KeNo's Housing and Economic Portal: Saturday September 17 Housing and Economic stories

Friday, September 16, 2011

Saturday September 17 Housing and Economic stories

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TOP STORIES:

Why the European Union Could be Dead Within a Week - (www.marketoracle.co.uk) Shah Gilani writes: The clock may be ticking on the future of the European Union (EU). After being shaken to its core by the sovereign debt crisis, the entire Eurozone now runs the risk of blowing up within a week. Germany's highest court, the German Federal Constitutional Court, on Sept. 7 rules on the legality of German participation in the euro rescue fund that was established to bail out Greece. If the court rules that Berlin's commitment to the European Financial Stability Facility (EFSF) goes against EU law, or worse, against the German constitution, the entire Eurozone could collapse. Think of the Eurozone as a minefield full of bombs that have long lay dormant, but are all still very active. Now, Germany's court ruling - itself a single bomb timed to go off next Wednesday - could ignite a massive chain reaction. Germany: The Eurozone's Bomb Squad: Peripheral Eurozone countries like Portugal, Ireland, Greece, Spain, and Italy (the PIIGS) are in serious trouble and European banks face monumental liquidity and balance sheet issues. So far, only Germany's singular fiscal conservativism and economic strength have kept the EU from self-destructing. But now the Eurozone's only legitimate bomb squad may be hanging up its lead-suits, pliers, and contagion containers.

Central bank flight to Fed safety tops Lehman crisis - (www.telegraph.co.uk) A key warning signal of global financial stress has shot above the extreme levels seen at the height of the Lehman crisis in 2008. Central banks and official bodies have parked record sums of dollars at the US Federal Reserve for safe-keeping, indicating a clear loss of trust in commercial banks. Data from the St Louis Fed shows that reserve funds from "official foreign accounts" have doubled since the start of the year, with a dramatic surge since the end of July when the eurozone debt crisis spread to Italy and Spain. "This shows a pervasive loss of confidence in the European banking system," said Simon Ward from Henderson Global Investors. "Central banks are worried about the security of their deposits so they are placing the money with the Fed."

Double dip fears across the West as confidence crumbles - (www.telegraph.co.uk) The Western world is at mounting risk of a double-dip recession after key measures of confidence collapsed in both the United States and Europe, with Germany suffering the steepest one-month fall since records began in the 1970s. The US Conference Board's index of consumer sentiment in August plunged to the lowest level since the depths of the slump in 2009, falling to 44.5 from 59.2 in July. Future expectations fell even harder. The drop was far steeper than expected and follows grim warnings over the weekend from Christine Lagarde, new chief of the International Monetary Fund, that the global crisis is entering "a dangerous new phase" . The fund has slashed its growth forecast for America and Europe, according to a leaked draft of its World Economic Outlook. It has called on both the US Federal Reserve and the European Central Bank to stand ready for "further easing of monetary policy" - implying a fresh blast of quantitative easing (QE) by the Fed.

Fresh Scrutiny of BofA - (online.wsj.com) U.S. regulators have pushed Bank of America Corp. to show what measures it could take if conditions worsen for the Charlotte, N.C., lender, according to people familiar with the situation. Executives of the bank recently responded to the unusual request from the Federal Reserve with a list of options that includes the issuance of a separate class of shares tied to the performance of its Merrill Lynch securities unit, these people said. Bank of America purchased Merrill Lynch in 2009, and it has become the bank's most profitable division.

Banks in U.S. Overwhelmed by Mortgage Refinancing Boom After Reducing Jobs - (www.bloomberg.com) Mortgage rates near historic lows have sparked a refinancing boom that has U.S. lenders struggling to handle the surge. “There’s just so much volume,” said Kristin Wilson, a senior loan officer in Bloomington, Minnesota, for Fairway Independent Mortgage Corp., who has seen clients seeking lower rates climb to about half of her business from 20 percent a month ago. “We can’t just ramp up by hiring inexperienced people because they don’t know what they’re doing.” The lending logjam extends to the nation’s biggest banks, which fired thousands of mortgage workers after interest rates rose in November through February, chilling refinancing demand. Now, the time needed to close a loan has as much as doubled to 60 days, according to Wilson and other bankers, and lenders are holding some mortgage rates higher than they could be to slow the torrent of customers, data show.