KeNo's Housing and Economic Portal: Monday October 24 Housing and Economic stories

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TOP STORIES:

Banking crisis set to trigger a new credit crunch - (www.telegraph.co.uk) The global financial system is on the edge of a new credit crunch as the cost of insuring the bonds of banks across the world hits new highs, analysts have said. Credit default swaps on lenders as far afield as China and Australia, countries that until recently seemed immune to the chaos, have doubled in the last two months to levels not seen since the financial crisis. In Europe, French and Belgian government officials are due to meet on Monday to discuss the crisis enveloping Dexia as speculation mounts about a possible break-up of the Franco-Belgian lender. Last week, the cost of insuring Dexia bonds hit an all-time high of 900 basis points, nearly double the level just two months ago, meaning the annual cost to insure €10m (£8.59m) of the bonds is £900,000. "The money ran out in June and what you are seeing now is the beginning of a new credit crunch, except this time it will be truly global, not Western," said one senior London-based credit analyst.

Dexia, along with other European lenders, has been hard hit by the closure of the interbank lending markets and the continuing unwillingness of investors to buy the bonds of eurozone banks.

America's Big Banks, America's Financial Vietnam - (www.ourbroker.com) Three years ago the most-powerful instutitions in America were the nation’s largest banks and brokerages, Wall Street for short. While millions of people were losing their homes, their jobs and their savings, the nation’s elite extracted a $700 billion line-of-credit from Uncle Sam. Now Wall Street is our financial Vietnam. It’s broken. The old cures and postponements won’t work. Everyone knows it. “High risk mortgage lending and shortcomings in consumer protections for mortgage borrowers were among the most important underlying causes of the housing bubble and the financial crisis that resulted,” according to Sheila Bair, past chairman of the FDIC. “Not only did the proliferation of high-risk subprime and nontraditional mortgage products help to push home prices up during the boom, but excessive reliance on foreclosure as a remedy to default have helped to push home prices down since the peak of the market over four years ago.” No longer are huge financial corporations seen as too big to blame — nor as too big to fail. In fact, some have even embraced the idea of a voluntary bankruptcy.

Appraisers Are Pressured To Lie - (www.cleveland.com) Christine Turner and her husband agreed to pay $218,000 for a house in Brunswick last summer. Until an appraiser said it wasn't worth that much. The appraisal pegged the house at only $202,000. To keep the deal alive, the seller knocked off $4,000, and Turner and her husband paid $214,000 -- more than the estimated value -- so they could buy the house they wanted. "It was kind of a slap in the face when we got the appraisal," said Turner, a Realtor with Howard Hanna Real Estate Services. "But in all fairness, with the market the way that it is, I can kind of understand. . . . We were fortunate. We were not like a lot of buyers, who don't have extra cash. In those cases, that kind of kiboshes the deal." Once just another step in the sale process, appraisals are attracting ire from real estate agents, builders, homeowners, buyers and sellers. A major trade group says low appraisals are botching deals and stifling a housing recovery. Real estate agents say appraisers are being sent from miles away to evaluate homes in unfamiliar neighborhoods, resulting in flawed appraisals and sidelined sales.

We are the 99 per cent - (www.guardian.co.uk) This movement transcends political affiliations. America has been debased and degraded by greed. This has touched 99% of America's population. The other 1% is doing just fine – with more than a third of the wealth of this nation. We all know people who have been hurt by the big rip-off. We all know people who have lost their jobs or their homes. We all know people who have had to go and fight wars that seem to have no objective and no end – leaving families for years on end without fathers, mothers, sons and daughters. The 99% of us have paid a dear price so that 1% could become the wealthiest people in the world. We all pay insanely high energy prices while we see energy companies making record profits, year after year. We live with great injustices in the land of justice. We live with great lawlessness in the land of the law. It's time to check ourselves, to see if we still have that small part that believes in the values that America promises. Do we still have a shred of our decency intact in the face of debasement? If you do, then now is the time to give that forgotten part a voice. That is what this movement is ultimately about: giving voice to decency and fairness.

S.E.C. Faults Credit Ratings Agencies, Sort Of - (www.nytimes.com) An examination of credit ratings agencies by theSecurities and Exchange Commission found repeated instances of the companies failing to follow their own procedures or to manage conflicts of interest adequately, according to an S.E.C. staff report issued Friday. The examinations were mandated in the Dodd-Frank regulatory law passed last year after numerous investigations into the causes of the financial crisis. Several of those inquiries found that the agencies had issued inaccurate reports, failed to report or manage conflicts of interest and appeared to put generating revenue ahead of rigorous financial analysis. For the investing public, however, the S.E.C.’s report is likely to be of limited value because the commission did not name the agencies at which it found deficiencies. Instead, it described its findings as having occurred either at one or more of the three large agencies — Moody’s Investors Service, Standard & Poor’s and Fitch Ratings — or at one or more of the seven smaller ratings firms. The report also found that all three of the large agencies and four of the small ones had weak controls or inadequate policies for ownership of securities by employees.