Tuesday July 1 Housing and Economic stories

Top Stories: Do these look like healthy bank/lender stock charts? (click on chart for larger view)

Ron Paul on Federal Reserve and Inflation - (www.youtube.com) New Ron Paul video from 6/25/08 on Fed Reserve meeting results.

Is IndyMac on the verge of Bankruptcy? Stock falls below $1 after being hit with a run on the bank on Saturday
· After some depositors pull funds, IndyMac responds to latest rumors about its health; says it's working with regulators - (latimesblogs.latimes.com) Pasadena-based mortgage lender IndyMac Bancorp, battling fresh rumors that it is near collapse, conceded today that its financial position "has deteriorated since last quarter," and said it was working on a plan with its regulators to improve "the safety and soundness" of the bank.
· Late Day Update: Indymac Closes Commercial Unit, Depositors Withdrawing Funds - (www.ml-implode.com) - At 5:45 pm (EST), the following email was sent to customers of Indymac's commercial lending unit, Indymac Commercial Lending Corp.:
"ICLC, due to the current market and capital constraints has ceased lending operations as of 7/1/08. A formal announcement from ICLC will be coming out tomorrow regarding details and loans in process." Referring to today's press release on The IMB Report, Indymac's company web site, an LA Times report refers to "a weekend that saw depositors line up at some of its San Gabriel Valley branches to pull their money, as they reacted to news reports questioning the company's survival." Indymac's article responds with "while branch traffic is somewhat elevated this morning, it is substantially lower than on Saturday, and we are hopeful that this issue appropriately abates soon..."
· Schumer: concerned over IndyMac stability - (www.ap.com)
· [$$] Schumer Asks Regulators For Greater IndyMac Scrutinyat - (us.rd.yahoo.com/finance/external/wsj)
· CRL: Indymac Dug Its Own Grave - (www.thetruthaboutmortgage.com) - The Center for Responsible Lending has impeccable timing, considering the fact that Indymac is trading at its lowest point ever amid mounting solvency concerns.The group released a 22-page report today outlining the Pasadena, CA-based mortgage lender’s failings, accusing the company of “unsound and abusive lending” during the recent boom. The report includes interviews with former employees, which among other things, claim Indymac padded borrower income, used bogus appraisals, worked with misleading mortgage brokers, and treated minorities and the elderly unfairly.
· IndyMac Update: Shares Down On More Bad News - (www.ml-implode.com)


Will Lehman Brothers suffer the same fate as Bear Stearns? It will likely (within next month) be bailed out by the Fed or Barclays
· Lehman falls on talk of possible sale to Barclays - (www.ap.com) - Lehman Brothers Holdings Inc. shares fell sharply (over $2.4/share) Monday amid speculation that the nation's fourth-largest investment bank might be acquired by Britain's Barclays PLC at a discount price.
· Lehman up after Morgan Stanley's overweight rating - (www.reuters.com) – Yet Morgan Stanley changes rating to “overweight”. We should know in less than a month if MS was unethically trying to protect their interest or if Lehman gets acquired at $31/share.
· [$$] Lehman Hits Lowest Level Since 2000 Amid Buzz - (us.rd.yahoo.com/finance/external/wsj)









And how about Wachovia. Prediction is Wachovia will be acquired (or liquidated) in the next 2 months:
· Wachovia Drops On News of Possible $5 Billion Buyback - (www.bloomberg.com) Wachovia Corp., the fourth-largest U.S. bank, fell the most in two months after the New York Post said the company may have to buy back Prudential Financial Inc.'s stake in their joint retail brokerage venture.
· Wachovia halts mortgages with negative amortization featuresat MarketWatch(Mon 5:28pm) – (www.marketwatch.com)
· Wachovia eliminates pick-a-pay loansat bizjournals.com(Mon 5:25pm) – (www.bizjournals.com)
· ALERT! Wachovia Cries ‘UNCLE’ on the Pay Option ARM - (www.ml-implode.com)

Court Ruling Could Shock Entire U.S. Mortgage Industry - (www.ml-implode.com) - A lawsuit filed by a Wisconsin couple against their mortgage lender could have major implications for banks should a U.S. appeals court agree that borrowers can cancel their loans en masse when their lenders violate a federal lending disclosure law.
BIS slams central banks, warns of worse crunch to come - (www.telegraph.co.uk) A year ago, the Bank for International Settlements startled the financial world by warning that we might soon face challenges last seen during the onset of the Great Depression. This has proved frighteningly accurate. The venerable body, the ultimate bank of central bankers, said years of loose monetary policy had fuelled a dangerous credit bubble that would entail "much higher costs than is commonly supposed". In a pointed attack on the US Federal Reserve, it said central banks would not find it easy to "clean up" once property bubbles have burst. If only we had all listened to the BIS a long time ago. Ensconced in its Swiss lair, it has fired off anathemas for years, struggling to uphold orthodoxy against the follies of modern central banking. Bill White, the departing chief economist, has now penned his swansong, the BIS's 78th Annual Report, released today. It is a disconcerting read for those who want to hope the global crisis is over. "The current market turmoil is without precedent in the postwar period. With a significant risk of recession in the US, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point," it said. "These fears are not groundless. The magnitude of the problems yet to be faced could be much greater than many now perceive," it said. "It is not impossible that the unwinding of the credit bubble could, after a temporary period of higher inflation, culminate in a deflation that might be hard to manage, all the more so given the high debt levels."
Next Victim of Real Estate Bubble: Government - (www.businessweek.com) - State and local governments were flush with tax revenue during the five-year housing boom. They pulled from bulging pools of property, income, and sales tax to expand education, law enforcement, health care, and infrastructure programs without needing to burden residents and corporations with tax hikes. Those days are over. Home prices are falling, and foreclosures, gas prices, unemployment, and inflation are on the rise. At least 29 states, plus the District of Columbia, reported budget shortfalls that total about $48 billion as they finalized their 2009 fiscal budgets, which typically begin July 1, according to the Center on Budget & Policy Priorities.
Credit crisis fallout to limit houseowner spending - (www.reuters.com) "(U.S.) household spending now seems likely to weaken in response to high debt and service burdens, falling employment and the general tightening of credit conditions," it said.
A growing trend of negative equity -- where falling house prices leave homeowners with a mortgage bigger than their property's value -- is also expected to corset the borrowing ability of U.S. households. In some parts of the United States, houses have halved in value over the last two years as the property bubble has popped and mortgage defaults surge while builders flood already saturated markets with new properties. "As housing prices fall and credit conditions tighten, (more) such loans are likely to default because borrowers have few alternative financial resources," BIS said.
The Greenspan Gamble - (www.rgemonitor.com) it appears to me that the "Super Fed" could actually happen. Many of the other changes require consolidation of regulatory agencies, and bureaucracies seldom go gently into that good night. They and their constituents will fight for survival and probably win. But the Fed expansion is likely to be seen as the solution the problem of risk that the housing bust has made apparent. But wait. Isn't this the same Fed whose 1 percent fed funds rate helped inflate the great Housing and Mortgage Bubble that is now popping? Didn't this lead to massive losses, illiquidity, and panic? Wasn't the bubble exactly the sort of systemic risk that the new, more powerful Fed is expected to effectively manage?



Other Stories:

Deflationary Hurricanes to Hit U.S. and U.K. - (Mish at globaleconomicanalysis.blogspot.com) British households are now more indebted than those of any other major country in recorded history, it has emerged. Families in the UK now owe a record 173pc of their incomes in debts, official figures have shown. The ratio of debt to income is higher than any other country in the Group of Seven leading industrialised economies, and is sharply higher than the 129pc of incomes it was five years ago.
OPEC pres sees oil at $170 this year, blames Fed - (www.marketwatch.com)
28 in Michigan Charged With Mortgage Fraud - (www.ml-implode.com)
The end of the superbubble - (articles.moneycentral.msn.com)
FL Joins List Of States Lining Up With Suits Against Countrywide - (www.ml-implode.com) - Florida sued mortgage lender Countrywide Financial Corp for predatory lending practices on Monday, alleging the company at the c...
Central Bank Schizophrenia - (www.ml-implode.com) - "What is Ben Bernanke to do? Since his job is simultaneously to avoid recession while protecting against inflation, and right no...
Is Any Company Safe from Subprime Related Lawsuits? - (www.ml-implode.com)
California Under Schwarzenegger Underperforms Davis Debt Burden - (www.bloomberg.com) As the most populous U.S. state, with a gross domestic product that's No. 8 in the world, California is so strapped for cash that it must consider a short-term, $10 billion loan to cover its bills. The widening deficit means the financing may be about 0.85 percentage point more expensive than five years ago, when Davis lost his job over a budget gap twice as large as the $17 billion deficit the state now faces. That's an added $8.5 million on every $1 billion borrowed.

Consumers fail to save despite the gloom - (www.ft.com)
Subprime, Alt-A Bonds to Extend Drop as Banks Retreat - (www.bloomberg.com)
Homeowners Fall Further Behind on Mortgage Payments, Group Says - (www.bloomberg.com)
Engineering the Housing Bubble Through Monthly Payments - (mrmortgage.ml-implode.com)
Lenders create a bankruptcy monster - (articles.moneycentral.msn.com)
Crash not be an altogether bad thing - (www.atimes.com)
Lehman Selling Archstone - (patrick.net)
Second-Largest New England City Seeks Foreclosure Moratorium - (www.ml-implode.com)
Is Oil Having an Impact on Housing? Taking a Look at Los Angeles County - (www.ml-implode.com)
Mr Mortgage: Engineering the Housing Bubble Through Monthly Payments - (www.ml-implode.com)
Who owns my mortgage? - (msnbc.msn.com)
You ain't seen nothing yet - (www.informationclearinghouse.info)
Gloom and Doom? Nah; Just for the U.S. - (online.barrons.com)
One bullish American economist amid growling bears - (www.telegraph.co.uk)
Is Oil Impacting Housing? Look at Los Angeles County - (www.mybudget360.com)
Will the USA Invade Canada For Its Oil? - (www.sandersresearch.com)
Economist describes why inflation hits harder now - (www.marketwatch.com)

Hoarding Nations Drive Food Costs Ever Higher - (www.nytimes.com)
One Rebate Isn’t Enough - (www.nytimes.com) , Shiller
World needs tough monetary policy to tackle inflation - (www.reuters.com)
Northeast braces for home heating oil increases - (www.usatoday.com)

Banks seek market-based pricing scheme - (www.ft.com)
MBIA Has Sufficient Assets to Meet Collateral Call - (www.bloomberg.com)
Legg Mason Support for Money Funds to Cut Earnings by 64 Cents - (www.bloomberg.com)
Businesses Scramble To Offset Rising Cost Of Transportation - (online.wsj.com)
Small US banks feel the pinch - (www.ft.com)

European Prices Rise More Than Forecast as Oil Surges - (www.bloomberg.com)
China Stocks Fall; Benchmark Index Completes Worst Month Ever - (www.bloomberg.com)
Eurozone inflation jumps to 4% - (www.ft.com)

Monday June 2 Housing and Economic stories

Top Stories:

Pension Funds Defend Commodity Investments - (online.wsj.com) – Ken comment: US Politicians are setting a dangerous precedent of trying to blame “speculators” (instead of their own policies) for energy prices and prevent any energy investment trading. By trying to prevent “profiteering”, they are basically challenging the free market. Isn’t the whole premise of a free market to make a profit? If they close the US market to energy futures trading, this trading will move to other futures markets including Dubai, Iran, Venezuela, Europe and other markets that are more investor friendly. Funny how politicians allow bubbles to form in stock market and real estate, but demonize investors for energy price rises.
Kohn Signals Wall Street May Get Permanent Access to Fed Loans - (www.bloomberg.com) ``If you are a bondholder in one of these Wall Street firms, you know you have a big `Sugar Daddy' now called the Federal Reserve that's going to back you up,'' said Jeff Pantages, chief investment officer of Alaska Permanent Capital Management in Anchorage, which oversees $1.8 billion in assets. ``But if you are a stockholder this kind of worries you'' because investment banks ``will be more highly regulated and won't be able to use leverage as much as'' before, he said.
Bad Omens for Banks? - (www.businessweek.com) - News from KeyCorp suggests U.S. banks' loan losses may worsen. Is the credit crisis hitting a second, even scarier phase?
Foreclosure Phil - (www.motherjones.com) - Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today's subprime meltdown. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."
Bankruptcy Reform Act Finally Blows Sky High - (Mish at globaleconomicanalysis.blogspot.com) - “I argued some time ago that the whole point of stated income lending was to make the borrower the fall guy: the lender can make a dumb loan--knowing perfectly well that it is doing so--while shifting responsibility onto the borrower, who is the one "stating" the income and--in theory, at least--therefore liable for the misrepresentation.” And the reason this was carried to such an extreme was the debt slave act of 2005 in conjunction with absurd interest rate policy at the Fed, the Fed's direct sponsorship of ARMs and derivatives, and the "Ownership Society" of the Bush administration. All of which are also blowing sky high right now.
Libor Banks Lied About Interest Rates - (www.bloomberg.com) - Banks routinely misstated borrowing costs to the British Bankers' Association to avoid the perception they faced difficulty raising funds as credit markets seized up, said Tim Bond, a strategist at Barclays Capital. Discrepancies in the rates that banks quote are creating a crisis of confidence in the London interbank offered rate, the benchmark for 6 million U.S. mortgages and more than $350 trillion of derivatives and corporate bonds. In the first four months of 2007, the difference between the highest and lowest rates for three-month Libor didn't exceed 0.02 percentage point, according to JPMorgan Chase & Co. In the same period this year, it was as wide as 0.17 percentage point.
First Housing, Now Oil - (www.businessweek.com) - The double whammy of rising oil prices and plunging home prices could turn a mild recession into something more threatening
House prices falling faster than during Great Depression - (www.economist.com) - “A DESTABILISING contraction in nationwide house prices does not seem the most probable outcome...nominal house prices in the aggregate have rarely fallen and certainly not by very much.” Alan Greenspan's soothing, if rather verbose, words on America's housing market in 2005 rank high on history's list of infamous predictions. But to be fair, most American economists shared his view that it was highly unlikely that average nationwide home prices would drop. That was the sort of thing that happened only during a deep depression, like the 1930s.
Ford Gets Sideswiped by Credit Unit – (online.wsj.com) – Title of the story is a bit misleading. Ford was carried by credit unit as it financed all the car purchases for years. It was an accident that any halfway intelligent person could have predicted.
New Overdue Home Loans Swamp Effort to Fix Mortgages in Default - (www.bloomberg.com)
Warning: Credit Default Swaps May Not Work As Advertised - (www.ml-implode.com) - "The CDS contract and the entire Structured Credit Market originally was predicated on hedging of credit risk. Over time the market changed focus – in Mae West’s words: “I used to be Snow White, but I drifted.” The ability to short credit, leverage positions and trade credit unrestricted by the size of the underlying debt market have become the dominant drivers of growth in the market for these instruments
The new American investor - (www.ml-implode.com) - Two years ago, Lilia Garcia and her husband, Jesus, bought their dream house in Linden, Calif., for $535,000 and financed it in part by taking out a bigger loan backed by their previous house in nearby Stockton. They decided to hang onto the Stockton house and rent it out, believing that it would more than pay for itself and could be sold years in the future to help pay for college for their two children. This comment tells you about all you need to know about the plight of the Garcias who, like many others a few years back, borrowed against the equity in one house to buy an even bigger and better one thinking that perpetually rising real estate prices would make them wealthy.


Other Stories:

Feldstein Says U.S. Economic Indicators 'Pointing Down' - (www.ml-implode.com) - Check out the video.
The Sham of our Current Unemployment Rate Numbers: Lessons from the Great Depression - (www.ml-implode.com) - ``Unemployment is understated by underemployment and shadow workers (those that have given up looking for work). It also does n...
Being Owned By the Ownership Society in California: How Housing and Credit Came Crashing Down. - (www.ml-implode.com) - ``The problem with this ownership society isn’t necessarily the overall gist or philosophy but how it was approached.''
Ailing: Downey Savings & Loan hit by Class Action suits, Shares drop - (www.ml-implode.com) - We've been watching Downey Savings and Loan slide downhill for some time now. In recent news, a rash of shareholder class action...
Mortgage REIT Insider: Impac Gets Creative in Face of Cash Crunch - (www.ml-implode.com)
Bloomberg's Weird Numbers - (www.ml-implode.com)
KB Homes: U.S. Home Prices Will Drop 10% More - (www.ml-implode.com)

Realtors, Prepare to Lose Your 6 Percent - (www.seekingalpha.com) – Does any industry do less to earn their paycheck???? Not in my opinion.
Second house is tax time bomb - (www.nytimes.com)
S&P Downgrades $34 Billion of Alt-A Securities - (www.bloomberg.com)
U.S. Consumer Spending Rises 0.2%; Prices Excluding Food, Fuel Climb 0.1% - (www.bloomberg.com)
Fed's Fireman Feels Some Heat - (online.wsj.com)
Consumers Expect Higher Prices - (online.wsj.com)
Inflation outlook makes consumers' mood grim - (www.reuters.com)
April insured mortgage defaults rise - (www.reuters.com)
Inflation A Growing Problem For Americans - (www.forbes.com)
Consumers pick home over flying; avoided trips cost economy billions - (www.usatoday.com)
Lessons from the Great Depression - (research.stlouisfed.org)

Inflation - Wary Fed Looks Ahead to Rate Increases - (www.nytimes.com)
Probe of Oil Markets Widens - (online.wsj.com)
Libor Rises Amid Scrutiny - (online.wsj.com)
Gas prices inch closer to $4 while oil gyrates - (www.ap.com)
Liquidity levels hit funds of hedge funds - (www.ft.com)
Sharp Power-Price Rise Hits Texas - (online.wsj.com)
Realty leader expects further price decline - (www.startribune.com)
Libor Fix May Prove Elusive as Banks Offer Solutions - (www.bloomberg.com)
Mounting Costs Slow the Push for Clean Coal - (www.nytimes.com)
Charges of Insider Trading for a Wall Street Luminary - (www.nytimes.com)
The Truth Behind Florida's Housing Numbers - (futurerealestate.blogspot.com)
We're Nowhere Near A Bottom in Housing - (www.huffingtonpost.com)
What About The Other Bubbles? - (www.nuwireinvestor.com)
Dow says country in "true energy crisis"; ups prices - (ap.google.com)
Storms on the Horizon - (www.dallasfed.org)

The Pain Grows at Sears - (online.wsj.com)
GM says a quarter of U.S. hourly workforce will take exit offers - (www.latimes.com)
A giant continues to unravel - (www.chicagotribune.com)
Retailers closing stores - (money.aol.com)
Survey: Americans make 41 million fewer air trips - (www.chicagotribune.com)

European Inflation Accelerates More Than Forecast - (www.bloomberg.com)
High gas prices hit consumers worldwide - (www.ap.com)
ECB's Draghi Says Record Oil Prices `Limit' Monetary Policy - (www.bloomberg.com)
Britons' Confidence Reaches Lowest Level Since Thatcher Quit - (www.bloomberg.com)
Vietnam Inflation Crisis Is Feared - (online.wsj.com)
Inflation Asia's biggest concern: think tank - (news.yahoo.com/s/afp)
Irate Europeans Protest the Soaring Price of Gasoline - (www.nytimes.com)
Data points to grim outlook for Japanese economy - (www.marketwatch.com)
India's GDP Growth Holds at Slowest Pace Since 2005 - (www.bloomberg.com)
Double, double, oil and trouble - (www.economist.com)