KeNo's Housing and Economic Portal: Roubini

Thursday, July 17, 2008

Friday July 18 Housing and Economic stories

Top Stories:

WaMu wary of IndyMac cashier's checks - (www.latimes.com) – I believe WaMu could go under during this 8 week wait: MacPhee said a WaMu manager told her that under a new corporate policy, the bank was not accepting IndyMac checks. If a customer insisted on depositing the check, it could be eight weeks or more before the full amount would be accessible, she said she was told.

Suddenly Everyone Agrees With Ron Paul! - (www.campaignforliberty.com) A few months ago, everyone thought Ron Paul was an edge case. It seemed that Ron Paul was everywhere today, and that everyone was in agreement with him. Let’s start with Fed Chairman Bernanke: “Congressman, I couldn’t agree with you more that inflation is a tax, and that inflation is currently too high.” (Video here, quote at 5:10). CNBC anchor Larry Kudlow: “Oh, Mr. Paul! I heard [you accusing Fed Chairman Bernanke of being the biggest taxer in the country] this morning and I got so excited sir I just had to have you on! I’m so glad you’re around today. I say almost nightly that inflation is the cruelest tax of all.” (First video, 0:24)

SEC Restricts Shorting 19 Financial Stocks - (Mish at globaleconomicanalysis.blogspot.com) Big brother has now decided to step in and force the price of all financial stocks up with this SEC short sale order. The U.S. Securities and Exchange Commission issued an emergency order on Tuesday placing restrictions on the short selling of shares of certain major financial firms. The SEC's order will require that anyone effecting a short sale in these securities arrange beforehand to borrow the securities and deliver them at settlement. The order takes effect Monday, July 21, and will terminate at the end of July 29. The SEC said the order may be extended, but for no more than 30 calendar days in total duration. The agency identified the following securities affected by its order:
BNP Paribas Securities Corp, Bank of America Corp, Barclays PLC, Citigroup Inc, Credit Suisse Group, Daiwa Securities Group Inc, Deutsche Bank Group AG, Allianz SE, Goldman Sachs Group Inc, Royal Bank ADS, HSBC Holdings Plc ADS, JPMorgan Chase & Co, Lehman Brothers Holdings Inc, Merrill Lynch & Co Inc, Mizuho Financial Group Inc, Morgan Stanley, UBS AG, Freddie Mac, Fannie Mae

Tossed To The Dogs? - (Mish at globaleconomicanalysis.blogspot.com) While pondering SEC Restricts Shorting 19 Financial Stocks I could not help but notice the financial institutions conspicuously absent from the ruling. Who Is Missing? Where is Washington Mutual (WM)? Wachovia (WB)? Were they tossed to the dogs? What about Corus Bank (CORS), Bank United (BKUNA), National City Corporation (NCC)? It is beyond all belief that naked short selling is affecting Goldman Sachs (GS) more than Washington Mutual, Wachovia, Corus Bank, Bank United, and National City Corporation. Is this a hint of the banks and brokers the Fed and SEC want to protect at all costs? Or is this some kind of setup play, an open invitation to short the others before the same stunt is pulled again. The only problem I have with the latter kind of thinking is that it gives these bureaucrats credit for thinking and executing a plan. Of course whatever it is they are doing is going to blow sky high anyway because that is the nature of all such market manipulations.

John Rubino: The Wall Street Journal Senses That Something Is Wrong - (www.dollarcollapse.com) Here are a sampling of stories: Real-Estate Financier's Death Hints At Trouble for Lenders: Flamboyant real-estate financier Scott Coles penned a farewell letter, put on a tuxedo and climbed into bed, where he was later found dead in what police believe was a suicide. The tragedy last month is drawing attention to the condition of the nation's commercial real-estate market, which is beginning to show mounting signs of distress. Bankruptcy Rocks Spain: On Tuesday, Spain suffered its largest-ever business failure as construction group Martinsa-Fadesa SA, a company with assets of €10.8 billion, or about $17.17 billion, filed for bankruptcy protection, making it the biggest victim so far of Europe's bursting real-estate bubbles. That same day, the euro, boosted by the central bank's inflation-fighting efforts and fears of financial-sector fragility in the U.S., briefly reached a record high of over $1.60, posing a further threat to Europe's export sector. And an index of investor sentiment in Germany, Europe's biggest economy, fell to its lowest level since the recession of the early 1990s.

Asia Times: The Next Big Wave is Breaking - (www.atimes.com) This will be seen in history as the disastrous Greenspan "Revolution in Finance" - an experiment in asset-backed securitization, a mad attempt to bundle risk into loans, "securitize" them in new bonds, insure them via specialized insurers called "monoline" insurers (which insured only financial risks in bonds), then rate them via Moody's and Standard & Poor's as AAA, or highest grade. All that was done so that pension funds and banks around the world would assume they were high-quality debt. Fed in panic mode: While he is getting praise in the financial media for his "innovative" and quick reactions to the unraveling crisis, Fed chairman Bernanke in reality is in a panic mode. His room to act is increasingly bound by the soaring asset price inflation in food and oil, which is pushing consumer price inflation to new highs even by the doctored "core inflation" model of the Fed.

Roubini: The Worst Is Just Ahead - (www.thepinehillnews.com) In a series of recent writings on the RGE Monitor Nouriel Roubini – Chairman of RGE Monitor and Professor of Economics at the NYU Stern School of Business - has argued that the U.S. is experiencing its worst financial crisis since the Great Depression and will undergo its worst recession in the last few decades. His analysis leads to the following conclusions:
* This is by far the worst financial crisis since the Great Depression * Hundreds of small banks with massive exposure to real estate (the average small bank has 67% of its assets in real estate) will go bust * Dozens of large regional/national banks (a’ la IndyMac) are also bankrupt given their extreme exposure to real estate and will also go bust

Mystery Surrounds Wells Fargo’s Earnings - (www.ml-implode.com) - This story concerns their massive $84 BILLION Home Equity Line/Loan portfolio, of which much is now underwater due to massive house price depreciation. Technically (and realistically) these have become unsecured. This is a real problem for banks. By my estimates, Wells Fargo wildly under-reserved on their home equity exposure.

Merrill Lynch reports $4.9 billion loss - (money.cnn.com) - Merrill Lynch booked its fourth-straight quarterly loss Thursday, this time losing nearly $5 billion, as the nation's largest brokerage was forced to once again take massive writedowns.

Battered mortgage giants spent about $186 million on lobbying, political contributions - (www.newsday.com) Over the past decade, both Fannie and Freddie made the list of Washington's top 20 lobbying spenders. They spent a combined $170 million to cultivate allies during that period, a bit less than the American Medical Association and a bit more than General Electric. At the same time, their executives have consistently led the mortgage-banking sector in campaign giving to members of Congress, contributing a combined $16.2 million since 1997."

Buyer's Agent Works Against Buyer - (patrick.net) – Interesting, but not really hard to believe. This is a paraphrased note from the buyer’s agent: “Tell the seller’s agent that we think our client’s offer is too low, so the seller should counter-offer. We think the buyer will get emotionally involved (with the home) and will accept the counter so we can close the deal.”

Other Stories:

Wachovia Hit With Surprise Inspection In Auction-Rate Debt Probe - (Mish at globaleconomicanalysis.blogspot.com) When a good old-fashioned short squeeze is on, and one is on, see SEC Restricts Shorting 19 Financial Stocks and Selective Enforcement of Regulation SHO for more information, some things that might ordinarily matter, simply don't matter. Perhaps this is a big deal, and perhaps not, but stocks such as Wachovia (WB) typically do not soar 27% in the face of news like Wachovia Securities hit with inspection in probe.
More Houseowners Taking in Boarders - (www.nytimes.com)

Orange County Office Construction Sinks 91% - (Mish at globaleconomicanalysis.blogspot.com) In the sake of complete fairness and in regards to presenting both sides of the story, and on behalf of a specific email request by the National Association of Realtors, and the National Association of Home Builders I present O.C. office construction plummets 91%. Commercial Brokerage reports that construction of O.C. office buildings plunged 90.8% in the second quarter to 325,276 square feet. Last year in the second quarter, 3.5 million square feet was under construction. Jerry J. Holdner Jr., Voit vice president of market research says, it’s both a sign of the economy as well as the end of a construction binge that saw 7 million square feet of office space — 7 percent of O.C.’s total market — built in the last two to five years.
Fannie Mae CEO Mudd Tries To Instill Confidence, Fails - (www.clusterstock.com)
Wachovia Says It Is Setting Aside More Capital - (www.washingtonpost.com)

Who wins when banks die? - (patrick.net)
Hamptons House Prices Fall Amid Wall Street's Decline - (www.bloomberg.com)
Southern California house sales and prices keep falling - (www.latimes.com)
Fed Chief Bleak on Economic Outlook - (www.nytimes.com)
An Economy Thrown Into Turmoil - (www.washingtonpost.com)

JP Morgan’s Dimon: Prime Mortgages Look “Terrible” - (www.housingwire.com) While second quarter earnings Thursday from JP Morgan Chase & Co. beat analyst expectations and helped set the stage for another rally in stocks ahead of market open, executives at the company sounded a strong warning bell over growing trouble in the nation’s mortgage market."
Fed's Kroszner Says Fed Rules Will Affect Subprime and Alternative Mortgages - (www.mortgagenewsdaily.com) "Delivering comments at the FDIC's Minority Depository Institutions National Conference in Chicago, Fed Governor Randall Kroszner said the Fed's new rules on mortgages would alleviate pressures in nearly the entire subprime sector and some other alternative mortgage markets."
Terminate Fannie Mae and Freddie Mac - (www.lewrockwell.com)
Opposition, From Both Parties, Over Bailout Plan - (www.nytimes.com)
On the Outside Now, Watching Fannie Falter - (www.washingtonpost.com)
Kucinich: "In a free nation, nothing is more important than the truth." - (www.dailypaul.com)
Nine Republicans Break Party Ranks: Send Impeachment Article to Judiciary for Hearings - (www.opednews.com)
Video: Kucinich Impeachment Battle No Longer So Quixotic - (depression2.tv)
Kucinich Says Unidentified Foreign Official Wants to Speak at Impeachment Talks - (www.cqpolitics.com)
Inflation Grows At Fastest Pace in 27 Years - (money.cnn.com)

Opposition from Both Parties Over Bailout Plan - (www.nytimes.com)
Phony Accounting on Fannie, Freddie Rescue Legislation - (www.nakedcapitalism.com) The Congressional Budget Office is expected to estimate the cost of Treasury's proposals to the federal government to be in the tens of billions of dollars, according to people familiar with the matter. That estimate is expected to reflect the likelihood that an equity investment will be made by the federal government and that the line of credit might also be tapped

Stupid "taxpayer funded" bailout talk - (www.ml-implode.com) - "Just like the $150 billion stimulus, any Fannie and Freddie bailout will just get tacked on to the national debt and lawmakers ...
Where is Marshall Prentice? - (www.ml-implode.com) - "Yesterday, DataQuick released the Southern California real estate sales data for the month of June and, once again, President M...
Rear View Mirrors and Lemonade - (www.ml-implode.com)
US Mortgage Insurers’ Troubles May Worsen - (www.ml-implode.com)
Don't get too excited about the housing starts - (www.ml-implode.com)
William Ackman on Fannie & Freddie - (www.ml-implode.com)
Ron Paul on Fox Business talking about inflation as the greatest tax. - (www.ml-implode.com)
Round up the usual suspects - (www.ml-implode.com) Naked short selling has dogged many firms for years but only became an urgent issue for the SEC to act on when the practice hit financial firms.

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