Tuesday July 1 Housing and Economic stories

Top Stories: Do these look like healthy bank/lender stock charts? (click on chart for larger view)

Ron Paul on Federal Reserve and Inflation - (www.youtube.com) New Ron Paul video from 6/25/08 on Fed Reserve meeting results.

Is IndyMac on the verge of Bankruptcy? Stock falls below $1 after being hit with a run on the bank on Saturday
· After some depositors pull funds, IndyMac responds to latest rumors about its health; says it's working with regulators - (latimesblogs.latimes.com) Pasadena-based mortgage lender IndyMac Bancorp, battling fresh rumors that it is near collapse, conceded today that its financial position "has deteriorated since last quarter," and said it was working on a plan with its regulators to improve "the safety and soundness" of the bank.
· Late Day Update: Indymac Closes Commercial Unit, Depositors Withdrawing Funds - (www.ml-implode.com) - At 5:45 pm (EST), the following email was sent to customers of Indymac's commercial lending unit, Indymac Commercial Lending Corp.:
"ICLC, due to the current market and capital constraints has ceased lending operations as of 7/1/08. A formal announcement from ICLC will be coming out tomorrow regarding details and loans in process." Referring to today's press release on The IMB Report, Indymac's company web site, an LA Times report refers to "a weekend that saw depositors line up at some of its San Gabriel Valley branches to pull their money, as they reacted to news reports questioning the company's survival." Indymac's article responds with "while branch traffic is somewhat elevated this morning, it is substantially lower than on Saturday, and we are hopeful that this issue appropriately abates soon..."
· Schumer: concerned over IndyMac stability - (www.ap.com)
· [$$] Schumer Asks Regulators For Greater IndyMac Scrutinyat - (us.rd.yahoo.com/finance/external/wsj)
· CRL: Indymac Dug Its Own Grave - (www.thetruthaboutmortgage.com) - The Center for Responsible Lending has impeccable timing, considering the fact that Indymac is trading at its lowest point ever amid mounting solvency concerns.The group released a 22-page report today outlining the Pasadena, CA-based mortgage lender’s failings, accusing the company of “unsound and abusive lending” during the recent boom. The report includes interviews with former employees, which among other things, claim Indymac padded borrower income, used bogus appraisals, worked with misleading mortgage brokers, and treated minorities and the elderly unfairly.
· IndyMac Update: Shares Down On More Bad News - (www.ml-implode.com)


Will Lehman Brothers suffer the same fate as Bear Stearns? It will likely (within next month) be bailed out by the Fed or Barclays
· Lehman falls on talk of possible sale to Barclays - (www.ap.com) - Lehman Brothers Holdings Inc. shares fell sharply (over $2.4/share) Monday amid speculation that the nation's fourth-largest investment bank might be acquired by Britain's Barclays PLC at a discount price.
· Lehman up after Morgan Stanley's overweight rating - (www.reuters.com) – Yet Morgan Stanley changes rating to “overweight”. We should know in less than a month if MS was unethically trying to protect their interest or if Lehman gets acquired at $31/share.
· [$$] Lehman Hits Lowest Level Since 2000 Amid Buzz - (us.rd.yahoo.com/finance/external/wsj)









And how about Wachovia. Prediction is Wachovia will be acquired (or liquidated) in the next 2 months:
· Wachovia Drops On News of Possible $5 Billion Buyback - (www.bloomberg.com) Wachovia Corp., the fourth-largest U.S. bank, fell the most in two months after the New York Post said the company may have to buy back Prudential Financial Inc.'s stake in their joint retail brokerage venture.
· Wachovia halts mortgages with negative amortization featuresat MarketWatch(Mon 5:28pm) – (www.marketwatch.com)
· Wachovia eliminates pick-a-pay loansat bizjournals.com(Mon 5:25pm) – (www.bizjournals.com)
· ALERT! Wachovia Cries ‘UNCLE’ on the Pay Option ARM - (www.ml-implode.com)

Court Ruling Could Shock Entire U.S. Mortgage Industry - (www.ml-implode.com) - A lawsuit filed by a Wisconsin couple against their mortgage lender could have major implications for banks should a U.S. appeals court agree that borrowers can cancel their loans en masse when their lenders violate a federal lending disclosure law.
BIS slams central banks, warns of worse crunch to come - (www.telegraph.co.uk) A year ago, the Bank for International Settlements startled the financial world by warning that we might soon face challenges last seen during the onset of the Great Depression. This has proved frighteningly accurate. The venerable body, the ultimate bank of central bankers, said years of loose monetary policy had fuelled a dangerous credit bubble that would entail "much higher costs than is commonly supposed". In a pointed attack on the US Federal Reserve, it said central banks would not find it easy to "clean up" once property bubbles have burst. If only we had all listened to the BIS a long time ago. Ensconced in its Swiss lair, it has fired off anathemas for years, struggling to uphold orthodoxy against the follies of modern central banking. Bill White, the departing chief economist, has now penned his swansong, the BIS's 78th Annual Report, released today. It is a disconcerting read for those who want to hope the global crisis is over. "The current market turmoil is without precedent in the postwar period. With a significant risk of recession in the US, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point," it said. "These fears are not groundless. The magnitude of the problems yet to be faced could be much greater than many now perceive," it said. "It is not impossible that the unwinding of the credit bubble could, after a temporary period of higher inflation, culminate in a deflation that might be hard to manage, all the more so given the high debt levels."
Next Victim of Real Estate Bubble: Government - (www.businessweek.com) - State and local governments were flush with tax revenue during the five-year housing boom. They pulled from bulging pools of property, income, and sales tax to expand education, law enforcement, health care, and infrastructure programs without needing to burden residents and corporations with tax hikes. Those days are over. Home prices are falling, and foreclosures, gas prices, unemployment, and inflation are on the rise. At least 29 states, plus the District of Columbia, reported budget shortfalls that total about $48 billion as they finalized their 2009 fiscal budgets, which typically begin July 1, according to the Center on Budget & Policy Priorities.
Credit crisis fallout to limit houseowner spending - (www.reuters.com) "(U.S.) household spending now seems likely to weaken in response to high debt and service burdens, falling employment and the general tightening of credit conditions," it said.
A growing trend of negative equity -- where falling house prices leave homeowners with a mortgage bigger than their property's value -- is also expected to corset the borrowing ability of U.S. households. In some parts of the United States, houses have halved in value over the last two years as the property bubble has popped and mortgage defaults surge while builders flood already saturated markets with new properties. "As housing prices fall and credit conditions tighten, (more) such loans are likely to default because borrowers have few alternative financial resources," BIS said.
The Greenspan Gamble - (www.rgemonitor.com) it appears to me that the "Super Fed" could actually happen. Many of the other changes require consolidation of regulatory agencies, and bureaucracies seldom go gently into that good night. They and their constituents will fight for survival and probably win. But the Fed expansion is likely to be seen as the solution the problem of risk that the housing bust has made apparent. But wait. Isn't this the same Fed whose 1 percent fed funds rate helped inflate the great Housing and Mortgage Bubble that is now popping? Didn't this lead to massive losses, illiquidity, and panic? Wasn't the bubble exactly the sort of systemic risk that the new, more powerful Fed is expected to effectively manage?



Other Stories:

Deflationary Hurricanes to Hit U.S. and U.K. - (Mish at globaleconomicanalysis.blogspot.com) British households are now more indebted than those of any other major country in recorded history, it has emerged. Families in the UK now owe a record 173pc of their incomes in debts, official figures have shown. The ratio of debt to income is higher than any other country in the Group of Seven leading industrialised economies, and is sharply higher than the 129pc of incomes it was five years ago.
OPEC pres sees oil at $170 this year, blames Fed - (www.marketwatch.com)
28 in Michigan Charged With Mortgage Fraud - (www.ml-implode.com)
The end of the superbubble - (articles.moneycentral.msn.com)
FL Joins List Of States Lining Up With Suits Against Countrywide - (www.ml-implode.com) - Florida sued mortgage lender Countrywide Financial Corp for predatory lending practices on Monday, alleging the company at the c...
Central Bank Schizophrenia - (www.ml-implode.com) - "What is Ben Bernanke to do? Since his job is simultaneously to avoid recession while protecting against inflation, and right no...
Is Any Company Safe from Subprime Related Lawsuits? - (www.ml-implode.com)
California Under Schwarzenegger Underperforms Davis Debt Burden - (www.bloomberg.com) As the most populous U.S. state, with a gross domestic product that's No. 8 in the world, California is so strapped for cash that it must consider a short-term, $10 billion loan to cover its bills. The widening deficit means the financing may be about 0.85 percentage point more expensive than five years ago, when Davis lost his job over a budget gap twice as large as the $17 billion deficit the state now faces. That's an added $8.5 million on every $1 billion borrowed.

Consumers fail to save despite the gloom - (www.ft.com)
Subprime, Alt-A Bonds to Extend Drop as Banks Retreat - (www.bloomberg.com)
Homeowners Fall Further Behind on Mortgage Payments, Group Says - (www.bloomberg.com)
Engineering the Housing Bubble Through Monthly Payments - (mrmortgage.ml-implode.com)
Lenders create a bankruptcy monster - (articles.moneycentral.msn.com)
Crash not be an altogether bad thing - (www.atimes.com)
Lehman Selling Archstone - (patrick.net)
Second-Largest New England City Seeks Foreclosure Moratorium - (www.ml-implode.com)
Is Oil Having an Impact on Housing? Taking a Look at Los Angeles County - (www.ml-implode.com)
Mr Mortgage: Engineering the Housing Bubble Through Monthly Payments - (www.ml-implode.com)
Who owns my mortgage? - (msnbc.msn.com)
You ain't seen nothing yet - (www.informationclearinghouse.info)
Gloom and Doom? Nah; Just for the U.S. - (online.barrons.com)
One bullish American economist amid growling bears - (www.telegraph.co.uk)
Is Oil Impacting Housing? Look at Los Angeles County - (www.mybudget360.com)
Will the USA Invade Canada For Its Oil? - (www.sandersresearch.com)
Economist describes why inflation hits harder now - (www.marketwatch.com)

Hoarding Nations Drive Food Costs Ever Higher - (www.nytimes.com)
One Rebate Isn’t Enough - (www.nytimes.com) , Shiller
World needs tough monetary policy to tackle inflation - (www.reuters.com)
Northeast braces for home heating oil increases - (www.usatoday.com)

Banks seek market-based pricing scheme - (www.ft.com)
MBIA Has Sufficient Assets to Meet Collateral Call - (www.bloomberg.com)
Legg Mason Support for Money Funds to Cut Earnings by 64 Cents - (www.bloomberg.com)
Businesses Scramble To Offset Rising Cost Of Transportation - (online.wsj.com)
Small US banks feel the pinch - (www.ft.com)

European Prices Rise More Than Forecast as Oil Surges - (www.bloomberg.com)
China Stocks Fall; Benchmark Index Completes Worst Month Ever - (www.bloomberg.com)
Eurozone inflation jumps to 4% - (www.ft.com)