KeNo's Housing and Economic Portal: Sunday December 18 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Fannie, Freddie tentacles embraced many in Washington - (www.reuters.com) While presidential hopeful Newt Gingrich was forced to defend his lucrative former role with Freddie Mac this week, the mortgage giant and its larger cousin Fannie Mae had a roster of Washington heavyweights on their payroll for years, many of them Democrats. The two entities spent over $170 million on political and lobbying operations in a 10-year period leading up to the financial crisis of 2008 when both were seized by the government as they teetered on the brink of failure, according to the Center for Responsive Politics. Fannie and Freddie hired figures such as Tom Donilon, now President Barack Obama's national security adviser, and Rahm Emanuel, Obama's former White House chief of staff, as part of a campaign aimed at protecting government ties that allowed them to borrow money cheaply from financial markets.

Bernanke to Get Congress to Force US Taxpayers to Bailout Europe - (www.fedupusa.org) Federal Reserve Chairman Ben Bernanke’s apologetic take on the Fed’s negative role in causing the Great Depression may translate into a willingness to bail out Europe, writes economics blogger James Pethokoukis. Bernanke will not be willing to let the European Central Bank’s ineffectiveness infect U.S. banks and destroy the global economy. He points to statements from well-known independent economist Ed Yardeni to elaborate on that idea: Given the ECB’s reluctance to act, I suspect that the Fed will spearhead the formation of a Global Liquidity Facility (GLF) to avert a global financial meltdown. Fed Chairman Ben Bernanke demonstrated that he is a master at putting together such emergency measures back in 2008. In effect, it would act as the world’s central bank. Mr. Bernanke is clearly very worried about the prospect that the European sovereign debt crisis is a contagion that could spread to the US, as evidenced by his bizarre town hall meeting with troops returning from Iraq on November 10. The GLF would receive deposits from the Fed and other participating central banks, including the ECB.

Watchdog slammed for being too easy on banks - (www.smh.com.au) A federal judge in New York has issued a stern challenge to the government's recent history of imposing ''relatively modest'' punishments on big Wall Street banks for wrongdoing during the financial crisis. Jed Rakoff, a federal judge in Manhattan, issued a sharply worded order on Monday rejecting a proposed $US285 million settlement between the Securities and Exchange Commission and Citigroup that would have allowed the bank to avoid admitting it defrauded investors over toxic mortgage securities. He said that other similar settlements had not stopped banks from breaking the law and the fines were ''pocket change to any entity as large as Citigroup''. Judge Rakoff's order echoes public anger that the banks have been let off too easily for their role in causing the financial crisis that peaked in 2008. It also has the potential to affect future fraud cases that the SEC enters into with Wall Street firms that do not want to admit they violated the law - a key step that helps shelter them from further civil litigation.

Why judge blocked Citigroup's sweet deal - (www.jacksonville.com) Finally, a judge with the courage to say no -- no to a settlement designed to gloss over and obscure a big bank's misdeeds that contributed to the housing meltdown. Federal Judge Jed Rakoff's order is an indictment of Citigroup and the laxness of the Securities and Exchange Commission, which first allowed financial shenanigans that fueled the mortgage crisis and now would let the perpetrators escape with a wrist slap. And no admission of wrongdoing. Now I ask you, how could it be that Citigroup, when faced with charges that it misled investors about rotten securities, could agree to settle and pay fines of $285 million and nobody be guilty of wrongdoing? Oh, but to admit wrongdoing would make Citigroup more vulnerable to civil suits. Admitting to cheating your own investors might cause people of principle to stop doing business with the bank. But to pay a modest fine and have a court declare nothing was wrong here enables the public relations department to gloss over it all.Let's agree on some basics: When regulators and their targets agree to settle such cases, with no trial to air the sordid details, and no admission of guilt, and a pliant judge goes along, then there's guilt, plain and simple, and a degree of guilt the accused did not want trotted out in court. Can we all agree on that?

State-backed mortgages are not the answer to low housing prices - (www.telegraph.co.uk) Many years have passed since I bought my first property, a tiny bedsit in north London; but I well remember the financial struggle. I needed to raise a 10 per cent deposit, which was hard enough to accumulate while paying for rent and other outgoings. The cost of the flat was about three times my salary and interest rates at the time were well into double figures (this was the 1980s). As a result, the mortgage repayments took up more than half my monthly salary, with an additional insurance indemnity premium thrown in. But it was just about manageable and I took that first, grateful step on to the bottom rung of the fabled property ladder. At no point did it cross my mind that if I could not raise the money the Government would step in and help, any more than it would have occurred to my father a generation earlier to do anything other than scrimp and save until he had enough to put down a deposit.