Saturday February 28 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Housing Downturn Moves Into Phase II - (www.newgeography.com) The great housing turndown, which started as early as 2007, has entered a second and more difficult phase. We can trace this to Monday, September 15, 2008 just as October 29, 1929 – “Black Tuesday” – marked the start of the Great Depression. September 15 does not yet have a name and the name “Black Monday” has already been taken by the 1987 stock market crash. The 1987 crash looks in historical perspective like a slight downturn compared to what the world faces today. On September 15 – let’s call it “Meltdown Monday” – the housing downturn ended its Phase I and burst into financial markets leading to the most serious global recession since the Great Depression. Indeed, International Monetary Fund head Dominique Strauss-Kahn now classifies it a depression. Phase I claimed its own share of victims; Phase II seems likely to hit many more. Phase II of the Housing Downturn: The Panic of 2008: By September 15, the “die had been cast.” The holders of mortgage debt could no longer sustain the losses that were occurring in the ground zero markets. This led to the Lehman Brothers bankruptcy and then to a financial sector that seems to be accelerating faster than the taxpayers can pick up the pieces. The ensuing “panic” – a 19th century synonym for a severe economic downturn – has led to millions of layoffs, decreases in demand across the economy and taxpayer financed bailouts around the world. Many have seen their retirement funds wiped out. Others have lost their jobs. American icons, such as General Motors and Bank of America have been relegated to begging on Washington’s K Street. Housing Downturn Broadens and Deepens: The panic has now brought about a new phase in the housing downturn – what I label Phase II. In Phase II, a deteriorating economy starts to kick the bottom out of the rest of the housing market. With evaporating confidence in the economy and the drying up of demand, house prices have begun a free-fall in virtually all markets, regardless of the extent to which their prices had bloated.

The Insolvency of the Fed - (www.mises.org) Yet, has the Fed really "run out of ammunition"? First of all: what is the Fed shooting at? It is trying to artificially stimulate the economy with its monetary policy, thereby it is also unwittingly shooting at the value of the currency. Through its monetary policy, the Fed is trying to bail out an insolvent and illiquid banking system to maintain an unsustainable structure of production. As long as the currency is not totally destroyed, the Fed will never run out of ammunition. In order to assess the ammunition left, one should have a look at the balance sheet of the Federal Reserve — especially at the assets the Fed can still obtain. The Fed's balance sheet also gives insights on the condition or quality of the dollar. Since the crisis broke out, the Fed has continuously weakened the quality of the dollar by weakening its balance sheet. In fact, the assets the Federal Reserve holds have deteriorated tremendously. These assets back the liability side of the balance sheet, which mainly represents the monetary base of the dollar. The assets of the Fed, thereby, hold up the value of the dollar. At the end of the day, it is these assets that the Fed can use to defend the dollar's value externally and internally. Thus, for example, it could sell its foreign exchange reserves to buy back dollars, reducing the amount of dollars outstanding. From the point of view of the buyer of the foreign exchange reserves, this transaction is a de facto redemption. In the first stage of the crisis that lasted until September 2008, the Federal Reserve did not increase its balance sheet. Instead, the Fed changed its balance sheet's structure. These changes are very important for the value of the currency. Imagine that the Fed announces tomorrow that is has sold all its gold and has bought Zimbabwean government bonds with the revenues. The Fed would explain this move by arguing that the stability of the Zimbabwean economy would be crucial for the US economy and the welfare of mankind. This action by itself would not change the quantity of money at all, which shows that concentrating exclusively on the quantity of money is not sufficient to evaluate the condition of a currency. Qualitative issues can be even more important than mere quantities. In fact, an asset swap from gold to Zimbabwean government bonds would mean a strong deterioration of the quality of the dollar

Walking away could save debtors a lot of money - (www.nytimes.com) In a speech in Phoenix, a signature real estate boomtown gone bust, President Obama will explain his plan to reduce foreclosures. And the key to understanding that plan will be remembering that there are two different groups of homeowners who are at risk of foreclosure. The first group is made up of people who cannot afford their mortgages and have fallen behind on their monthly payments. Many took out loans they were never going to be able to afford, while others have since lost their jobs. About three million households — and rising — fall into this category. Without help, they will lose their homes. The second group is far larger. It is made up of the more than 10 million households that can afford their monthly payments but whose houses are worth less than what is owed on their mortgages. In real estate parlance, they are underwater. If they want to stay in their homes, they will have no trouble doing so. But some may choose to walk away voluntarily, rather than continue to make payments on an investment that may never pay off. Scratch beneath the details of any housing bailout proposal, and the fundamental issue is whether it tries to help the second group or just the first. Mr. Obama has evidently decided to focus on the first group, based on the previews of his speech that aides have offered. In coming weeks, his administration will begin spending $50 billion to entice banks to reduce the monthly payments of people who otherwise couldn’t afford to stay in their houses. In effect, the government will split the losses on these mortgages with banks. The $50 billion will come from the money Congress has already allocated for the bailout of the financial system. It is likely to be aimed at people who need a significant, but not an enormous, amount of help to meet their mortgage payments. There are some big advantages to this approach. Bailing out all underwater homeowners would be tremendously expensive. All told, about $500 billion in mortgage debt is already underwater, and it’s impossible to know in advance who is likely to walk away. So the government would have to spend hundreds of billions of dollars to help millions of people who don’t need help staying in their homes. But the Obama approach also brings risks. The administration is betting that few of those 10 million underwater homeowners will walk away. (A year from now, the number will about 15 million, Moody’s Economy.com projects.) If they begin to abandon their homes in large numbers, however, they will aggravate the housing bust and the financial crisis — and probably force the administration to come up with a new, much larger housing bailout down the road.

Banned by Zippy Realtors - (paper-money.blogspot.com) Somewhat funny story showing the power that realtors who control the MLS have. When the user replied to the site that the housing market was still very soft and sales were non-existent, they banned him from the site.

New foreclosure defense: Prove I owe you - (msnbc.msn.com) Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage. "I'm going to hang on for dear life until they can prove to me it belongs to them," said Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. "I'll try everything I can because it's all I have left." In interviews with The Associated Press, lawyers, homeowners and advocates outlined the produce-the-note strategy. Exactly how many homeowners have employed it is unknown. Nor is it clear how successful it has been; some judges are more sympathetic than others. More than 2.3 million homeowners faced foreclosure proceedings last year and millions more are in danger of losing their homes. On Wednesday, President Obama will unveil a plan to spend at least $50 billion to help homeowners fend off foreclosure. Chris Hoyer, a Tampa lawyer whose Consumer Warning Network Web site offers the free court documents Lovelace used to file her request, has played a major role in promoting the produce-the-note strategy. "We knew early on that the only relief that would ever come to people would be to the people who were in their houses," Hoyer said. "Nobody was going to fashion any relief for people who have already lost their houses. So your only hope was to hang on any way you could."

It May Cost Taxpayers Less to Let GM Fail - (www.cnbc.com) Obama's housing plan is bound to rile the Republicans, says Joe Magyer, senior analyst at The Motley Fool. He also tells CNBC's Martin Soong & Amanda Drury that it may actually cost the U.S. taxpayers less, to allow GM to go bankrupt then the automaker alleges.

Venezuela Takes Over Local Stanford Bank - (www.cnbc.com) Venezuela took control of a local bank owned by Allen Stanford, who faces U.S. fraud charges, the finance minister said on Thursday, as the impact of the American case spread through Latin America.
"We have taken the decision to take over," Finance Minister Ali Rodriguez said, adding that the government would seek to quickly sell the bank. In recent days, depositors had worried that the trouble at Stanford International Bank would hurt Stanford Bank Venezuela and had withdrawn cash from the small local bank even though the companies' assets are separate, industry officials and bank customers said. Industry officials have said the fall of one of the smallest retail banks in Venezuela, which only takes deposits and makes loans in local currency, was unlikely to cause much of a disturbance in the rest of the sector.

California budget deadlock broken - Assembly quickly follows Senate and OKs spending plan to end crisis. GOP Sen. Abel Maldonado of Santa Maria changes his vote to end the impasse. In exchange, Democrats agree to his demand to rewrite election rules. The plan includes billions of dollars in tax increases. GOP Sen. Abel Maldonado's vote broke the deadlock. In exchange, Democrats agreed to his demand to rewrite election rules. Voting at dawn to end a three-month impasse, the California Legislature approved a deal that Democrats and Gov. Arnold Schwarzenegger reached with a GOP holdout to resolve the state's fiscal emergency. Under the arrangement, Sen. Abel Maldonado of Santa Maria provided the final Republican vote needed to pass a spending plan with billions of dollars in tax hikes. In exchange, Democrats agreed to rewrite election rules that Maldonado said had allowed the Capitol to become paralyzed by partisanship, leading the state to the brink of financial ruin.

Carmakers' latest loan requests spur suspicions - (www.latimes.com) Some say GM's and Chrysler's requests for additional loans amount to a high-stakes game of chicken. Pay a lot now, or much more later. That's the choice General Motors Corp. and Chrysler presented Washington this week as they requested $22 billion in additional bailout money -- and warned that the tab could be many times that should the companies go bankrupt. Despite historic sales declines, critics contend that the automakers' arguments are simply posturing to squeeze more money out of the government and to make billion-dollar cash infusions seem more palatable. The Detroit companies' stance amounts to a high-stakes game of chicken, critics said, as President Obama risks going too far to support a deeply troubled industry or not going far enough and letting them fail at possibly huge costs to the economy and the taxpayers. GM and Chrysler said in business plans submitted to the government Tuesday that a bankruptcy filing would be costly not only in monetary terms, but also in the possible loss of hundreds of thousands of jobs -- a prospect that would be devastating to an already ravaged economy.




OTHER STORIES:

Jobless Claims Hit Record High; Inflation Jumps - (www.cnbc.com)
Biggest Fear: Job Loss - (www.cnbc.com)
Philly Fed Index Slumps; Indicators Show Rebound - (www.cnbc.com)
Wrap Up: Selling the Mortgage Plan - (www.cnbc.com)
Sprint Loses Subscribers, but Results Beat Views - (www.cnbc.com)

Spain's Santander May Give Shares to Lehman Victims - (www.cnbc.com)
Investors Scramble for Safety as Markets Test Bottom - (www.cnbc.com)
Nationalization Loses Stigma - (www.cnbc.com)
Class Action Status Denied in Microsoft Vista Case - (www.cnbc.com)
War of Words: Starbucks vs. Britain - (www.cnbc.com)
Swiss Bank Secrecy Under Threat after UBS Tax Deal - (www.cnbc.com)
Bonus Cuts Hurting More Than Top Wall Streeters - (www.cnbc.com)

Saving the Housing Market By Speeding Up Foreclosures - (www.time.com)
Obama unveils plan to reward debtors at expense of savers - (biz.yahoo.com)
How Will Obama's Housing Plan Work? - (www.cbsnews.com)
Carlyle Group's Presentation on World Financial Crisis - (www.freshsupercool.com)
This Is Not the Bottom in Housing - (Charles Hugh Smith at www.oftwominds.com)
Lawmakers Look Loony After Passing Stimulus Package - (www.greatdepression2006)
American's Standard Of Living Permanently Harmed by Debt - (finance.yahoo.com)
Government Doubles Aid to Debt-Mongers Fannie and Freddie - (www.washingtonpost.com)
The Next Round of Real Estate Price Drops - (www.criticalmas.com)
Fed sees deepening economic pain this year - (msnbc.msn.com)
America's Emptiest Cities - (realestate.yahoo.com)
D-Day vet's tale parallels mortgage meltdown - (msnbc.msn.com)
Obama Plan on Housing Said to Push on Lenders - (www.nytimes.com)

U.S. housing starts, permits plumb record lows - (uk.reuters.com)
East SF Bay Prices continue to drop - (eastbayhousingbubble.blogspot.com)
Portland-area house sales slow to a trickle in January - (www.oregonlive.com)

Flipped Out - (www.jonnyoblog.com)
U.S. Mortgage Delinquency, Foreclosure Rates Table - (www.bloomberg.com)
Every Prevailing Economic Consensus Must End - (www.baselinescenario.com)
You will pay for the bailouts without complaint, right? - (media.point2.com)
Start New Banks To Keep TARP Money Away From Bad Banks - (online.wsj.com)
Companies turning to pay cuts to avoid more layoffs - (www.chicagotribune.com)
Price War Developing Between Beijing Housing Builders - (www.chinastakes.com)
Spending is not so sexy anymore - (www.dispatch.com)
Wealthy cities discovering they're not recession-proof - (www.latimes.com)
A Recession Even Letters Can't Describe - (www.watchingmarcitz.com)