Americans at least used to believe were in place? I can; did you hear the story about that recently-caught Boston-area mob boss who bought off the FBI?

The Billion Dollar Bank Heist

By Gary Rivlin
Newsweek
July 12, 2011

How the financial industry is buying off Washington and killing reform. The only winners seem to be well-paid lobbyists and the legislators who are being showered with campaign dollars.

Freshman GOP Rep. Sean Duffy, a member of the House Financial Services Committee, raised more than $200,000 in his first three months in office. Duffy said then he was still “getting up to speed” on issues like banking “that I didn’t deal with in my entire life.”

There are the bills a president signs sitting in the Oval Office and the bills that merit a Rose Garden ceremony. And then there are bills so momentous—or at least so critical to a president’s reelection prospects—that those around the commander in chief orchestrate a more elaborate ceremony. Such was the case with Dodd-Frank, the financial-reform package that President Obama signed into law last July against a backdrop of velvet curtains in a resplendent venue a few blocks from the White House.

“Passing this bill was no easy task,” Obama told the 400 dignitaries who witnessed the most ambitious overhaul of the financial system since the Great Depression. “We had to overcome the furious lobbying of an array of powerful interest groups and a partisan minority determined to block change.”

The pomp and ceremony may have been premature. Ever since the law’s passage, those same “powerful interest groups” who opposed Dodd-Frank have been trying to prevent it from taking effect. As written, the law delayed implementation of most of its new rules for at least 12 months so regulators would have time to hammer out the finer points of the 2,319-page bill. But that delay has also provided an opening to banks and other financial institutions seeking to defang the law. “Just because we lost that round,” says Cam Fine, president of the Independent Community Bankers of America, which spent $1 million in the first three months of this year to lobby against implementation, “doesn’t mean we just give up. Congress changes its mind all the time.”

Take what’s been happening with the Consumer Financial Protection Bureau, which is the law’s most significant and controversial provision. The agency is set to go live next week, except that Republicans in the Senate have made it clear they won’t confirm anyone to serve as its head unless the agency is radically scaled back. All told, Dodd-Frank has some 300 provisions, and the bulk of them are under attack by a number of foes, from bankers to check-cashing companies to free-market Republicans.

And so it is, says a discouraged Rep. Barney Frank, that his eponymous bill is “facing a death through a thousand cuts.”

The story of this evisceration is largely one of money—the tens of billions of dollars in profits that banks and other financial institutions stand to lose if Dodd-Frank is implemented, and the astonishing sums they’re spending to squash it. The industry paid lobbyists $1.3 billion in 2009 and through the first three months of 2010, according to the Center for Public Integrity, which added up the spending by the 850 businesses and trade groups fighting financial reform. Many of these same businesses are now spending as much money, if not more, to lobby for curbs on the new law.
…

The Wall Street Journal
POLITICS
JULY 20, 2011

Obama Backs Latest Bargain
By JANET HOOK, NAFTALI BENDAVID and DAMIAN PALETTA

President Barack Obama, in a last-ditch bid for a bipartisan “grand bargain” on the budget, threw his weight Tuesday behind a $3.7 trillion deficit-reduction plan unveiled by six Republican and Democratic senators.

President Obama backed a $3.7 trillion deficit-reduction plan from the “Gang of Six” as “a very significant step” after it gained fresh momentum from a bipartisan group in the Senate. Nell Henderson has details from Washington.

The plan, which would span a decade, has scant chance of passing intact as the solution to the current debate over raising the government’s borrowing limit. Some Republicans were wary of the plan’s changes in tax rules. Democrats said it would be near impossible to draft legislative language and pass it quickly.

Still, some elements from the so-called Gang of Six senators could be incorporated into a final deal to shrink the deficit and raise the government’s $14.29 trillion debt cap by Aug. 2. That’s when the Treasury Department says the government will run out of cash to pay all its bills without an increase in borrowing authority.

Even House Majority Leader Eric Cantor (R.,Va.), one of the party’s most combative conservatives, didn’t dismiss the plan out of hand. “While there are still portions that are unclear and need more detail, this bipartisan plan does seem to include some constructive ideas to deal with our debt.”

The developments come against a backdrop of a dramatic shift in public attitudes toward the debt ceiling. A new Wall Street Journal/NBC News poll found a plurality of Americans—38%—now say the debt ceiling should be raised, while 31% say it shouldn’t. A month ago, sentiment was the reverse, with 39% opposing the idea while just 28% said it should be raised.

Historically, the U.S. has run up deficits during wars and recessions, but then debt has substantially declined.

The senators backing the new proposal say 74% of the deficit reduction would come from spending cuts and 26% from new taxes. It would impose spending cuts and caps, and make changes in Social Security to make the program solvent over 75 years. It would direct congressional committees to reduce the deficit by specific levels in their areas of jurisdiction, likely including major entitlements such as Medicare and Medicaid.

The plan also would make big changes to the tax code. It would lower personal and corporate tax rates, eliminate the unpopular Alternative Minimum Tax and many deductions and tax breaks.

Comparing the Gang of Six plan to current law, which provides that all Bush tax cuts expire in 2012, it would cut taxes by $1.5 trillion over 10 years, making it attractive to some Republicans.
…

Downgrade could be KO for housing
By JOSH BOAK | 7/19/11 10:34 PM EDT

As the rating agencies have recently made clear, failure to raise the nation’s debt ceiling would threaten more than Social Security checks and interest payments to China.

The chain reaction from a downgrade of the Treasury’s top rating would hit thousands of municipalities, student loan provider Sallie Mae, too-big-to-fail banks and places that have dealt with plagues of truly biblical proportions: Israel ($11.9 billion of U.S. guaranteed debt) and Egypt ($1.25 billion).

But nothing might be more vulnerable than the housing market that spawned the financial crisis three years ago.

Mortgage firms Fannie Mae and Freddie Mac could lose the top-notch ratings made possible through their government conservatorship.

Tucked into Moody’s recent report is a footnote estimating that, without explicit government support, Fannie Mae and Freddie Mac would have the equivalent of a B2 junk bond grade.

In perspective, the sovereign debt of Sri Lanka, recovering from a 26-year civil war, has a better stand-alone rating. And up until June, so did the dangerously cash-strapped and protest-laden nation of Greece.
…

Reuters Breakingviews
Time for Action on Freddie and Fannie
By AGNES T. CRANE, GEORGE HAY and PETER THAL LARSEN
Published: July 18, 2011

A year after passage of the Dodd-Frank act, the $10.5 trillion American mortgage market remains in limbo. One big reason is that the law scarcely touches Fannie Mae, Freddie Mac and the Federal Housing Administration — the government-run lenders that dominate the home loan market.

The consequences of lax mortgage lending were central to the crisis that Dodd-Frank was intended to make unrepeatable. But rather than tackle the huge and highly political issue of Fannie, Freddie and the F.H.A., the law narrowly focused on one part of the market. That’s the private-label mortgage-backed securities area, source of more than $3 trillion of mortgage bonds from 2002 to 2007.

The most significant new rule could require private sector financial institutions to hold at least 5 percent of securities they create by repackaging loans. Giving them some incentive to ensure the securities are creditworthy isn’t a bad idea, but it reinforces the notion that the private sector is at a competitive disadvantage to government lenders if it returns to the mortgage-backed business. That’s because Fannie and other government-run programs would be exempt from this requirement.

The risk retention rule plays into another Dodd-Frank initiative: the creation of standards for safer home loans known as qualified residential mortgages. Such loans, in which the proposal is that homeowners must put 20 percent down, among other criteria, would be exempt from risk retention requirements.

Banks, real estate lobbyists and consumer groups want looser standards because mortgages that don’t qualify could be costlier. That hardly seems catastrophic for borrowers when 30-year mortgage rates are as low as 4.5 percent. But it’s easy to see the point when federally backed housing agencies sometimes allow homeowners to borrow 96.5 percent of the value of their homes.

In short, the reform effort so far seems to make it harder for the private sector to re-establish itself while entrenching the cost, and risk, with taxpayers. Congress and regulators must assess housing finance as one market. Until the future of the hulking government mortgage finance companies is mapped out, the worthy goals of Dodd-Frank don’t mean much.
…

TheMoneyIllusion
A slightly off-center perspective on monetary problems.
A demographic depression

When I read the newspapers from the 1930s I’d occasionally see hopeful articles about how consumer spending would have to pick up soon, because of all the “pent-up” demand. If people hadn’t been buying cars for a while then presumably their cars would wear out, and this would trigger new demand for replacements. Of course I knew that there actually was no light at the end of the tunnel, which made these articles seem slightly pathetic—as if they were grasping for straws. They overlooked the fact that the depression made America much poorer, and that low consumer demand reflected that poverty. For similar reasons, there isn’t much “pent up demand” for cars in Somalia, despite low sales in recent years.

Sometimes I see this argument applied to the housing slump. Housing construction is down 70%, to levels far lower than at any time in post-war history (relative to population.) And this slump has been going on for a number of years. Surely we’ll soon need to build more houses, to meet our growing population. If only that were true. Unfortunately, as sharply as housing construction has fallen, household formation has fallen even faster.

Jim Glass sent me some very interesting data on household formation, which casts a very different light on the recent housing crash.

By my simple measure recent housing starts peaked with an inventory of 40% of an average year’s worth of starts above the trend line in 2007. That’s a cyclical high but a typical one. About the same or a little higher was reached in three other cycles since 1960.

But the plunge in starts since 2007 is unprecedented — by the end of 2010 cumulative starts were 72% of an average year’s worth of starts below trend. The next-lowest figure was 46% below trend back in 1970. If things were “normal” this would predict a huge boom in housing starts soon.

But housing starts are *following* household formation, which is plunging even faster, like an ICBM heading straight to its target.

In 2007 household formation was 1627k (average 1998-2007: 1499k) and housing starts were 1355k (average 1998-2007: 1716k). In 2010 household formation was all of 357k, down 78% from 2007 and down 76% from the prior ten year average. Housing starts were 587k, down 57% from 2007 and down 66% from the prior ten years. That’s a big fall, but it is still *well behind* the fall in household formation.

If I still had my blog I’d post the graphs — the line for household formation is heading straight down like to the bottom of the sea, it’s three times the fastest-deepest decline of the last 40 years. The line for housing starts looks like it is just striving to not fall too far behind.

I hate to be the bearer of bad news, but that light at the end of the tunnel is an onrushing train called falling household formation. It’s caused by three factors:

1. Less immigration due to the post-2006 crackdown.

2. Less immigration due to the severe recession and high unemployment

3. 20-somethings who can’t get jobs are living with their parents.
…

Did Sister Sledge mean “We are household” instead of “We are family”? Understanding Household Formation
Submitted on June 15, 2011 - 5:33pm

When thinking about the housing sector, we can think about the short, medium, and longer term. In the short-term, we receive a wide variety of indicators, such as the data released today on housing starts and permits (both rose in May and the April data were revised upwards). In the medium-term (say the next year or so), a variety of factors will be at play, including the improving job market. In the longer-term, the key driver will be changes in the numbers of households. Given that “household formation” isn’t often discussed, we thought it might be useful today to go into a little more detail about what is a household and what has recently been happening on the household formation front.

Household Growing Pains

Our statistical agencies define a household as any single person or group of persons residing in a single housing unit. Housing units generally are defined as separate living quarters with direct access. So, a house, apartment, group of rooms, or even a single room intended for occupancy as separate living quarters can be a housing unit. For instance, if you rent out an apartment above your garage (say to someone called “Fonzie”), then the folks who occupy that apartment would be considered a separate household.

What’s happening to the number of households in the U.S.? In first quarter 2011, there were an estimated 112.2 million households in the U.S., but household formation has slowed drastically over the last few years. And though the slowdown in household formation coincided with the recession, as the economic recovery began and strengthened last year, household formation has yet to pick up.

For this slowdown to occur, overall population growth has to slow and/or the number of persons living in the average household has to increase. We have seen a fair amount of the former and a tiny bit of the latter. Between 2007 and 2010, the civilian non-institutional population age 16 and over (younger persons and the institutionalized would not presumably head a household) grew by 2.6 percent, down from the 3.8-percent growth over the three years prior to the recession and, in fact, the slowest growth in over half a century. The slowdown reflects a sharp drop-off in net migration. The foreign-born population age 16 and over increased by 3.3 million persons or 10.2 percent from 2004 to 2007, but just 0.9 million or 2.4 percent from 2007 to 2010. Contrast that with the native-born population, whose growth ticked down from 5.3 million to 5.1 million over those two time periods. Average household size edged up a tad from 2.56 persons per household to 2.59 from 2007 to 2010 after having been essentially unchanged for several years. This slowdown in household formation certainly has not helped the housing industry recover from its woes.
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