Monday June 2 Housing and Economic stories

Top Stories:

Pension Funds Defend Commodity Investments - (online.wsj.com) – Ken comment: US Politicians are setting a dangerous precedent of trying to blame “speculators” (instead of their own policies) for energy prices and prevent any energy investment trading. By trying to prevent “profiteering”, they are basically challenging the free market. Isn’t the whole premise of a free market to make a profit? If they close the US market to energy futures trading, this trading will move to other futures markets including Dubai, Iran, Venezuela, Europe and other markets that are more investor friendly. Funny how politicians allow bubbles to form in stock market and real estate, but demonize investors for energy price rises.
Kohn Signals Wall Street May Get Permanent Access to Fed Loans - (www.bloomberg.com) ``If you are a bondholder in one of these Wall Street firms, you know you have a big `Sugar Daddy' now called the Federal Reserve that's going to back you up,'' said Jeff Pantages, chief investment officer of Alaska Permanent Capital Management in Anchorage, which oversees $1.8 billion in assets. ``But if you are a stockholder this kind of worries you'' because investment banks ``will be more highly regulated and won't be able to use leverage as much as'' before, he said.
Bad Omens for Banks? - (www.businessweek.com) - News from KeyCorp suggests U.S. banks' loan losses may worsen. Is the credit crisis hitting a second, even scarier phase?
Foreclosure Phil - (www.motherjones.com) - Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today's subprime meltdown. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."
Bankruptcy Reform Act Finally Blows Sky High - (Mish at globaleconomicanalysis.blogspot.com) - “I argued some time ago that the whole point of stated income lending was to make the borrower the fall guy: the lender can make a dumb loan--knowing perfectly well that it is doing so--while shifting responsibility onto the borrower, who is the one "stating" the income and--in theory, at least--therefore liable for the misrepresentation.” And the reason this was carried to such an extreme was the debt slave act of 2005 in conjunction with absurd interest rate policy at the Fed, the Fed's direct sponsorship of ARMs and derivatives, and the "Ownership Society" of the Bush administration. All of which are also blowing sky high right now.
Libor Banks Lied About Interest Rates - (www.bloomberg.com) - Banks routinely misstated borrowing costs to the British Bankers' Association to avoid the perception they faced difficulty raising funds as credit markets seized up, said Tim Bond, a strategist at Barclays Capital. Discrepancies in the rates that banks quote are creating a crisis of confidence in the London interbank offered rate, the benchmark for 6 million U.S. mortgages and more than $350 trillion of derivatives and corporate bonds. In the first four months of 2007, the difference between the highest and lowest rates for three-month Libor didn't exceed 0.02 percentage point, according to JPMorgan Chase & Co. In the same period this year, it was as wide as 0.17 percentage point.
First Housing, Now Oil - (www.businessweek.com) - The double whammy of rising oil prices and plunging home prices could turn a mild recession into something more threatening
House prices falling faster than during Great Depression - (www.economist.com) - “A DESTABILISING contraction in nationwide house prices does not seem the most probable outcome...nominal house prices in the aggregate have rarely fallen and certainly not by very much.” Alan Greenspan's soothing, if rather verbose, words on America's housing market in 2005 rank high on history's list of infamous predictions. But to be fair, most American economists shared his view that it was highly unlikely that average nationwide home prices would drop. That was the sort of thing that happened only during a deep depression, like the 1930s.
Ford Gets Sideswiped by Credit Unit – (online.wsj.com) – Title of the story is a bit misleading. Ford was carried by credit unit as it financed all the car purchases for years. It was an accident that any halfway intelligent person could have predicted.
New Overdue Home Loans Swamp Effort to Fix Mortgages in Default - (www.bloomberg.com)
Warning: Credit Default Swaps May Not Work As Advertised - (www.ml-implode.com) - "The CDS contract and the entire Structured Credit Market originally was predicated on hedging of credit risk. Over time the market changed focus – in Mae West’s words: “I used to be Snow White, but I drifted.” The ability to short credit, leverage positions and trade credit unrestricted by the size of the underlying debt market have become the dominant drivers of growth in the market for these instruments
The new American investor - (www.ml-implode.com) - Two years ago, Lilia Garcia and her husband, Jesus, bought their dream house in Linden, Calif., for $535,000 and financed it in part by taking out a bigger loan backed by their previous house in nearby Stockton. They decided to hang onto the Stockton house and rent it out, believing that it would more than pay for itself and could be sold years in the future to help pay for college for their two children. This comment tells you about all you need to know about the plight of the Garcias who, like many others a few years back, borrowed against the equity in one house to buy an even bigger and better one thinking that perpetually rising real estate prices would make them wealthy.


Other Stories:

Feldstein Says U.S. Economic Indicators 'Pointing Down' - (www.ml-implode.com) - Check out the video.
The Sham of our Current Unemployment Rate Numbers: Lessons from the Great Depression - (www.ml-implode.com) - ``Unemployment is understated by underemployment and shadow workers (those that have given up looking for work). It also does n...
Being Owned By the Ownership Society in California: How Housing and Credit Came Crashing Down. - (www.ml-implode.com) - ``The problem with this ownership society isn’t necessarily the overall gist or philosophy but how it was approached.''
Ailing: Downey Savings & Loan hit by Class Action suits, Shares drop - (www.ml-implode.com) - We've been watching Downey Savings and Loan slide downhill for some time now. In recent news, a rash of shareholder class action...
Mortgage REIT Insider: Impac Gets Creative in Face of Cash Crunch - (www.ml-implode.com)
Bloomberg's Weird Numbers - (www.ml-implode.com)
KB Homes: U.S. Home Prices Will Drop 10% More - (www.ml-implode.com)

Realtors, Prepare to Lose Your 6 Percent - (www.seekingalpha.com) – Does any industry do less to earn their paycheck???? Not in my opinion.
Second house is tax time bomb - (www.nytimes.com)
S&P Downgrades $34 Billion of Alt-A Securities - (www.bloomberg.com)
U.S. Consumer Spending Rises 0.2%; Prices Excluding Food, Fuel Climb 0.1% - (www.bloomberg.com)
Fed's Fireman Feels Some Heat - (online.wsj.com)
Consumers Expect Higher Prices - (online.wsj.com)
Inflation outlook makes consumers' mood grim - (www.reuters.com)
April insured mortgage defaults rise - (www.reuters.com)
Inflation A Growing Problem For Americans - (www.forbes.com)
Consumers pick home over flying; avoided trips cost economy billions - (www.usatoday.com)
Lessons from the Great Depression - (research.stlouisfed.org)

Inflation - Wary Fed Looks Ahead to Rate Increases - (www.nytimes.com)
Probe of Oil Markets Widens - (online.wsj.com)
Libor Rises Amid Scrutiny - (online.wsj.com)
Gas prices inch closer to $4 while oil gyrates - (www.ap.com)
Liquidity levels hit funds of hedge funds - (www.ft.com)
Sharp Power-Price Rise Hits Texas - (online.wsj.com)
Realty leader expects further price decline - (www.startribune.com)
Libor Fix May Prove Elusive as Banks Offer Solutions - (www.bloomberg.com)
Mounting Costs Slow the Push for Clean Coal - (www.nytimes.com)
Charges of Insider Trading for a Wall Street Luminary - (www.nytimes.com)
The Truth Behind Florida's Housing Numbers - (futurerealestate.blogspot.com)
We're Nowhere Near A Bottom in Housing - (www.huffingtonpost.com)
What About The Other Bubbles? - (www.nuwireinvestor.com)
Dow says country in "true energy crisis"; ups prices - (ap.google.com)
Storms on the Horizon - (www.dallasfed.org)

The Pain Grows at Sears - (online.wsj.com)
GM says a quarter of U.S. hourly workforce will take exit offers - (www.latimes.com)
A giant continues to unravel - (www.chicagotribune.com)
Retailers closing stores - (money.aol.com)
Survey: Americans make 41 million fewer air trips - (www.chicagotribune.com)

European Inflation Accelerates More Than Forecast - (www.bloomberg.com)
High gas prices hit consumers worldwide - (www.ap.com)
ECB's Draghi Says Record Oil Prices `Limit' Monetary Policy - (www.bloomberg.com)
Britons' Confidence Reaches Lowest Level Since Thatcher Quit - (www.bloomberg.com)
Vietnam Inflation Crisis Is Feared - (online.wsj.com)
Inflation Asia's biggest concern: think tank - (news.yahoo.com/s/afp)
Irate Europeans Protest the Soaring Price of Gasoline - (www.nytimes.com)
Data points to grim outlook for Japanese economy - (www.marketwatch.com)
India's GDP Growth Holds at Slowest Pace Since 2005 - (www.bloomberg.com)
Double, double, oil and trouble - (www.economist.com)