KeNo's Housing and Economic Portal: Tuesday April 10 Housing and Economic stories

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The Age of the Shadow Bank Run - (www.nytimes.com) I recently asked a group of colleagues — and myself — to identify the single most important development to emerge from America’s financial crisis. Most of us had a common answer: The age of the bank run has returned. Since the end of World War II, economists have generally thought that runs on banks were dead, at least as a phenomenon in advanced nations. In the United States, for example, bank deposits are insured by the Federal Deposit Insurance Corporation, and, as a last resort, the Federal Reserve can back deposits by printing money. The new complication is that bank deposits are no longer the dominant form of modern short-term finance. The modern bank run means a rush to withdraw from money market funds, the disappearance of reliable collateral for overnight loans between banks or the sudden pulling of short-term credit to a troubled financial institution. But these new versions are in some ways still similar to the old: both reflect the desire to pull money out of an endeavor — and to be the first out the door. And both can set off a crash.

Radical Central Bank Action Should not Disguise Crisis - (www.telegraph.co.uk) The former head of the European Central Bank has warned that the radical action taken by western central banks should not hide the fact that the global economy has yet to emerge from a multi-year crisis. No one should think that "because of the forthcomingness (of central banks), there is no crisis," Jean Claude Trichet told a conference in Washington on Saturday. That should be a "collective, collegial message from the central banks." "No one would have expected that such a long time after Lehman we would still have the scale of expansion in our balance sheets." However, the French banker who stepped down after eight years at the helm of the ECB in October, said that the move by his Italian successor, Mario Draghi to offer European banks cheap, three-year loans was "fully justified."

Foreclosures Still Haunt the Housing Market - (www.businessweek.com) Despite glimmers of hope in the unemployment statistics and other economic indicators, housing remains in a slump. New Commerce Department data show that new homes sales fell 1.6 percent in February, which follows a decline in January. The number of foreclosed homes on the market—and the threat of more to come—continues to drag down sales. “It is unlikely that home prices can recover on a sustained basis until the number of distressed properties is significantly reduced,” Steven Wood, president of Insight Economics, told Bloomberg News. There are signs that lenders may be stepping up their efforts to tackle the problem. Bank of America is starting a program to help delinquent homeowners avoid foreclosure. Borrowers will be able to hand their title to the bank, then remain in the house while renting it for up to three years at or below market rates. The pilot will start with fewer than 1,000 borrowers in Arizona, Nevada, and New York. The idea behind so-called Right to Rent programs have had support among progressives such as Dean Baker, co-director of the Center for Economic & Policy Research, who has advocated the measures for several years.

Why BATS Pulled Its IPO On Friday After Its Huge Technical Disaster: Investors Were In A State Of Revolt - (www.businessinsider.com) On Friday we saw the worst IPO debacle of all time. BATS, an alternative stock trading platform, was forced to completely pull its offering after the stock had an insta-flash crash upon its first attempt to sell itself. The company tried for awhile to re-open trading, but eventually decided to not go public at all on Friday, before ultimately withdrawing its offering entirely, with no current plans to try again. Because BATS was listing its stock on its own exchange, that technical glitch was a huge public blow to the entire premise of the company (which does control 11% of stock market volume). So why did the company really pull the offering, even once the technical glitch was worked out? Because the investors who bought the stock the night before were in revolt, according to WSJ

Owing $150,000 in student loans puts you in the top 1% of student debtors - (finance.yahoo.com) Meet Kelli Space. She went to Northeastern University to get a degree in sociology. And she graduated in $200,000 of student loan debt. In the economy's newest trillion-dollar crisis, she is the 1 percent. Kelli is not the face of America's student debt problem. Among the 37 million people in this country with student loans to pay off, the median balance is $12,800. A whole 72 percent of borrowers have less than $25,000 left in debt, according to data from the Federal Reserve Bank of New York. No, students like Kelli are the rarities, the white rhinos. Only about 5 percent of borrowers owe more than $75,000. The question is: How do they get there? In some cases, the answer may be that the students simply didn't understand the decision they were making, at least according to a new study of high-debt borrowers by youth advocacy group Young Invincibles. The group surveyed about 6,500 former undergraduate and graduate students, who owed an average of $76,000 in loans (those who only had a bachelor's degree averaged $54,000). A full 65 percent responded that they either misunderstood or were surprised by some aspect their loans.