Thursday January 2 Housing and Economic stories

TOP STORIES:

FHA faces $1.3 billion capital shortfall, audit finds - (www.washingtonpost.com)  The Federal Housing Administration, which recently received an infusion of funds from the Treasury to cover projected losses, still faces a $1.3 billion capital shortfall, an independent audit released Friday found. The annual analysis calculates the solvency of the FHA’s mortgage insurance fund under a range of economic assumptions. FHA Commissioner Carol Galante declined to comment at a briefing for reporters on whether the agency might need a second straight taxpayer subsidy. The government mortgage insurer received a $1.7 billion infusion from Treasury in September, the first time it has needed aid in its 79-year history. The report could raise concerns about the prospect of more taxpayer dollars being tapped to stabilize the housing sector, which was at the epicenter of the 2007-09 financial crisis and recession. Nevertheless, it showed the FHA’s finances improving from the $16.3 billion shortfall that was projected a year ago.

TIPS Wipeout Signals Fed Losing Fight Against Disinflation - (www.bloomberg.com) Losses on TIPS accelerated in the past month, wiping out returns in September and October, after Fed Vice Chairman Janet Yellen became the favorite to succeed Chairman Ben S. Bernanke. While Yellen has voted for every stimulus measure since 2008 and drawn criticism from some lawmakers concerned that her approach will spur too much inflation, a slowdown in price increases may pose a more imminent threat to the economy by causing consumers and businesses to put off spending.

Gold Funds See Unprecedented 31% Slump With World Losing Faith - (www.bloomberg.com) Investors are dumping gold-backed exchange-traded products at the fastest pace since the securities were created a decade ago, mirroring the steepest price drop in 32 years. Holdings in the 14 biggest ETPs plunged 31 percent to 1,813.3 metric tons since the start of January, the first annual decrease since the funds started trading in 2003, data compiled by Bloomberg show. The removals erased $69.7 billion in the value of the assets as prices fell by the most since 1981. A further 311 tons will be withdrawn next year, according to the median of 11 analyst estimates compiled by Bloomberg.

Secret Inside BofA Office of CEO Stymied Needy Homeowners - (www.bloomberg.com) To help run its modification program, Bank of America relied on managers who had worked at Countrywide Financial Corp., the subprime lender it took over in 2008. Those executives created and enforced quotas for resolving complaints, according to the former employees. Among them was Rebecca Mairone, found liable by a federal jury in October for defrauding government-backed housing companies Fannie Mae and Freddie Mac while working at Countrywide. Urban Lending staff, struggling to meet those quotas, resorted to falsifying records and improperly purging complaints, the people said. They sent letters containing inaccurate statements on Office of the CEO and President stationery to lawmakers and U.S. agency officials who sought assistance on behalf of borrowers, the former employees said.

Eurozone M3 money plunge flashes deflation alert for 2014 – (www.telegraph.co.uk) Eurozone money supply growth plummeted in October and loans to firms contracted at a record rate, heightening the risk of a stalled recovery and Japanese-style deflation next year. The European Central Bank said M3 money growth fell to 1.4pc from a year earlier, lower than expected and far below the bank's own 4.5pc target deemed necessary to keep the economy on an even keel. Monetarists watch the M3 data - covering cash and a broad range of bank accounts - as an early warning signal for the economy a year or so in advance. “This a large dark cloud hanging over the eurozone in 2014; it means the public debt ratios in Southern Europe are at greater risk of exploding,” said Tim Congdon from International Monetary Research.

OTHER STORIES:

Banking union: Nice idea but detail still devilish - (www.reuters.com)
[FT] China attacks Abe air defence zone ‘slander’ at Asean - (www.ft.com)

[Tett] Forget the Fed, prepare for Tokyo ‘taper’ - (www.ft.com)

Industrial Production in U.S. Increases 1.1%, Most in a Year - (www.bloomberg.com)

Tough Question for Fed: Time to Act? - (online.wsj.com)

The last chapter of the Bernanke era - (www.marketwatch.com)

Fed could set off year-end fireworks - (www.reuters.com)

Federal Reserve Tapering to U.K. Inflation: Global Economy - (www.bloomberg.com)