Wednesday February 18 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Senators Boxer and Burr Protecting Realtors At Your Expense - (patrick.net) Amazing how senators name these bills exactly the opposite of what they really mean. Kind of like how the Patriot Act allows spying on Americans without a warrant. A more proper name for the Community Choice Act would be the Realtor's Choice Act: http://boxer.senate.gov/news/releases/record.cfm?id=307559 Please write your senator and let him know you are tired of his protection of the monopolistic and deceptive practices that got the country into its current predicament. The primary architects of this housing crisis are realtors and brokers. They lured buyers into paying far too much for houses while their well-funded NAR spokesmen gave very bad financial advice to the public, all in pursuit of commissions. Now the banks are sitting on any foreclosed properties and taxpayers are forced to bail out the banks. Realtors and brokers don't need any protection. The American people need protection from realtors and brokers! American realtor commissions are among the highest in the world due to monopolistic practices protected by lawmakers like Barbara Boxer and Richard Burr. Please refer to this research paper: http://business.fullerton.edu/finance/irer/papers/past/vol5_pdf/012_039US.pdf. I would like to buy a foreclosed house directly from a bank without non-productive intermediaries like realtors. I would like to avoid paying hefty commissions for services I don't want or need. Both the banks and consumers will be better off by directly dealing with each other. It is the realtors who are stifling competition from the internet and other forms of competition. They are influential group and they have effectively killed any competition and protected their commissions at the expense of the public via legislation exactly like this. Let the banks lend the money and sell houses directly to a person who is creditworthy without these intermediaries. This will bring healthy competition to our housing market.

It's Time To STOP Encouraging Debt - (gbr.pepperdine.edu) Our financial crisis came about because of flawed thinking about how to help the poor. Financially sophisticated parents would never tell their children to borrow to the ceiling to buy a house or anything else. And yet, lawmakers thought that the way to help the poor was to encourage them to borrow heavily. The mass inducement to the poor to borrow beyond their means was nothing short of an act of incredible cruelty. So how can we help the poor and get out of the mess we’re in? There has been talk about bailing out homeowners so that they can make their mortgage payments. But this is just more of the same flawed thinking. Imagine the misery of just being able to make payments year after year. Dinner consists of macaroni and cheese, entertainment is renting a movie once a month, life revolves around hovering on the brink of disaster. These mortgage bailouts aren’t “relief,” they’re an act of cruelty designed to extract the maximum possible. And in-trouble homeowners throw good money after bad, hanging on in the hope of a bailout… We need to let borrowers who got in over their head default. The transition back to an apartment will hurt, but then life can begin again. Cash will be freed up for consumer purchases and saving for a comfortable retirement—possibly replacing the car that should be scrapped anyway. Instead of an economy full of people who don’t have a spare dime due to their mortgage payments, we will have an economy of people who can spend again. This will stop the layoffs. The more people who have jobs, the more of a base we will have to tax, which, ultimately, will help us pay off the massive debt being incurred. Jobs are everything; they are the key.

Russia Banks Seek Debt Talks; No Restructuring Plans - (www.bloomberg.com) International banks proposed restructuring talks with Russian companies that owe $400 billion of foreign debt due in the next four years, according to the Russian Association of Regional Banks. “Several western banks asked about holding discussions,” Anatoly Aksakov, head of the association, whose 450 members include Citigroup Inc.’s Russia unit, Alfa Bank and VTB Group, said in an interview. “It was their initiative to have talks on this topic to look at restructuring the debts of several companies, so that everyone can be calm.” Banks such as London-based HSBC Holdings Plc suggested meetings with Russian companies concerning their ability to meet obligations, said Aksakov, who is also a lawmaker in the lower house of parliament. Less than $100 billion of international debt, $15 billion of which is due this year, may need to be restructured, he said. Speculation of European bank losses on Russian loans drove declines in the euro against the dollar and yen today. Russian President Dmitry Medvedev has pledged more than $200 billion in emergency funding to support banks and companies as the 62 percent decline in oil prices since August and the ruble’s 34 percent tumble against the dollar push the world’s biggest energy supplier into its worst economic crisis since the government defaulted on $40 billion of domestic debt in 1998.

GM to axe 10,000 salaried jobs and cut execs' pay - (www.reuters.com) General Motors said Tuesday it will cut its global salaried work force by about 10,000, or 14 percent, this year and impose pay cuts on most remaining white-collar U.S. workers as it scrambles to slash costs under a restructuring mandated by its U.S. government bailout. GM said it would cut its salaried work force to about 63,000 from 73,000 during 2009. In the struggling automaker's home market, about 3,400 of 29,500 white-collar jobs will be cut. Most jobs will be cut by May 1, and most remaining U.S. staff will see pay cuts of between 3 percent and 10 percent for the year, GM said. The job and pay cuts are the latest step GM is taking to pare its operations ahead of a deadline to present a restructuring plan to the U.S. government on Feb. 17. "These difficult actions are necessitated by a severe drop in vehicle sales worldwide and by the need to restructure GM for long-term viability," GM said in a statement.

U.S. life insurers dragged down by soured investments - (www.reuters.com) U.S. life insurers Principal Financial (PFG.N), Lincoln National (LNC.N) and Genworth (GNW.N) on Monday posted fourth-quarter losses, hurt by soured investments. Insurers, already battered by the declining value of investments in the third quarter, are increasingly being hit by charges to boost reserves for variable annuity equity market guarantees, a popular retirement product. Principal Financial swung to a quarterly loss of $7.5 million, after net realized capital losses of $188.9 million, largely from impairments on fixed maturity securities and declining equity values. Principal's investment losses were larger than expected, said Morningstar analyst Alan Rambaldini. "But none of the (insurers') operating results were good," he added. Shares of Des Moines, Iowa-based Principal fell 24 percent in post-market trading. Lincoln National also swung to a quarterly net loss, as costs for variable annuities soared, and returns from investments in hedge funds and private equity evaporated, sending its shares down about 6 percent post-market.

$9.3 bn drains from quant funds - (www.ft.com) Quantitative investment managers suffered a net outflow of $9.3bn in the third quarter last year as they ran for cover from the financial sector in favour of information technology and materials stocks. The activities of quantitative funds, which trade using statistical models designed to identify patterns in financial markets, are increasingly important because they account for such huge trading volumes.
EDITOR’S CHOICE

Losses Mount on Credit Cards for Retailers - (www.nytimes.com) Though only a small corner of the credit card market, cards that can be used only at a single retailer are quickly turning into a big headache for their issuers. The cards, known in the industry as private label credit cards, tend to be held by riskier borrowers with fewer credit options. Losses on the cards are rising at a faster pace than the broader credit card market — reaching a three-year high of 10.51 percent in January, according to Fitch Ratings, up 44 percent from a year ago. That compares with general credit card losses of 7.5 percent, up 40 percent from the year before. While private label cards account for only about 11 percent of all credit card loans outstanding, their troubles offer a window into the deteriorating finances of some of the most distressed Americans. And the losses may prove to be a warning of deeper problems ahead for general cards as the economy weakens and unemployment climbs.

Mortgage subsidy scheme draws fire - (www.ft.com) The competing versions of the US economic stimulus bill to be negotiated between the House of Representatives and the Senate this week contain little directly aimed at stabilising America’s ailing housing market. Congressional Republicans have tried to introduce a broad plan to subsidise mortgages, and have succeeded in getting a smaller proposal adopted to give a tax credit to homebuyers. But those ideas have come under fire even from some Republican-supporting economists, who say they will do little to address the most troubled parts of the housing market. The mortgage subsidy plan was a centrepiece of the Republicans’ proposal for an alternative stimulus to the versions pushed by the White House and congressional Democrats. The proposal would in essence cap mortgage rates at 4-4.5 per cent and would, its proponents say, help to stabilise house prices and hence prevent the downward spiral of falling asset values, bankrupt households and troubled lenders. Despite the attempts of the Federal Reserve to drive such borrowing costs lower by purchasing home loans, average mortgage rates have risen from 5.04 per cent on January 13 to 5.51 per cent last Friday.

Economists Failed To See Gigantic Housing Bubble - (www.scoop.co.nz) Recently - Professor Paul Krugman of Princeton University wrote within a brief New York Times article Bubble Blindness – “The big mystery is the (economists) failure to see the housing bubble. The data screamed “bubble”even in real time. And there was no excuse for thinking that such things don’t happen in efficient markets, not with the dead body of the dot-com bubble still warm.” “So why did so few people point out the obvious? One answer may be that macroeconomists, in particular, didn’t want to go up against bubble denier Alan Greenspan, which might get them blackballed from Jackson Hole and all that. But overall, the failure to see the most obvious bubble in my lifetime remains a puzzle.” This inexcusable failure is not a “puzzle” Professor Krugman. Within a recent Boston Globe article Paradigm Lost, Drake Bennett wrote – “But academic economists are (experts). And with very few exceptions, they did not predict the crisis either. Some warned of a housing bubble, but almost none foresaw the resulting cataclysm. An entire field of experts, dedicated to studying the behavior of markets, failed to anticipate what may prove to be the biggest economic collapse of our lifetime. And now that we are in the middle (or is it the start?) of it, many admit they are not sure how to prevent things from getting worse.” “As a result, there’s a sense among some economists that, as they try to figure out how to fix the economy, they are also trying to fix their own profession”. By no means however, did the economics profession have a monopoly on “housing bubble blindness”. Michael Lewis, author of Liars Poker wrote recently within a Portfolio com article The End of Wall Streets Boom - most within the finance and investment sector, appeared to be oblivious to the existence of housing bubbles and even less aware of their consequences. As Michael Lewis explains – during late 2004 - only a few, such as Steve Eisman, Ivy Zelman and Meredith Whitney understood that the core problems were the inflating housing bubbles –



OTHER STORIES:

U.S. stock futures lower ahead of bank rescue plan - (www.marketwatch.com)
Gold Advances on Haven Buying; Platinum Climbs to 4-Month Peak - (www.bloomberg.com)
Oil Rises on Speculation Stimulus, Bank Plans Will Help Demand - (www.bloomberg.com)
Treasuries Rise on Bets Yield Gain Will Spur Auction Demand - (www.bloomberg.com)
Geithner Says U.S. Financial System Badly Damaged, Needs Aid - (www.bloomberg.com)

Bond Vigilantes Push Treasuries Into Bear Market as Yields Rise - (www.bloomberg.com)
JPMorgan Cracks Down on Unused Credit as Banks Free Up Capital - (www.bloomberg.com)
Bullion sales hit record in rush to safety - (www.ft.com)
China monthly auto sales overtake US for 1st time - (finance.yahoo.com)
Financial bailout expected to rely on private investors - (www.latimes.com)
Geithner Said to Have Prevailed on the Bailout - (www.nytimes.com)
Obama Says Failing to Act Could Lead to a ‘Catastrophe’ - (www.nytimes.com)
Obama Signals U.S. Is Open to Expanding Financial-Rescue Plan - (www.bloomberg.com)
Fannie, Freddie Funding Needs May Pass $200 Billion, FHFA Says - (www.bloomberg.com)

GM fights to avoid bankruptcy protection - (www.ft.com)
Anglo-Saxon model has failed - (www.ft.com)
Up Next for Bankers: A Flogging - (www.nytimes.com)
Palo Alto 94306 Prices Fall 67% - (www.patrick.net)
Menlo Park 94025 Prices Fall 43% - (www.patrick.net)
Million-dollar house sales plummet in California - (www.dqnews.com)
In Florida, Despair and Foreclosures - (www.nytimes.com)
Next foreclosure wave to drive Las Vegas prices even lower - (www.inbusinesslasvegas.com)
Five reasons buying a house in 2009 is a bad idea - (www.marketwatch.com)
Congress giving hungover country "hair of the dog" - (www.newsherald.com)

Taking on the biggest Ponzi of all: housing - (www.heraldtribune.com)
Housing Appraisals: Still Blowing Bubbles? - (www.businessweek.com)
TARP Shortchanged Taxpayers $78 Billion - (www.bloomberg.com)
Consumer Spending: The Little Engine That Can't - (www.writingshop.ws)

How the 'Financial Experts' Keep Screwing You - (www.alternet.org)
Alternative views of the economic crisis - (news.bbc.co.uk)
US Inflation Could Hit 200% - (www.cnbc.com)
Peter Schiff: The hyperinflationary depression - (optionarmageddon.ml-implode.com)
Stimulis: Because all economies have performance issues - (www.youtube.com)