The Housing Bubble

Families in modern Ireland skip food to pay the mortgage
70pc support debt forgiveness as Morgan Kelly shows how it can work
By RONALD QUINLAN and JODY CORCORAN
Sunday August 28 2011

FAMILIES in modern Ireland are going without food to meet the demand of mortgage debt.

The arrival of the second wave of the economic crisis, giving rise for the first time in many decades to the spectre of hunger, has caused shock across the country.

The decision of homeowners to choose hunger over a fear of eviction helps expose as irrelevant the issue of “moral hazard”, the defence of policymakers who resist calls for debt forgiveness.
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GOSSIP EXTRA
Ex-teen heartthrob in tug-of-war with bankers
By Jose Lambiet
gossipink@aol.com

Chances are ex-teen heartthrob David Cassidy won’t sing I Think I Love You to BankUnited bigs any time soon!

The star of The Partridge Family and the Miami Lakes bankers are entangled in a tug-of-war over a $1.35 million-condo that Cassidy bought in Fort Lauderdale in 2005.

BankUnited drew first blood by filing a foreclosure action against Cassidy when he stopped making payment on its $900,000-exotic mortgage.

“It’s a strategic default,” says Cassidy’s lawyer, Jeff Harrington. “It just so happens that Mr. Cassidy is not your typical client.”

And Cassidy’s fighting back. He’s counter-suing for fraud. Bank officials declined comment. In their court action, they claim Cassidy now owes $916,488.62.

Cassidy listed the 34th floor condo at the Las Olas River House for $1.1 million.

Read more: http://www.miamiherald.com/2011/08/08/2349735/ex-teen-heartthrob-in-tug-of-war.html#ixzz1WJBttAAZ

I doubt these busy software engineers, who believe they some how are going to make bundles of money “investing” in $950,000 cookie-cutter style tract homes in Carmel Valley, are aware of the upcoming reduction in the conforming loan limit. As a result, the amount of Main Street American tax dollars that federally guarantee the value of these foreign expatriate real estate investors’ Jumbo mortgages will be limited to $625,500. Perhaps this is no big deal, so long as the Fed keeps ZIRP alive.

Hot and cold zones of San Diego real estate
Here’s the Union-Tribune’s half-year report home prices, sales
By Lily Leung, Reporter - Real estate
Sunday, August 28, 2011 at 6 a.m.

San Diego software engineer Paul Xu and his wife, Yaling, are expecting in December, so they’re scouting for something newer and bigger than their circa-1990s home in Mira Mesa to fit a growing family and Xu’s parents.

“We need more bedrooms,” said Xu, 36, as he walked through model homes starting in the $600,000s on a recent Sunday with his father, Min, and two family friends. “We’re also looking for good school districts … and good neighbors.”

The first area that came to Xu’s mind was Carmel Valley, a North County coastal community that draws both high-paid tech workers and move-up buyers, especially families, with its community playgrounds, block parties and environmentally friendly homes. It’s also among the few areas in San Diego County where housing prices have risen, remained relatively stable or declined slightly this year, shows a Union-Tribune analysis of sales and prices that compares half-year numbers in 2011, from January to June, to the same period in 2010.

Looking at the whole county and all housing types, sales fell 8.4 percent, from 19,099 to 17,490, while the median price dipped in 63 of 93 ZIP codes, with regional drops from 1.8 to 7.7 percent. One thing to keep in mind: 2011’s first half is being pitted against the first half of 2010, when homebuyer tax credits drove sales.

Still, among the areas that bucked the trend of declines during this year’s first half were north coastal areas such as Carmel Valley, where the median price for a single family home rose to $950,000, or 5.9 percent from 2010’s first half. The area’s new home sales also increased, from 76 to 86, or 13.2 percent.

“It’s a good community and it’s close to the coast,” said Ashish Sagar, a 43-year-old software engineer who browsed new homes at a Pardee development in Carmel Valley on a recent weekend. “I’ve been renting forever … This will be an investment.”
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Finally totally caught back up after my trip to Poland. I’m hoping drumminj will release a FF6-compatible version of the plugin so I can quit listening to FF5 whine at me to update :-).

Why is it again that Middle American Main Street tax payers are not only asked, but rather forced, to provide billions of dollars worth in federal mortgage guarantees for coastal housing that sells for north of $500,000? Any home buyer who can afford a home at that price level certainly can also afford to pay a little more to fund his own mortgage insurance premium.

Conforming loan limits at stake
For release: June 23, 2011

Drop in conforming loan limits would raise cost of housing financing, hamper housing recovery

LOS ANGELES (June 23) – More than 30,000 California families will face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011, according to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

“By reducing the conforming loan limit, thousands of California home buyers will be shut out of homeownership,” said C.A.R. President Beth L. Peerce. “The higher mortgage loan limits are critical to providing liquidity in today’s housing market and are essential to our housing recovery. We urge Congress to maintain the current limits and make them permanent to provide homeowners and home buyers with affordable financing and help stabilize local housing markets.”

Barring Congressional action, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum. The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

Under the new GSE loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by San Diego ($151,250), Sonoma ($141,550), Solano ($140,500), and Napa ($137,500) counties. Under the new FHA loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by Merced ($201,450), Riverside ($164,650), San Bernardino ($164,650), Solano ($157,300), and San Diego ($151,250) counties.

C.A.R. and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits. As a result of C.A.R.’s and NAR’s efforts, in 2008, Congress temporarily raised the conforming loan limits from $417,000 to $729,750 and has extended them annually through fiscal year 2011.
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http://www.azcentral.com/business/realestate/articles/2011/08/28/20110828az-real-estate-market-confusion.html

“Nearly five years after the beginning of the housing crash, the region’s market has fractured into countless different niches.”

“the market for small central Phoenix foreclosure homes being sold at auction - are booming, with prices rising and a huge demand from buyers.”

“traditional resales of newer large family homes in some neighborhoods in the far west or southeast Valley - have ground to a halt, where homes seemingly won’t sell at any price.”

“But agents and analysts see the same thing many homeowners feel. While some homes are selling easily, others simply won’t.”

“There’s a new normal for the market, but it’s a weird one.”

AND… finally they mix in a bit of truth.

“‘Homes in central Phoenix area priced under $100,000 are moving like gangbusters with very few homes remaining on the market for long,’ Hillier said. ‘I believe this is because of the location to jobs and public transportation’ and because the low prices mean investors get a reasonable return, in the form of rent, on their cash investment.”

And there it is. Crud shacks in old neighborhoods with no HOA or condo fees are being bought up at very low prices by slumlords.

If there is an HOA or a condo association that will complain about the delapadated condition of the rental, then you can’t sell it.

The economics of good looks

“Physically attractive women and men earn more than average-looking ones, and very plain people earn less. In the labour market as a whole (though not, for example, in astrophysics), looks have a bigger impact on earnings than education, though intelligence—mercifully enough— is valued more highly still.”

http://www.economist.com/node/21526782

From the San Francisco Chronicle:

Portion of men who work falling with wages

“Men who do have jobs are getting paid less. After accounting for inflation, median wages for men between 30 and 50 dropped 27 percent -to $33,000 a year -from 1969 to 2009, according to an analysis by Michael Greenstone, a Massachusetts Institute of Technology economics professor who was chief economist for Obama’s Council of Economic Advisers. “That takes men and puts them back at their earnings capacity of the 1950s,” Greenstone says. “That has staggering implications.”

City-data.com appears to be a personal playground for Lying Realtors. Their lies and misinformation there is stunning.

Service cuts in St. Lucie County aren’t painful to most residents

Posted: 10:10 PM
Eric Pfahler, TC Palm

ST. LUCIE COUNTY — Port St. Lucie, Fort Pierce and the county altogether have cut about half a billion dollars from their budgets in the last five years since the economy tanked, but officials have worked to make the cuts invisible to most residents.

Internal memos might take longer to receive attention than they once did.

It takes longer for builders to get permits, and some services are no longer available on holidays.Since 2007, St. Lucie County residents have had services trimmed as local governments recalibrate their budgets to coincide with massive reductions in property values.

“I honestly think the county’s done a marvelous job with the cuts,” said Craig Mundt, a member of the county’s Citizens Budget Committee. “I’ve seen very little impact on services.”

Port St. Lucie and Fort Pierce have made cuts, but the largest service impact has come from the county. All three entities, however, have eliminated more than 20 percent of their workforce as governments search for efficiency amidst declining revenues.

“Obviously, it’s never good when you’re laying off employees, and having reduced our workforce by more than one third is rather painful,” County Commission Chairman Chris Craft said. “But the reality is we’re part of the stewards of the property tax dollars that the people of St. Lucie County pay, and we need to make sure we’re running as efficiently as possible. I think (the decline in tax dollars has) helped us re-gauge that.”

Mundt said the biggest impact has been on employees. With staff reductions, current employees often have multiple tasks.

“What I do see, is I see a burden on the county employees,” he said. “They are really stretched and working hard.”

Still, not all service cuts in services have gone unnoticed.

Diminished library hours, decreases in lifeguards protecting beaches and longer times between mowing of public land are among service cuts that have generated complaints.

In Fort Pierce, employees have been furloughed.

In Port St. Lucie, 24 police officers were laid off.

Fort Pierce Mayor Bob Benton said city officials plan to end the furloughs after this budget year, but he hasn’t gotten many complaints from residents about City Hall being closed one day per month.

“When I explained the big picture, they were very understanding,” he said

http://www.wptv.com/dpp/news/region_st_lucie_county/service-cuts-in-st.-lucie-county-aren‘t-painful-to-most-residents- -

Bernanke’s Out-of-Touch Speech
The Daily Beast, Friday, August 26, 2011, 1:29pm (PDT)
By Zachary Karabell

No Ben to the rescue. The hugely anticipated speech by the Fed chairman proved to be remarkably vanilla, which should have surprised no one. Bernanke reiterated a series of themes that have been well iterated in recent weeks: that growth has stalled but is poised to rebound in the second half, that housing remains a drag on the slow economic recovery, that unemployment is disturbingly and dangerously high, and that better government fiscal policy to address short-term economic weakness and long-term deficits is essential.
Bing even more:

The only thing financial markets really cared about was whether there would be a hint of a new round of “quantitative easing,” known affectionately as QE, the last round of which, QE2, somehow appropriated the name of luxury liner. The results of QE2, however, were underwhelming for passengers in steerage, while temporarily making life that much easier for the staterooms. Stocks went up; employment and income did not.

On Friday morning, Bernanke promised no QE3, and given the excess of controversy and the dearth of tangible long-term benefit of the last round, that is a good thing. (The markets seem to have felt the same way, and rallied immediately after.) Instead, he stated blandly that the Fed “will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion.” Ooh, two days instead of one. Hosanna.

The larger issue is that while the Fed may be looked to as the proverbial knight in shining armor, to mix clichés, it has few arrows left in its quiver. Short-term interest rates that the Fed controls are already de facto zero, and Bernanke has promised that they will remain so until at least mid-2013.
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Gold retreats amid profit-taking
AFP, LONDON

Gold surpassed US$1,900 an ounce for the first time this week as investors continued to snap up the safe-haven investment on growth concerns, while oil gained thanks to an unclear outlook for Libyan crude output. After strong gains for commodities at the start of the week, profit-taking set in ahead of a keenly awaited speech on the economy by US Federal Reserve Chairman Ben Bernanke.

However, prices headed higher once more as Bernanke offered up no new economic stimulus measures for the struggling US economy, reigniting investor concerns about the recovery. Instead, Bernanke said he expected US growth in the second half of the year to improve after a first half in which expansion was nearly stagnant.

His optimistic outlook however came as official data showed the US economy grew less than initially thought in the second quarter, expanding 1 percent from the first quarter, compared with the US Department of Commerce estimate of 1.3 percent.

PRECIOUS METALS: Gold rocketed to US$1,913.50 an ounce on Tuesday before sliding US$200 over the following days. Investors banked profits ahead of Bernanke’s speech and also as exchanges increased their fees on gold transactions, analysts said.

Barclays Capital forecast that gold prices, which have surged in recent months on economic uncertainty, would average US$1,875 in the fourth quarter, and US$2,000 an ounce next year.
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QE2-fueled “higher than expected” food price inflation on top of high unemployment is driving up participation in the food stamp program. One in seven Americans now relies on food stamps to eat.

But not to worry, as Bernanke offered reassurances in his Jackson Hole speech that the economy will pick up in the second half of 2011.

Slow-Growth Economy Spikes Food Stamp Reliance
by Marilyn Geewax
Weekend Edition Sunday

About 46 million people get government help in the form of food stamps when buying food. That’s roughly 15 percent of the population.
Enlarge Joe Raedle/Getty Images

August 28, 2011

This week, the U.S. Department of Agriculture is expected to release its latest update on the food stamp program. It’s an important indicator of the nation’s economic health — and the prognosis is not good.

Food stamp use is up 70 percent over the past four years and that trend is expected to continue.

The spike began in late-2008 and early-2009 when the worst of the recession was triggering massive layoffs and home foreclosures. Although the economy has been growing since mid-2009, the pace has been too slow to absorb the nearly 14 million people without jobs. Nearly half of those have been out of work more than six months.

As a result, the number of people seeking federal help with groceries has been soaring. At this time four years ago, before the recession hit, about 27 million people were using food stamps. Today 46 million get help through the Supplemental Nutrition Assistance Program — what most people call food stamps — which is roughly 15 percent of the population.

The combination of rising prices and stagnant wages have contributed to the need for food stamps; about 40 percent of food stamp recipients live in households where a family member is earning a wage.

But the government’s latest inflation report shows that the cost of living increased 3.6 percent in the past year while wages have barely budged. So a lot of working people need food stamps to close the gap between their low wages and high grocery bills.
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I used to engage in a lot of religious arguemnts. The problem with those is that neither side can ever be shown to be correct.

Economics is a whole other thing. In 1998 I could argue with people about whether buying stock in a company that has never made profits is a bad or good idea. Just need to wait a couple years….

In 2004 I could argue about whether house prices increasing 30-50% a year was sustainable… just need to wait a couple years.

Now, I lay out a cogent argument about supply-side economics using debt to increase demand, debt having increased at 3x inflation for 30 years, government currenlty the borrow of last resort…

Those that care to respond come back with the very effective… “You are ignorant”. blah blah.

We’ll see.

What goes clip-clop, clip-clop, clip-clop, clip-clop, BANG! BANG! BANG! Clip-clop, clip-clop, clip-clop?

An Amish drive-by shooting.

Syracuse, NY — A sewer grate in the city of Syracuse weighs 250 pounds and can be extremely difficult to dislodge, depending on how long it’s been in place.

Since July, somebody has stolen 68 of them.

City police Sgt. Tom Connellan confirmed Saturday that police are looking for whoever has been stealing the galvanized steel sewer grates, presumably to sell as scrap metal. So far, the police have made no arrests.

“They’re metal, and anything metal is worth money,” Connellan said. “It’s a problem.”

Several Central New York scrap dealers said they pay as much as 13 cents a pound for steel, making each stolen grate worth $30 to $33 at a scrap yard.

The city pays $226 each to buy new grates, said Tom Simone, first deputy commissioner of public works. That means the thefts have cost taxpayers more than $15,000 so far.

http://www.syracuse.com/news/index.ssf/2011/08/grating_thefts_scrap_metal_scr.html

MARKETS
AUGUST 23, 2011, 3:09 P.M. ET

American Home Mortgage Files ‘Robo-Signing’ Suit
By NICK TIMIRAOS

One of the nation’s largest mortgage servicers filed a lawsuit on Tuesday against Lender Processing Services Inc., a top mortgage industry technology and services vendor, alleging that the firm improperly signed mortgage documents on its behalf and triggered millions of dollars in legal expenses as a result.

American Home Mortgage Servicing Inc. said in the lawsuit that it had incorrectly processed more than 30,000 mortgage assignments when seeking foreclosure on properties in all 50 states as a result of the work by an LPS subsidiary.

The lawsuit was filed Tuesday in a state court in Dallas County, Texas, and seeks unspecified damages worth millions of dollars. LPS, based in Jacksonville, Fla., does business with many of the nation’s largest mortgage servicers.

In a statement, LPS said it disagrees with the allegations included in the complaint and said that American Home has “refused to provide information evidencing … actual losses.”

In 2009, LPS shuttered the DocX LLC unit that was responsible for preparing mortgage filings after allegations surfaced that it had fabricated signatures and documents.

American Home, based in Coppell, Texas, and a unit of WL Ross & Co., doesn’t make loans but instead handles the day-to-day management of those mortgages on behalf of investors in mortgage-backed securities. It is the 15th-largest mortgage servicer and manages $72.5 billion in mortgages.

American Home alleged in the lawsuit that LPS didn’t dispute that it had improperly executed, notarized, and recorded thousands of assignments that American Home used to process foreclosures. But American Home said that LPS has refused to indemnify the servicer for millions of damages that resulted from the shoddy work by arguing that it wasn’t under an enforceable contract when the breaches occurred.

Last fall, mortgage servicers were forced to suspend and correct foreclosure filings after they were accused of “robo-signing,” or allowing employees to sign off on thousands of documents without reviewing their contents.

Tuesday’s lawsuit is one of the first by a servicer to attempt to put back losses for certain document-handling improprieties on an outside vendor. It concerns the use of “surrogate signers,” or employees that weren’t authorized to sign documents on behalf of the company.
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With Hurricane Ben bearing down on the global financial system, there really is no where to hide.

UPSIDE
AUGUST 27, 2011

Those Safe Havens You’ve Been Flocking to Aren’t So Safe
BY JACK HOUGH

It’s time for a flight from safety.

The recent market maelstrom has sent investors fleeing to traditional safe havens such as Treasury bonds, recession-resistant stocks, Swiss francs and gold.

But that has only made these assets riskier, exposing investors to the possibility of a tumble. Gold, for example, shed a quick $200 an ounce this past week before rebounding.

For investors whose “safety” now poses danger, here are some unloved assets to consider instead.
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Friday, August 26, 2011 at 10:00 PM
Programs for financially troubled homeowners have limited success
By Jennifer Dixon
Detroit Free Press

When President Obama announced his first foreclosure-prevention initiative in February 2009, he promised $75 billion to help up to 4 million homeowners modify their mortgages to more affordable payments.

More than two years later, less than $3 billion has been spent and fewer than a million homeowners have received permanent loan modifications.

The Troubled Asset Relief Program, or TARP, was to provide $50 billion of the total, with $25 billion more coming from taxpayer-subsidized Fannie Mae and Freddie Mac. Here is how three TARP foreclosure-relief efforts have fared:

Making Homes Affordable

What it is: The $29.9 billion program had an initial goal of helping 3 million to 4 million borrowers avoid foreclosure by modifying loans to an affordable level under the Home Affordable Modification Program, or HAMP.

How it has fared: Through June, 657,044 borrowers have received permanent modifications. An additional 115,515 were on trial modifications.

But more than 760,000 people had their trial modifications canceled. And 106,027 who won permanent modifications defaulted on those loans.

The latest numbers available show that TARP, Fannie Mae and Freddie Mac have spent slightly more than $2.2 billion to modify home loans.

What happened: According to TARP’s inspector general, HAMP’s failure to have a significant impact on the foreclosure crisis has many causes, including a rushed launch without fully developed rules; no initial requirement that borrowers document their income up front; and abysmal performances by banks handling loan modifications.

The Treasury Department says homeowners have had a median monthly savings of $524, or 37 percent of their original payment, for a total savings of $7.3 billion through June.

Mortgage Refinancing

What it is: The $8.1 billion Federal Housing Administration Short Refinance option gives banks the option to refinance an underwater borrower’s non-FHA insured mortgage into an FHA-insured mortgage at 97.75 percent of a home’s value, and reduce unpaid principal by at least 10 percent. Original estimates suggested it would help up to 1.5 million borrowers from 2011 to 2013.

How it has fared: According to a July report, just 257 loans have been refinanced under the program.

What happened: Bank participation is voluntary and involves forgiving at least 10 percent of the loan. Many large banks and investors, including Fannie Mae and Freddie Mac, oppose reductions of principal and are not participating. Through June, the program had spent $50 million, 0.6 percent of the total set aside.

Three years after these companies collapsed and became wards of the U.S. taxpayer, the MSM is finally getting around to explaining to the average American exactly who they are!? Wow…

Does the article explain how enormously profitable these companies were back when they operated as quasi-public corporations, and how huge the bill to the U.S. taxpayer has been since the government took them over after their spectacular Fall 2008 implosions?

August 26, 2011 at 10:00 PM
Who are Fannie Mae and Freddie Mac?
By Jennifer Dixon
Detroit Free Press

Fannie Mae and Freddie Mac are publicly traded companies that guarantee the majority of new mortgages in the U.S. They are key players in the government’s foreclosure-prevention initiative.

Fannie Mae, officially the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corp., were taken over by the government in 2008 after billions of dollars in losses and years of mismanagement.

Fannie and Freddie operate in the secondary mortgage market. They don’t sell mortgages directly to homeowners; they buy mortgages from banks and other lenders, which can use the money to issue new home mortgages.

To increase access to home loans, Fannie was created as a federal agency in 1938 and chartered by Congress in 1968, followed by Freddie in 1970. But they also are publicly traded corporations and — before their taxpayer bailout — had a duty to maximize shareholder return.

Those divergent missions were criticized as a “fundamentally flawed” business model by the Financial Crisis Inquiry Commission, which Congress created to examine the causes of the economic crisis that began in 2007.

Fannie and Freddie loosened underwriting standards leading up to the financial crisis, buying and guaranteeing riskier loans and ramping up purchases of mortgage-backed securities to please Wall Street analysts and to “ensure generous compensation for their executives and employees,” the commission determined.
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Fannie Mae Conservator Sued by Pension Funds Over Recovery Limit
By Tom Schoenberg and Lorraine Woellert - Aug 26, 2011 9:01 PM PT

A pension fund investors group sued Fannie Mae’s conservator over a rule that could limit their recovery for damages stemming from securities fraud.

The Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio asked a federal judge in Washington yesterday to throw out the Federal Housing Finance Agency rule, which sets the priority for payment of unsecured claims against Fannie Mae and Freddie Mac, the home mortgage finance companies now under government control.

The pension funds argue that the rule, which took effect July 20, violates the Appointments Clause of the U.S. Constitution and the Housing and Economic Recovery Act because Edward DeMarco, FHFA’s acting director, who imposed it, has been in his position for almost two years without Senate confirmation.

“If Fannie Mae’s officers — the very individuals responsible for the fraud — sued the company to recover their attorney’s fees, their claims would receive priority over plaintiffs’ valid securities fraud claims,” the shareholders allege in the lawsuit.
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Mortgages are hardly the only underwater part of New Jersey.

Record Flooding Expected in New Jersey
Aug. 27, 2011

Deputy Coordinator for the Burlington County, NJ Office of Emergency Management Steve King tells WSJ’s Christopher Rhoads that the newest rain estimates for Hurricane Irene will be higher than expected and could lead to record flood levels in the state.

School superintendent gives up $800k in pay

By TRACIE CONE - Associated Press
AP – 2 hrs 14 mins ago..

FRESNO, Calif. (AP) — Some people give back to their community. Then there’s Fresno County School Superintendent Larry Powell, who’s really giving back. As in $800,000 — what would have been his compensation for the next three years.

Until his term expires in 2015, Powell will run 325 schools and 35 school districts with 195,000 students, all for less than a starting California teacher earns.

“How much do we need to keep accumulating?” asks Powell, 63. “There’s no reason for me to keep stockpiling money.”

Powell will still earn a six-figure retirement, especially hefty by the standards of California’s farming heartland. But because his salary comes out of the district’s discretionary budget, for the next three years he’ll be able to steer the money he is giving up where he wants: to programs for kindergarten and preschool, the arts and a pet project that steers B and C students into college by teaching them how to take notes and develop strategy skills.

“Our goal has never been to have things,” Powell said of himself and his wife, Dot. “We want to give back.”

http://news.yahoo.com/school-superintendent-gives-800k-pay-150206667.html - -

The Financial Times
August 28, 2011 8:24 pm
Waiting for QE3

Ben Bernanke disappointed those who hoped his speech at the central bankers’ conference in Jackson Hole would signal a fresh round of quantitative easing. The US Federal Reserve chairman ruled nothing out, however. He acknowledged the recent run of gloomy economic news, and said the next meeting of the Fed’s policymaking committee would take an extra day to discuss the “merits and costs” of monetary stimulus. Meanwhile, he called on Congress to improve its fiscal policy and attend to issues that lie outside the Fed’s purview.
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If the American economy were an internal combustion engine, I would suggest the Fed has flooded it with too much liquidity.

AHEAD OF THE TAPE
AUGUST 26, 2011

More Liquidity Only Douses Growth Sparks
BY KELLY EVANS

Today’s ultralow interest rates have helped boost profits, but not economic growth.

This is plainly evident in recent figures. Since the recession ended in mid-2009, U.S. corporate profits have jumped by about 43% to a record $1.45 trillion as of the first quarter, after taxes, inventory and accounting adjustments, according to the Commerce Department.

What hasn’t recovered, however, is economic growth. Indeed, in real terms, gross domestic product hasn’t even returned to its prerecession peak.
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Number of short sales on the rise
By Julie Schmit, USA TODAY
Updated 1h 35m ago

Short sales are increasing as a percentage of home sales in many states, helping some neighborhoods and homeowners avoid the more devastating impacts of foreclosures.
By J Pat Carter, AP

Short sales — when lenders allow financially strapped borrowers to sell homes for less than their unpaid mortgage — accounted for 12% of home sales nationwide in the second quarter. That’s up from 10% in the same period last year, says researcher RealtyTrac.

The increases were sharper in some states, including California, Nevada, Michigan, Georgia and Colorado, the data show.

In Colorado, short sales were 17% of all sales in the second quarter, up from 10% a year earlier. In California, they made up 25% of sales, vs. 18%.

Bank of America, the largest home mortgage servicer, expects to complete more than 100,000 short sales this year — more than double what it did in 2009, the bank says.

Wells Fargo Senior Vice President J.K. Huey says short sales have been “steady to slightly” up in recent months, partly because there are fewer bank-owned houses for sale in some markets, and that has forced buyers to pursue more short-sale properties.

Short-sale homes, which often remain occupied until sold, tend to retain values better than those that go through foreclosure. That helps values of neighboring homes.

In the second quarter, short-sale homes sold at a 21% discount to non-foreclosure homes, while bank-owned homes went at a 40% discount, RealtyTrac says. Short sales may also reduce losses for loan owners because they avoid full foreclosure costs. Borrowers may qualify for new mortgages sooner after a short sale than after a foreclosure.

“Short sales are a very positive solution,” says BofA Vice President Dave Sunlin.

Short sales peaked at 16% of the market in early 2009, RealtyTrac says. Realtors say there should be more short sales and that they should get done faster.
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Almost all the foreclosure notices I see in the paper these days are for loan amounts north of $500K — clearly not involving little guys.

The Obama administration has been talking about helping out homeowners already for years, with little success. How is this proposal any different, particularly if it attempts to coerce group B of non-homebuyers to fund members of group A_’s home purchases?

One Final Bailout That Still Might Happen
By Rick Newman
Posted: August 26, 2011

There’s one big group of Americans who still haven’t received much of a bailout from Washington—homeowners. Now, there’s a growing chance the Obama administration may finally do something to help the little guy directly.
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Elections
Paul: Bernanke Is Out of Options to Save Economy
Published August 28, 2011

Chairman Ben Bernanke is not calling for another fix to the economy by the Federal Reserve because he’s already used up all the quivers in the Fed’s bow, Rep. Ron Paul said Sunday.

Paul is a 2012 Republican presidential candidate and supports the U.S. returning to the gold standard to protect its currency and force a balanced budget. He has been highly critical of the Federal Reserve and its chairman over plans for “quantitative easing,” a two-part program which flooded the market with dollars in an attempt to make money more available for borrowing and lending.

Paul argued that Bernanke’s plan to buy bank assets and drop more than $2 trillion into the economy did not yield the results the chairman hoped, a conclusion that Paul says Bernanke implicitly acknowledged during a speech last week in which he offered no new bailout programs from the Fed.

“He really hasn’t pulled back. Symbolically, he has and he is not having another QE3,” Paul said. “But he has maintained a (view) to keep interest rates low until 2013. You can’t keep interest rates low without monetizing debt because if somebody else doesn’t buy it, he has to buy it. So he’s continuously quantitatively easing.”
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The super low dollar has attracted droves of foreign buyers into snapping up American foreclosure homes at fire-sale prices.

Atlanta Business News
5:00 a.m. Wednesday, August 24, 2011
Home market gets foreign aid
By Christopher Quinn
The Atlanta Journal-Constitution

Foreign accents and real estate agents representing foreign buyers have become common at foreclosure auctions in metro Atlanta.

Low home prices and strong foreign currencies have made the Georgia even more attractive to investors.

Georgia has long been a top-10 state for foreign real estate investors, the National Association of Realtors says, but low home prices and strong foreign currencies have made the U.S. and Georgia even more attractive to investors. What is new in this round of buying is that individuals, not just investment firms, are getting involved, and they are dropping money into Atlanta houses, condos and apartments rather than stocks or bonds back home.

Foreign residential investments in the U.S. grew from $66 billion to $82 billion in the 12 months between March 2010 and 2011, the NAR says. Two percent of the $82 billion came to Georgia, it says.

The money is helping prop up metro Atlanta home prices and keeping Georgians employed, local real estate agents say.

Michael Over, an Englishman living in Thailand, visited Las Vegas, Memphis and Atlanta, researching a place to park some investment money. The retired baker bought five homes on this trip.

After keeping them for a while and seeing how they do, he might buy another five, he said in the Marietta offices of WRI Capital Group.

Andy Capps, a managing partner with the firm that specializes in helping foreign investors, sees more brokers, big investors and individuals coming on their twice-monthly bus tours of available metro Atlanta homes.

“We are selling 30 to 40 a month,” Capps said, with most buyers coming from Australia, the United Kingdom, China, Israel and Canada.

“Definitely, the average person can now get into the residential real estate market,” he said. “And interest has certainly picked up on the residential side.”
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Did Buffett’s $5bn capital injection obviate these concerns?

Stephen Foley: Spectre of sub-prime lending is still haunting Bank of America
Saturday, 13 August 2011

US Outlook: Anyone searching for terrifying echoes of the 2008 financial crisis need have looked no further than what happened to Bank of America this week.

How much of this sounds familiar? Shares in one of the biggest banks in the US are pinging about as if they were a penny stock, and the cost of insuring its debt is soaring. Analysts openly speculate about a “black hole” in its finances, where mounting and unquantifiable mortgage losses may force it into an emergency fundraising. Most terrifying of all, the chief executive finds it necessary to go on business television to calm frayed nerves.

Who can forget Bear Stearns’s boss Alan Schwartz going on CNBC in March 2008 to deny aliquidity crisis at his firm, a declaration of complacency that only exacerbated the run and sank the bank within days?

These were the similarities that got everyone’s attention whenBrian Moynihan, BofA’s chief executive, took to the airwaves. The differences were actually more apparent – BofA is not facing an existential crisis, and it has many more sources of liquidity than a pre-crisis investment bank like Bear ever did – but my goodness, Mr Moynihan is in a mess.

BofA is the quintessential “systemically important financial institution” (Sifi is the new jargon term for banks popularly known as too big to fail). It touches one out of every two households in the US. Its branches are on almost every street corner in the nation and it owns Merrill Lynch, the powerhouse investment bank.

Importantly for understanding why it is in such a state, it also bought America’s largest subprime lender, Countrywide Financial, in 2007. Countrywide is now the imploding star at the heart of the company.

Four years after the collapse of the subprime mortgage market, we still don’t know the total losses involved. How can we? Banks have resisted a once-and-for-all programme of loan forgiveness for underwater borrowers, and are instead pursuing piecemealrefinancings and foreclosures, all of which are gummed up in paperwork. Meanwhile, the ailing economy threatens to bring about another drop in house prices (which BofA worryingly claimed this week it was not planning for).
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ABREAST OF THE MARKET
AUGUST 29, 2011

Fed Faces Old Foe as Hazard Returns
By E. S. BROWNING

To seasoned investors, last week’s sharp market swings were a fresh reminder of a problem tormenting financial markets: moral hazard.

Stocks jumped, then sank and then rose again, as investors tried to bet on whether the Federal Reserve is going to intervene again to support financial markets.

Economists sometimes refer to that kind of market behavior as moral hazard, which refers to risky investing done in the hopes that government will bail people out of any trouble they get into.

It was a big issue after the 2008 collapse of Lehman Brothers Holdings Inc., when the government bailed out several other banks. It created the idea that they were too big to fail and that their executives and bondholders would be protected from their own mistakes.

Today, investors have returned to risk-taking in hopes of government intervention, and newly confident banks are protesting efforts to increase regulation.

In an interview, former Fed Chairman Alan Greenspan said government intervention can create moral hazard.

“Oh, I think so,” he said. While he declined to comment on current monetary policy, he mentioned “too big to fail” as an example. Government actions almost inevitably have unintended consequences, he said.

“There were unintended consequences to almost every action I was involved in” as Fed chairman, said Mr. Greenspan, who himself cut interest rates to help stave off a bond-market crisis in 1998, and later was accused of helping inflate the stock bubble of the late 1990s.

“If we anticipated the unintended consequences that were going to happen we might have changed the policy,” he said, but he added that it is impossible to forecast all the consequences of government action.

Asked if he had regrets about any of his decisions, Mr. Greenspan said that policy makers are fortunate if they get it right 80% of the time. “Central bankers don’t fret about the ones that came out less well than they would like. They just press forward and do the best they can,” he said.
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ECONOMY
AUGUST 29, 2011

Central Bankers Worry Economy Still in Peril
By JON HILSENRATH And CHARLES FORELLE

JACKSON HOLE, Wyo.—After four years of fighting crises and pumping money into the financial system, the world’s central bankers are concluding that the global economy is still in a precarious position and the policy apparatus is ill-equipped to help.

The mood here in the Grand Tetons, where central bankers and private economists from around the world gather each August, was distinctly gloomy.

The angst was underscored in a blunt speech by the International Monetary Fund’s new managing director, Christine Lagarde. “We risk seeing the fragile recovery derailed,” she said Saturday. Those risks have been aggravated, she said, by the public’s sense that policy makers’ response has been inadequate. “We are in a dangerous new phase,” the former French finance minister said.

What Ms. Lagarde said publicly, several central bankers expressed privately. The central bankers’ problems are compounded by internal divisions and current realities. Several U.S. Federal Reserve officials have doubts about how much more they can do to resuscitate a U.S. recovery that is falling short of Fed expectations. Most European Central Bank officials believe the solutions to Europe’s sovereign-debt, governance and banking woes lie with elected leaders, not the ECB.

Economists at JPMorgan, in their weekly reprise of economic developments, blamed the recent global stock selloff on “a sense of policy paralysis in the U.S. and Europe, which has driven home the point that there is no cavalry to ride to the rescue.”

“Fiscal policy has turned restrictive and an additional sharp tightening lies just ahead in the U.S., while monetary authorities have exhausted much of their ammunition,” they said.

Officials on both sides of the Atlantic who orchestrated the response to the global financial crisis insist the world economy would have been worse had they not acted as they did. But it’s clear that the remedies didn’t deliver the recovery for which they hoped.
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