Monday August 25 Housing and Economic stories

Top Stories:

Columbian Bank and Trust of Kansas Shut by Regulators - (www.bloomberg.com) – Another Friday night take-over by the FDIC most likely to try and minimize news coverage. Columbian Bank and Trust Co. of Topeka, Kansas, was closed by U.S. regulators today, the ninth U.S. bank to collapse this year amid bad real-estate loans and writedowns stemming from a drop in home prices. The bank, with $752 million in assets and $622 million in total deposits, was shuttered by the Kansas state bank commissioner's office and the Federal Deposit Insurance Corp., the FDIC said today in a statement. The pace of bank closings is accelerating after financial companies reported more than $500 billion in writedowns and credit losses since the start of 2007. The FDIC's ``problem'' bank list grew by 18 percent in the first quarter from the preceding three-month period, to 90 banks with combined assets of $26.3 billion.

GM, Ford Seek Taxpayer Bailout - (globaleconomicanalysis.blogspot.com) Presidential candidate and presumptive Republican nominee Sen. John McCain today gave his support to the proposal. "Our auto companies are rising to the challenge building the next generation of American cars, but are doing so in times when credit conditions cripple the funding for the facilities and technologies to take the steps to the future," he said in an e- mailed statement. "We should fund it and take action that will assist Detroit and its suppliers in making it through this difficult time of transition," he said in the statement. My Comment: McCain is a fool and if Obama supports this mess he is too. GM and Ford are perpetually in a state of "transition", losing money on every car produced all along the way. There is no evidence that GM or Ford is rising to any challenge. Both overly relied on trucks, SUVs, and ridiculous concepts like the Hummer. Market share of both is collapsing, and rightfully so. Besides, GM is not really a manufacturing company at all, but rather a subprime lender that sells cars. The market for subprime has dried up so GM needs another "transition". GM had a miracle opportunity to dump GMAC and Rescap at absurd prices and failed to do so. GM executives are clearly incompetent. Yes, GM has some battery technology, but had GM focused on that instead of SUVs and subprime financing, it would be better positioned now. But the key issue is the marketplace and market competition is what should be leading the way, not taxpayer sponsored bailouts. "This is a horrible idea, another transfer of funds to failed ventures," said David Littmann, senior economist for the Mackinac Center for Public Policy in Midland, Michigan, which describes itself as a supporter of free-market ideals. "If this were a good idea, the market would price the debt accordingly and give them the money." "We've seen these kinds of bailouts for the financial companies, why not the automakers?" said Aaron Bragman, a Troy, Michigan-based auto analyst for Global Insight Inc. "The big problem is that a lot of people in Washington don't see a value in the U.S. auto industry because they have a foreign plant in their district that is doing just fine."

GM, Ford Seek $50 Billion From U.S., Double Request - (www.bloomberg.com) General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles. The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.

Lehman, Treasury, Fed Have Lost Control Of The Game - (globaleconomicanalysis.blogspot.com)
Ten Financial Entities On The Brink - (globaleconomicanalysis.blogspot.com)

Fannie Doesn’t Want New York Subprime, Either - (www.housingwire.com) - Following in the footsteps of Freddie Mac (FRE: 2.81 -11.08%), Fannie Mae (FNM: 5.00 +3.09%) said earlier this week that it would no longer purchase subprime loans fitting New York State’s new definition for the credit class. The decision by bth GSEs to exit subprime loan purchases in New York comes on the heels of new legislation designed to protect borrowers from predatory lending practices. “Fannie Mae will not purchase or securitize any mortgage loan that meets the definition of a subprime home loan under New York law, regardless of whether any provision of the law is preemptedparticular mortgage or for a particular originator,” senior vice president Michael Quinn wrote in a seller bulletin dated Aug. 19.
Quinn suggested that New York’s new definition of subprime falls under what the GSE sees as “high-cost” or “high-risk” home loans, and said that Fannie has had a long-standing policy of not purchasing such loans for securitization or for its retained portfolio. See the full letter. One of HW’s sources didn’t buy Neiman’s bluster, however. “Fannie and Freddie didn’t purchase a lot of subprime, as he suggests, but it’s also true that the GSEs are the only game in town right now,” said the source, a bank executive. At least one subprime lender is still making loans in New York State, as far as we know: the Federal Housing Administration. Which makes for an interesting twist: a state government passes tight restrictions and new liabilities for lenders making “subprime loans” within the state, and the federal government then becomes the only lender willing to make such a loan.

San Diego foreclosures hit new record in July - (www.signonsandiego.com) Those waiting for signs that the housing slump is nearing an end were disappointed Thursday, as MDA DataQuick reported 2,004 San Diego County homes went into foreclosure in July, a 9 percent increase over June and a jump of nearly 213 percent over last year. The July foreclosure tally was a record high since DataQuick began monitoring mortgage failures in 1988. It marked the county's 40th consecutive month of year-over-year increases in both foreclosures and notices of default, the start of the foreclosure process.

Lots of Lousy Houses Are On The Market - (money.cnn.com) - Mold, maggots and piles of festering trash - no wonder home prices are in freefall. It’s not just the subprime mortgage crisis that’s to blame for plummeting home prices. A flood of squalid properties on the market is helping to exaggerate the post-bubble price declines. "Part of the reason home prices are declining is a fundamental deterioration in the housing stock," said Glenn Kelman, CEO of the online, discount broker Redfin. "During the boom, nine out of 10 houses for sale in many markets were in prime condition. Now, for every 10 houses, at least three are dogs." Most of these mutts are foreclosed properties that have been permitted to fall into disrepair by lenders overwhelmed with thousands of vacant homes. If these houses sell at all, they’re going for bargain basement prices that are hurting home values throughout the neighborhood. "I’ve never seen so many houses in this condition before," said Ray Anderson of Buyer’s Advantage Real Estate in Auburn Calif., near Sacramento. "And I’ve been in the business 20 years. I’ve seen bank-owned properties in the past. They were never like this."

That Student Loan, So Hard to Shake - (www.nytimes.com) Then there is Alan Collinge, who for years has described his struggle with tens of thousands of dollars in student loan debt to anyone who will listen. He has appeared on “60 Minutes” criticizing Sallie Mae, the nation’s largest student lender, and has been quoted in the pages of this and other newspapers attacking loan companies. Student lending is a big business, one that has been the subject of many complaints over the past two years after revelations of questionable ties between lenders and colleges’ financial aid officers. More recently, tight credit markets raised the possibility that some students might not be able to borrow to go to college in the fall. But much less attention has been paid to what happens to students after they borrow. Lenders who make loans guaranteed by the federal government can more easily take steps against borrowers — like garnishing wages and benefits — than they can with other kinds of unsecured consumer debts. And all student loans, federally guaranteed or not, are extremely hard to get rid of in bankruptcy proceedings, more so than credit card or other debt.

Hedge fund Ore Hill limits redemptions - (www.reuters.com) Hedge fund Ore Hill Partners, which specializes in credit strategies, has barred clients from redeeming their money from its flagship offering, imposing a freeze just as investors clamored for an exit, the company said on Friday. The firm, half owned by Man Group Plc (EMG.L: Quote, Profile, Research, Stock Buzz), the world's largest publicly traded hedge fund, put up a so-called gate provision on its roughly $1.2 billion Ore Hill International portfolio this week, limiting the amount of withdrawals after investors sought the return of roughly $300 million, said an investor who asked not to be identified. Heavy redemptions for September triggered an automatic gate, said Sophie Sophaon, a spokeswoman for the fund. Fund directors are considering what measures to take that will be in the best interest of all investors, she added.

Manhattan looks abroad for property saviours - (www.ft.com) Real estate developers in New York City are stepping up their appeals to foreign buyers to bolster a housing market that is beginning to reflect the sagging fortunes of Wall Street. Stratospheric housing prices in Manhattan, which until recently was one of the few markets in the US that had escaped the housing slump, have long been propped up by foreigners eager to live and invest there. The weak dollar has helped to encourage them still further in recent years. But financial workers - whose annual bonuses (or lack thereof) are an obsession for Manhattan's property brokers - are facing job cuts and an uncertain future. This has left the city's resourceful brokers working harder to lure foreign investors.

English Families Suffering Because They Believed Realtors - (www.businessweek.com) She turns her swollen face away. Twenty-four years old, King has been fighting the undertow of poverty for a year. Poverty has won. Her mistake lay in believing what banks and politicians in Great Britain have been advising for years. Conventional wisdom was to get a "foot on the property ladder" as quickly as possible. In other words, buy property, and do it early in life. And it was okay, they said, to take out a large amount of credit, because property values would continue to rise, just as they had nearly tripled in the preceding decade. In the past year, however, the trend has reversed. The decrease in property values began in the United States, and in the past few months the phenomenon has reached Spain, Ireland and Great Britain—countries where a building boom produced a housing bubble that is now bursting. After that bubble bursts, the next sound is often a quiet whimper at the kitchen table. With interest rates rising and the value of houses declining, the first to go bankrupt are those who had little capital to begin with and could only receive dubious credit. In the United States it's called "subprime": credit that's risky, second-rate and expensive. For years, banks bundled these credits together and then resold them, making first-rate profits. That bubble, too, has burst. Between March and June alone, 37,740 British homeowners had to turn their property back over to the banks. By the end of the year it's likely to be 75,000. More than a million people in Britain will have difficulties paying off their debt. After 15 years of economic boom, a word is on their lips again that the country thought it had struck from its vocabulary entirely: recession.


Other Stories:

U.S. Mint to Resume Distribution of American Eagle Gold Coins - (www.ml-implode.com) - The U.S. Mint said it will resume limited distribution of its 1-ounce American Eagle Gold coins a week after suspending sales be...
Here They Go Again - (www. wallstreetexaminer.com) - On July 15th I actually posted a glass half full item about subprime suggesting that most of the problems or bad eggs were in the pipeline. If you view the chart and article from June from Bankstocks.com in the post you will see that new delinquencies were fading or burning out on a comparative basis. Now comes new data from July that indicates that a cause of this fade were earlier workouts or restructurings with borrowers. But, now exposed further to the cold reality of even lower housing prices, those are once again falling into trouble. More color is provided here as well.

NY now least affordable market as CA prices fall more - (biz.yahoo.com)

Blogger Threatened By MLS For Exercising Freedom Of Speech - (www.knifecatchers.com)
More lenders stuck with houses - (www.chicagotribune.com)
As values drop, lenders cut house-equity loans - (www.signonsandiego.com)
How Much Will Foreign Banks Lose On US Mortgage Collapse? - (www.clusterstock.com)
Greenback Surges, Euro Shrivels - (www.counterpunch.org)
The Merits of Staying in Cash - (www.seekingalpha.com)
Wholesale Inflation Is Red-Hot! - (www.insidefutures.com)
Are You Ready For Higher Mortgage Rates? - (www.nuwireinvestor.com)
Looking for a bright spot in housing crisis - (www.dailycamera.com)
Forgetting Freddie - (and Fannie) - (www.marketwatch.com)
Speculation nation - (www.salon.com)

"The subprime turmoil: What’s old, what’s new, and what’s next" - (www.ml-implode.com) - "When you think you've read everything worth considering on a given topic, once in a while something comes along to prove you wr...
Freddie's Loss is Gold's Gain - (www.ml-implode.com)
Homebuilders mourn loss of free down payments - (www.ml-implode.com)
Mr. Mortgage: Fannie/Freddie Bailout - Who Gets Thrown Under the Bus? - (www.ml-implode.com)
Update2: Revised - Rescap/GMAC Bank Cuts Balloon Jumbos, Freezes Hiring and Will Eliminate Recruiters - (www.ml-implode.com)
SouthCoast lenders point to benefits and remaining questions in mortgage relief plan - (www.ml-implode.com)
Wells Fargo's Premiere Asset Services: No More SFDPA's, Thank You! - (www.ml-implode.com)
These homes for sale suck - (www.ml-implode.com)
Fannie Mae & Freddie Mac Failure: The Lies, the Cover Ups and the Making of a Disaster - (www.ml-implode.com)

Mexico's growth rate falls short of expectations - (www.latimes.com)
Olympics disappoint China business owners - (www.latimes.com)
Treasury wants GSEs shareholder-owned: source - (www.reuters.com)

U.S. Mint Suspends Sales of American Eagle Gold Coins - (www.bloomberg.com)
Fannie, Freddie and Lehman ensure August is anything but quiet - (www.cfo.com)
More houses return to lender, address unsold - (www.chicagotribune.com)

Inflating the next bubble - (www.ml-implode.com)
Tepper Bought $2.4 Billion of Energy Stocks Before Prices Fell - (www.bloomberg.com)
Bad data used to manipulate natural gas market - (www.chron.com)
Auction-rate securities probe expands to nearly 40 brokerages - (www.latimes.com)
U.S. and Global Economies Slipping in Unison - (www.nytimes.com)
Ex-BOE official says Fed rate cuts went too far - (www.reuters.com)
In the Ruins of the Housing Bust - (www.nytimes.com)
Fed Chairman Urges Broader Market Oversight - (www.nytimes.com)
Inflation Stings U.S. Workers - (online.wsj.com)
Finding the Mess Behind the Mess - (www.nytimes.com)
Bernanke Urges Broader Powers For Central Bank - (www.washingtonpost.com)

Driving Is Down, but Auto Insurance Rates Are Rising - (www.nytimes.com)
Buy American? Foreign companies are doing just that - (www.financialweek.com)
Buffett says economy's troubles will continue - (www.ap.com)
Uncertainty Over Fannie and Freddie - (www.nytimes.com)

Moody's ratings cut latest blow to Fannie, Freddie - (www.reuters.com)
U.S. hotel sales down 81% in first half - (www.chicagotribune.com)
What Will Mac ’n’ Mae Cost You and Me? - (www.nytimes.com)
A Mission Goes Off Course - (www.nytimes.com)