The Housing Bubble

It takes a very big man to disavow a lifetime of misguided work.

BUSINESS
Updated July 26, 2012, 9:32 a.m. ET

Big-Bank Pioneer Now Seeks Breakup
By E.S. BROWNING and DAVID BENOIT
Associated Press

Sanford Weill, shown in 2007.

In a few seconds, Sanford Weill disavowed the work of a lifetime.

Former Citigroup Chairman and CEO Sandy Weill turned the financial world on its ear when he said it’s time to split up investment banking from regular banking. WSJ’s David Reilly visits Mean Street to explain. Photo: Getty Images.

Mr. Weill, who built Citigroup Inc. C +1.90% through repeated acquisitions—including the 1998 megadeal that prompted Congress to strike down a six-decade-old ban on commercial banks doing investment banking, and vice versa—on Wednesday called for the breakup of huge U.S. financial conglomerates.

“I am suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk,” Mr. Weill said in a TV interview on CNBC. “Mistakes were made,” he added a few seconds later.

After years of silence, banking’s greatest living empire builder—who powered Citigroup’s ascent to the top of the U.S. banking industry, and then watched from retirement as the New York company nearly collapsed in the 2008 financial crisis—joined the ranks of big-bank critics who contend that smaller is better. It was as if Napoleon had called for an end to military conquest.

“There is an irony,” said William Isaac, a former chairman of the Federal Deposit Insurance Corp. who is now global head for financial institutions at FTI Consulting Inc. Mr. Weill, he said, “probably had a larger role than any other person in bringing down Glass-Steagall,” the Depression-era law that kept commercial banks out of riskier brokerage and investment-banking work.
…

ft dot com
July 25, 2012 4:05 pm
Ex-Citi chief Weill urges bank break-up
By Tom Braithwaite in New York and Shahien Nasiripour in Washington
Sandy Werill who called for the break up of big banks on CNBC today

Citigroup’s former chief executive Sandy Weill has called for a break-up of large banks in a significant about-face from one of the architects of the modern financial conglomerate.

Mr Weill’s intervention adds to a growing chorus of regulators, politicians and bankers calling for a return to the separation of investment banking from commercial banking that existed in the US before the 1990s.

“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,” Mr Weill told CNBC.

The 79-year-old’s comments come 13 years after the repeal of Glass-Steagall, the law passed after the Great Depression, which had forced a separation of financial activity. Mr Weill championed that repeal as he created Citigroup through acquisitions.
…

Markets & Finance
Housing: A Long Way From Normal
By Peter Coy and Roben Farzad on July 26, 2012

Remember suburban Phoenix, home of empty subdivisions with green swimming pools and roving coyotes? It’s booming again. A house in Glendale got 95 offers and eventually sold for 17 percent above the asking price. “This is not something we would see in a normal market,” says Michael Orr, director of the Center for Real Estate Theory and Practice at Arizona State University’s W.P. Carey School of Business.

After falling 57 percent from 2006 through last October, Phoenix metro housing prices rose 12 percent through April and have continued upward since, according to the Standard & Poor’s/Case-Shiller home price indexes. In Atlanta, meanwhile, the housing recession is far from over: Home prices fell 17 percent in the year through April to their lowest point since 1997, according to Case-Shiller.

Housing is most Americans’ biggest asset and crucial to the health of the overall economy, so it’s natural to ask when it will get back to normal. As the contrast between Phoenix and Atlanta shows, the answer is: not yet. The sector remains roiled by extremes. The lowest mortgage rates in history, courtesy of a recession-fighting central bank, coupled with the biggest drop in housing prices since the Depression, have made homes the most affordable since 1970, according to the National Association of Realtors. But people can’t scrape up a down payment when mortgages on their current residences are underwater. Banks have tightened lending standards even as the bad economy has lowered many borrowers’ credit scores. And the country is stuck in the longest period of 8 percent-plus unemployment since the government began keeping track in 1948.
…

Long bond yields hit record low
July 23, 2012, 12:30 PM

Yields on 30-year Treasury bonds finally caught up with their shorter-term counterparts on Monday, in terms of setting a record low.

And a lot of mom and pop investors grumble about how that means their retirement funds are dwindling. But the gains in price – which move in the opposite direction of yields – have made for some more than decent returns.

Thirty-year yields have lagged in the rally because there’s a smaller pool of investors focused on the long-term maturities — namely liability-driven buyers like pension funds and insurance companies, said Chris Ahrens, head U.S. rates strategist at UBS.

“There’s been a reluctance to lock in really long-dated U.S. assets at historically low yields,” he said.

“As we move into ever lower levels and yields compress, people get forced to move that much further out into longer maturities just to see some incremental return.”

“It wouldn’t surprise me to see the trade continue and see a move into even lower yields,” Ahrens added.
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Market Pulse
Home>Collections
Spain 10-year bond yield drops below 7%
July 26, 2012|Barbara Kollmeyer

MADRID (MarketWatch) — Euro-supportive comments from European Central Bank President Mario Draghi continued to push down yields for Spanish and other peripheral bond yields. The yield on Spain’s 10-year government bond (ES:10yr_esp) plunged 40 basis points to 6.94%, while the yield on the two-year note (ES:2yr_esp) sank around 80 basis points to 5.36%. Draghi said earlier Thursday the ECB would do all that is needed to save the single currency, sparking a rally for the euro, Europeaan stock markets and U.S. futures. The Spain IBEX 35 index (XX:ibex) shot up 3.8% to 6,231.70, led by a 7% rally for Banco Santander SA (ES:san)(US:san). The yield on Spain’s 10-year bond has climbed as high as 7.6% in recent days as speculation intensifies the country may need a full bailout.

Seniors facing foreclosure at increasing rates

By Kimberly Miller
Palm Beach Post Staff Writer
Posted: 6:33 a.m. Thursday, July 26, 2012

He wore silk shirts as a successful Philadelphia businessman and married the girl he started courting in the 10th grade. When he retired to Palm Beach County, he played golf, opened and closed a small business, and cared for his wife of 65 years in the days before she died in 2008.

Sy Goldberg, 87, is a member of the Greatest Generation, and a victim of the Great Recession.

He grew up under the American ethos that real estate would only ever appreciate in value. Today he owes more on his mortgage than his small condominium is worth and has struggled for the past two years to get a loan modification under the threat of foreclosure.

“I’ve kept fighting and writing letters to everyone,” said Goldberg, who is in the trial period of a bank plan that allows him to make lower monthly mortgage payments. “If they took my house away from me, I would die.”

A quarter of subprime loans of borrowers age 50 or older were 90 days or more late on payments or in foreclosure as of December 2011.

For generations, home ownership has been a safety net in retirement, the report notes. Equity that built up over decades could be tapped for medical bills, supplement fixed incomes or help transition into an assisted living facility.

But older Americans weren’t immune to the real estate boom and bust. They took out second mortgages when property values skyrocketed, sold their homes for hefty prices and purchased investment properties that floundered.

Goldberg’s housing woes began when his wife took out a second mortgage to boost a small business she was starting. On top of that, one of the loans was interest-only. Goldberg’s fixed income couldn’t handle the load when payments increased to include principal.

“I never thought anything like this would happen,” Goldberg said. “I was never lacking in funds in my life. I never had a problem paying bills.”

There are also cases where seniors were taken advantage of during the real estate frenzy.

Royal Palm Beach-based foreclosure defense attorney Tom Ice has an 86-year-old client who got a call in 2005 offering a fool-proof way to make money in real estate. A mortgage broker, who turned out not to be licensed, persuaded the World War II veteran to take out a mortgage on a small condo he owned outright and buy additional properties.

Now the additional properties are in foreclosure and his own home west of Delray Beach is in jeopardy.

“If I wasn’t married now, I would pray that I could die every night,” said Ice’s client, who didn’t want to be identified. “I’ve invested frugally all my life. I’m not used to being this in debt.”

Ice, who is working on a contingency and foregoing his monthly fee, was able to get the bank to dismiss a foreclosure case on his client’s primary home, but it could be re-filed.

“With so many seniors on fixed incomes you can really see how they would have problems with adjustable rate mortgages,” Ice said. “They were told ‘Don’t worry, you can refinance when it adjusts.’ Then the bottom dropped out and no one could refinance.”

http://www.palmbeachpost.com/news/business/seniors-facing-foreclosure-at-increasing-rates/nP4Ls/ -

Posted: 5:13 p.m. Wednesday, July 25, 2012

Report criticizes Florida for no measurable goals in program meant to help people in foreclosure

By Kimberly Miller

Palm Beach Post Staff Writer

A federal inspector general report critical of a $7.6 billion foreclosure prevention plan specifically mentions Florida as failing to set measurable goals for its Hardest Hit program.

The report, released Wednesday, also faults the Treasury Department for not following recommendations made in the spring to create an action plan for states to increase the number of homeowners helped by the program.

Florida was one of 18 states and the District of Columbia that received money from the Hardest Hit Fund, which was first announced in Feb. 2010.

Through the end of June, 6,320 Florida homeowners have been approved for assistance with the state’s $1 billion share of Hardest Hit money. About $107.8 million has so far been reserved for approved Florida homeowners.

Nationwide, $350 million of the $7.6 billion _ less than 5 percent _had been dispersed through March, according to the quarterly report to Congress by the Inspector General of the Troubled Asset Relief Program. States have through 2017 to spend the money.

“Treasury has not set measurable goals and metrics that would allow Treasury, the public, and Congress to measure the progress and success of the Hardest Hit Fund,” the report notes. “Taxpayers that fund this program have an absolute right to know what the government’s expectations and goals are for using $7.6 billion.”

Florida’s goals of “preserving homeownership” and “protecting home values” are singled out for having high-level expectations with no measurable target.

In April, the inspector general criticized the Hardest Hit program for ramping up too slowly and helping too few homeowners.

Two weeks later, Florida announced it was revamping its plan to eliminate eligibility roadblocks and increase the amount of money homeowners receive.

“Our August report will likely show an increased number of people taking advantage of the program,” said Cecka Green, communications director for the Florida Housing Finance Corp., which oversees the state’s Hardest Hit program. “Our goals were mirrored exactly from what Treasury said in its guidelines.”

Florida’s Hardest Hit program is meant to create breathing room for homeowners looking for work or higher-paying jobs. Those who are eligible can receive up to a year of mortgage assistance with a cap of $24,000, and up to $18,000 to bring a mortgage current on payments. Homeowners seeking only to have their mortgage arrearage paid can get up to $25,000.

For information and applications, visit flhardesthithelp.org or call (877) 863-5244.

Four Little Words
WSJ - July 26, 2012

What’s the difference between a calm and cool Barack Obama, and a rattled and worried Barack Obama? Four words, it turns out.

“You didn’t build that” is swelling to such heights that it has the president somewhere unprecedented: on defense. Mr. Obama has felt compelled—for the first time in this campaign—to cut an ad in which he directly responds to the criticisms of his now-infamous speech, complaining his opponents took his words “out of context.”

The obsession with tested messages is precisely why the president’s rare moments of candor—on free enterprise, on those who “cling to their guns and religion,” on the need to “spread the wealth around”—are so revealing. They are a look at the real man. It turns out Mr. Obama’s dismissive words toward free enterprise closely mirror a speech that liberal Massachusetts Senate candidate Elizabeth Warren gave last August.

Ms. Warren’s argument—that government is the real source of all business success—went viral and made a profound impression among the liberal elite, who have been pushing for its wider adoption. Mr. Obama chose to road-test it on the national stage, presumably thinking it would underline his argument for why the wealthy should pay more. It was a big political misstep, and now has the Obama team seriously worried.

If somebody told me he had a problem because there was an elephant living in his living room I would think that the description of the problem would suggest a solution, as in get rid of the elephant.

But this doesn’t seem to work with TBTFs. If something is Too Big To Fail then by definition it is too big. The solution to something that is TBTF is to - what? - make it smaller?

Is it really all that complicated?

We have learned nothing.

Obama is truly one of the worst presidents we have ever had in America.

We might as well ALL go flip houses now.

And - we never say this coming…

——————————————-

And You Thought the Housing Crisis Was Over! The Community Reinvestment Act is back

The American Spectator | July 27, 2012 | William Tucker

Do you remember that thing about how the banks wouldn’t lend to blacks and Hispanics because they were racists? And do you remember how they passed the Community Reinvestment Act so that banks were forced to reduce down payments practically to zero and lend to a lot of people they knew were bad credit risks? And do you remember how Wall Street bundled all these risky subprime mortgage and sold them to investors around the world so that when it became clear that those people weren’t going to be able to pay their mortgages banks everywhere were left holding the bag and all five of the Wall Street investment houses either went under or had to be bailed out by the federal government?

And do you remember how, when it was all over, liberals said it was actually the banks’ fault for “deceiving” all those people into thinking they could afford to buy homes and that the banks should be punished for it and some of those people be allowed to keep their homes anyway? And do you remember how all this cost the government close to a trillion dollars and put the whole economy in a hole that we really haven’t begun to dig ourselves out of yet?

Well, get ready because the whole thing is about to happen again.

Yes, believe it or not, the federal government is now starting another initiative to force banks to lend to low-credit-rated blacks and Hispanics — not just anybody but specifically blacks and Hispanics — and is threatening — and already collecting — huge punitive fines if they don’t. Moreover, this time they’re going even further. They’re going to take over the credit rating agencies and force them to change their standards to accommodate blacks and Hispanics so that nobody will have any idea who is a bad credit risk and who is not. In so many words, the government is about impose its will on the whole home-lending market and force another round of bad loans so that the banks are going to be looted once again so that even the federal government may not be able to bail them out this time.

Yes - this is coming to America.

What else can be the end of the road with trillions in debt, a massive and ever expanding government and not one banker in jail for fraud…

———————————–

Spain unemployment hits new high of 24.6%
BBC | 27 July 2012 | Staff

Some 5.7 million Spaniards, equivalent to almost one in four, are now seeking work, according to official figures.

The country’s unemployment rate rose to 24.6% during the April to June quarter, up from 24.4% during the previous quarter.

Separately, Spain’s third largest bank reported an 80% fall in net profits.

NFL Training Camps Are Open

Well it`s Dog eat Dog and Cat eat Cat
Livin` Free is where it`s at
HAMP and HARP not one but two
Hardest Hit was made for you!
Goooooooooo Deadbeats!

Just keep buying those houses - in fact, you need to overbid to get on the property ladder.

———————————

US economic growth slowed to 1.5 pct. annual rate in Q2 as consumer spending weakened

Associated Press - Martin Crutsinger - July 27, 2012

WASHINGTON (AP) — The U.S. economy grew at an annual rate of just 1.5 percent from April through June, as Americans cut back sharply on spending. The slowdown in growth adds to worries that the economy could be stalling three years after the recession ended.

Woke up in a pissy mood today. Why do:
Fat people plop down on sofa and sit right on the edge breaking them down?
Why do women sit down and nervously grind their heels into a hard wood floors or rugs like a Karastan?
Why do people go into a room and automatically switch on the light and then walk out and leave it on?
Why do people buy a quality meal and then before they even taste it load it up with hot sauce masking all the flavor?
Why are people so lazy as to not do a job right but say I’ll get that later, later never comes?
Why do you give people a choice when they are happy? Example you go into a store and buy a small item and are about to walk out, the clerk as you are leaving says ‘Do you want a bag?’ The customer says, ‘Oh, sure?’. Or a kid choses a meal and then the parent says ‘ Would you like (X) and the kid says yeah?
Why do you go to some place like Micky D and ask for a milk shake and they always say it’s not working? High profit margin coffee and soda are always available.
Why do people change their baby’s diaper or ash tray and leave the trash where they were parked?
Why do people with kids come over and tell you that you should child proof your house because it makes them work harder watching them while they visit? How come you don’t have a tv so they can be entertained?
Why is it that a woman always plans functions when you are doing work on a house? Nothing a man hates more when doing a project is to start and then have to put everything away during a function only to relocate everything after the event so work can be started again.
Why do people take a 3minute shower at their house and a thirty minute shower at your house?
Coffee time now!!!

Cautious consumers, trade curb U.S. growth

A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo. REUTERS/Jim Young/Files

By Lucia Mutikani

WASHINGTON | Fri Jul 27, 2012 9:41am EDT

(Reuters) - Economic growth slowed as expected in the second quarter as consumers spent at their slowest pace in a year, increasing pressure on policymakers to do more to bolster the recovery.

Gross domestic product expanded at a 1.5 percent annual rate between April and June, the weakest pace of growth since the third quarter of 2011, the Commerce Department said on Friday.

First-quarter growth was revised up to a 2.0 percent pace from the previously reported 1.9 percent. Output for the fourth quarter was raised to a 4.1 percent rate from 3.0 percent.

“This is the sign…that policymakers must act to provide more support to the economy if they want it to grow fast enough to start putting sustained downward pressure on today’s still too-high unemployment rate,” said Josh Bivens, research and policy director at the Economic Policy Institute.

The ailing economy could cost President Barack Obama a second term in office when Americans vote in November.

The expansion following the 2007-09 recession is the slowest since the 1980-81 period and the recession itself was the deepest in the post-war period, annual revisions to the data confirmed.

The weak second-quarter reading, which was in line with economists’ expectations, could raise expectations of a third round of bond purchases, also known as quantitative easing, by the Federal Reserve.
…

ft dot com
July 27, 2012 11:44 am
Bundesbank repeats hostility to ECB bond buying
By James Wilson in Frankfurt

Germany’s powerful Bundesbank issued a reminder that it still opposed sovereign bond purchases by the European Central Bank, dampening market optimism after ECB president Mario Draghi hinted he could act more decisively in the eurozone debt crisis.

Senior officials at the German central bank have long been critical of using ECB resources to buy the bonds of struggling countries such as Greece or Spain. The Bundesbank believes that this is against the spirit of the ECB’s statutes, which forbid it to finance states. “There haven’t been any changes” in this position, the bank said on Friday.

Mr Draghi on Thursday raised hopes of such ECB intervention, saying his institution would do “whatever it takes” to halt the crisis. He argued the ECB could be justified in acting to curb excessive sovereign bond yields because they were a problem for its implementation of normal monetary policy.

The euro fell on Friday following the remarks from the Bundesbank, reversing strong gains following Mr Draghi’s comments.
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More
Investor fears rise over Spain
ECB ‘ready to do whatever it takes’
Moody’s warns eurozone core
Global Market Overview Easing eurozone fears lift growth assets
Spanish unemployment hits record high

July 27, 2012, 10:19 a.m. EDT

Fresh insight into U.S. recession, aftermath
Downturn not as severe, recovery not as fast as prior data showed
By Jeffry Bartash, MarketWatch

WASHINGTON (MarketWatch) — The recession of 2007-2009 wasn’t quite as deep and the ensuing recovery wasn’t nearly as fast as initially believed, according to newly revised government data.

The American economy contracted by 4.7% from the fourth quarter of 2007 to the second quarter of 2009, the Commerce Department reported Friday. Previously the economy was estimated to have shrunk by 5.1%.

The last downturn was still the deepest since the Great Depression, however. The next-biggest contraction was during 1957-58, when the economy shrank by 3.7%.

The updated statistics were released Friday by the Commerce Department as part of its annual revisions of U.S. growth data in prior years. The latest revisions cover the years 2009 to 2011 and incorporate more accurate figures from the Internal Revenue Service and other sources.
…

Some people don’t like Trex very much

http://trex-decking-review.blogspot.com/

So if businesses aren’t really built by business owners and are instead built by the govt as our Dear Leader said, does that then mean Romney didn’t build up Bain after all? And does that then mean all of Obama’s Bain attacks are actually attacks on the govt?

Folks - Not sure it ever left, but I can say with certainty that the housing bubble is back with a vengeance in Los Angeles.

Via anecdotal conversations, these low interest rates have everyone foaming at the mouth again to buy property.

Insane.

Message from my former landlord who is also a realtor(tm) :

“Prices have begun to move up, and demand is good- multiple offers are common on properties that are priced to the market. It would be a shame to miss the market; what do you think, is it time for you all to buy now?”

Just got back from a Trustee Sale. The house we were going to bid on was postponed at pos (point of sale). No notice on foreclosure website we subscribe to.

A regular “heavy hitter” (aka flipper) when asked a questions replied “I am an evil captialist”. Nasty contruction slugs with attitudes all over the place. My definition of a capitalist must be different from theirs.

The expensive stuff $300K+ - $450K stuff went back to the bank. The Trustee Reps were authorized to represent the Beneficaries and got the bidders to increase their winning bid price. Most of the actives turned to postpones today. Everyone is trying to extend to Ca HomeMoans Bill Of Right effective Jan 13th, 2013.Free ride for all FBs.

It was our 3 time at an auction.

renter nation

“The supply of empty homes for rent is falling, and the nation’s homeownership rate is hovering near a fifteen year low.

How can that be when the housing market is finally turning around and more homes are selling?

The answer is simple: Investors.

The nation’s home ownership rate ticked up a statistically insignificant basis point, from 65.5 percent in the first quarter of this year to 65.6 percent in the second quarter, according to the U.S. Census Bureau. Q1 was the lowest home ownership rate since 1997 and is down from the peak of 69.4 percent in 2004.

[More From CNBC: The Most Expensive American Cities to Rent]

Given that home sales improved significantly during the first half of this year, you would think that home ownership rate should have surged higher, but the rate is calculated using only owner-occupied homes. If an investor buys one home or 100 homes, those homes are not even put into the calculation because they owner doesn’t live in the homes. Realtors estimate around 20 percent of homes sales are currently to investors, but given bulk deals offered by the government and banks on foreclosed properties, that percentage is likely higher.

“The very modest increase in the homeownership rate in Q2 does not persuade us to alter our view that the share of the population who own their home will fall further over the next couple of years,” writes Paul Diggle of Capital Economics. “Meanwhile, supply conditions in the rental market are tightening, with a falling proportion of single and multi-family rental homes vacant.”

Rental vacancies in fact fell to their lowest rate since 2001. That is why so many investors are rushing in to buy distressed properties. The rental market his hot and getting hotter. Average asking rent rose 5 percent from a year ago, though they are down slightly from the previous quarter.

Happy Campers: The Great Outdoors is the theme of the August 2 Odyssey Storytelling show. I’ll be sharing a story from my bicycle travels through all 50 of the United States. Performance is 7:00 p.m. at Fluxx Studio and Gallery, 416 East 9th Street, Tucson.

Hope to see some HBB-ers there!

While we are discussing the “Free S**t Army”

Nothing beats Title IX in NCAA college athletics for transferring funds from poor black males, to “pull yourself up by your bootstraps with daddy’s money and influence”, richy-rich, Caucasian females.

A brief review of our local Big 12 “Equestrian Team”, all 57 of them. Most of them on scholarship, plus the horses, the state of the art barn, transportation to shows, etc. etc.

Of the first 10-12 girls on the team (none, nada, zero of them minority), I searched for the occupations of their parents:.

-A doctor in Arizona,
-A “Medical Specialist” in Oklahoma
-an LAPD sargeant
-a building contractor in Illinois
-a landscaping contractor in Michigan
-a “ranch property manager/owner” in Colorado
-a CPA in New York
-a manager with Monsanto in Missouri
-farmers in Kansas and North Carolina

I could review all 57, but you see my point.

I’m betting they are all Romney Republicans.

Uncle Tom signs over $ millions more to his Masters

Looks like Socialism, Asset Inflation and Weak Dollar Policies are here for keeps!

“Obama Pre-Empts Romney’s Israel Visit With Security Aid Bill Signing”
http://www.npr.org/blogs/itsallpolitics/2012/07/27/157483260/obama-pre-empts-romneys-israel-visit-with-security-aid-bill-signing