KeNo's Housing and Economic Portal: Friday February 19 Housing and Economic stories

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TOP STORIES:

Fannie and Freddie are dead. What's next? - (www.fool.com) "This committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance; that's the approach, rather than the piecemeal one." -- Rep. Barney Frank, Jan. 22, 2010. What if Frank isn't just talking out of his rear, and Fannie Mae (NYSE: FNM)and Freddie Mac are really on a path to being put out of their misery? What would happen? Your guess is as good as mine. Frank offered exactly zero details. Logically, major overhaul of Fannie and Freddie would either be:

- A complete eradication of their roles, ending government-backed mortgage securities and loan insurance.

- A continuation of their current roles, but only after being brought 100% onto the government's books.

Fed Gave Banks Access To $23.7 trillion Not $700 Billion! - (www.youtube.com)

Risky Trading Wasn't Just on the Fringe at A.I.G. - (www.nytimes.com) Ever since the American International Group nearly collapsed, the conventional wisdom has been that the exotic derivatives that drove it to the brink were the product of a lone, unregulated subsidiary in London. The Federal Reserve chairman, Ben S. Bernanke, called the London branch “a hedge fund, basically, attached to a large and stable insurance company.” But the suggestion that A.I.G.’s core insurance business did not dabble in derivatives is not quite true. One of its biggest insurance units, incorporated in Delaware, was also dealing in the derivatives known as credit-default swaps, according to regulatory filings with the state. Though the Delaware division had a much smaller portfolio of those swaps than the London unit, and its portfolio did not pose a similar risk to the world financial system, the very presence of the swaps in a regulated insurance company points to a weakness in insurance oversight. There is a continuing dispute over whether such swaps are insurance products or something else; who, if anyone, should regulate them; and whether insurers should have to set aside reserves to secure the promises that swap contracts make. A.I.G.’s insurance business did not set aside such reserves.

Top 5 cities where house prices are plummeting - (www.realestate.msn.com) Some metros have it worse than others. San Diego has seen the greatest three-month drop in asking prices of the 27 markets Altos tracks, falling 7.3% between October and December 2009. In that city, volatility is the name of the game. Prices drifted upward for the first half of 2009, prodded by new sellers who were encouraged by modest bumps in pricing. But when fall's seasonal slump hit, the trend reversed dramatically. Although home prices are always weakest in the fall — they typically peak in the spring and hold steady through the summer — Altos' numbers reflect an unsteady market in general. Its 10-city composite, which it uses as a proxy for the national market, shows a 1.4% drop since October. When stimulus measures like the first-time homebuyer tax credit (which expires in June) and historically low interest rates abate, the market could continue to suffer.

Foreclosures continue unabated in San Luis Obispo - (www.sanluisobispo.com) Foreclosure activity has not abated in San Luis Obispo County, a signal that many homeowners here remain stressed. Notices of default – the first step in the foreclosure process – increased 41 percent during the fourth quarter of 2009, compared to the same quarter the previous year, according to DataQuick Information Systems, a San Diego-based real estate information and tracking firm. A total of 436 notices of default were filed during the fourth quarter, up from 309 during the fourth quarter of 2008. The number of houses and condominiums lost to foreclosure also increased during the fourth quarter. A total of 245 trustees deeds were recorded in the county in the final quarter of 2009, compared to 182 in the same period the previous year. That’s a nearly 35 percent jump from the fourth quarter of 2008. Notice of default activity slowed somewhat from the third quarter of last year. A total of 539 notices of default were recorded in the third quarter of 2009, a nearly 46 percent increase from the same quarter in 2008 when 370 were recorded

Stanford Tops Harvard as College Donations Fall Most Since ’69 - (www.bloomberg.com) Donations to U.S. colleges and universities fell by 12 percent, the most in at least four decades, as a result of the recession, the Council for Aid to Education said. Contributions totaled $27.9 billion in the year ended June 30, down from $31.6 billion the year before, according to the report released today. The survey used data from 1,027 colleges. The nationwide drop in donation revenue, the largest since at least 1969, hurt colleges already suffering from investment losses and pressure to moderate tuition increases, said Ann E. Kaplan, the survey director. Companies, foundations and alumni had less capacity to give, she said. With the economy and equities doing better this year, colleges now may see a recovery in donations, Kaplan said. “If the relationship between the stock market and gifts continues to follow historical trends, then 2010 should be a better year and giving should start to rebound,” said Kaplan, whose employer is a nonprofit organization based in New York. Stanford University topped Harvard University in fundraising for the fourth year in a row. Stanford’s donations declined 19 percent to $640.1 million, while Harvard’s fell 7.5 percent to $601.6 million, according to the survey. Stanford raised the most of any university and Harvard was No. 2 in all four years.

Surface geniality belies ‘Volcker rule’ frustration - (www.bloomberg.com) The administration has done a decent job in the past couple of weeks at papering over the gaps and unanswered questions on the so-called “Volcker rule”. Even Paul Volcker, who is old enough and independent-minded enough to cross the White House and Treasury when he feels like it, on Tuesday stressed that President Barack Obama’s unexpected endorsement of his bank separation initiative was not a political reaction to a lost election. “I know personally he decided this some weeks before and he’d been discussing what day to announce it long before Massachusetts,” Mr Volcker, the former Federal Reserve chairman, told the Senate banking committee. In mostly genial exchanges with senators from both parties, Mr Volcker and Neal Wolin, the deputy Treasury secretary, said an outright ban on proprietary trading by banks was the way to go, coupled with a new size cap. But this surface unanimity belies a great deal of frustration in the Senate at the lateness and lack of detail in the Obama announcement and Chris Dodd, the Democratic chairman of the banking committee, laid it bare at the end of Tuesday’s hearing. “It [the financial regulatory reform bill] is not a moveable feast,” he told the two witnesses. “It’s not one I can add ideas to on a weekly basis. It does come up late. [It] seemed to many to be transparently political and not substantive.”