Monday July 28 Housing and Economic stories

Top Stories:

Ron Paul on the Mother of All Bailouts - (patrick.net) – Very important video on the mother of all bailouts. Buried in the bill, national debt was increased $800B. Includes provision to fingerprint anyone in mortgage lending industry? Also all credit card transactions will be reported to the IRS. Government always coming up short so trying to collect more money.

U.S. Regulators Seize Two More Banks - (www.cnbc.com) - FDIC pulls another Friday night seizure, most likely to minimize press exposure. U.S. regulators took over two banks on Friday and sold them to Mutual of Omaha Bank, the sixth and seventh bank failures this year as financial institutions struggle with a housing bust and credit crunch. Two weeks after the Federal Deposit Insurance Corp seized IndyMac Bancorp Inc., the Office of the Comptroller of the Currency said it closed First National Bank of Nevada and First Heritage Bank NA of California. First National, characterized as undercapitalized, had total assets of $3.4 billion and $3 billion in deposits. First Heritage, described as critically undercapitalized, had assets of $254 million and $233 million in deposits, regulators said. The FDIC said the cost of the transactions to its insurance fund is estimated to be $862 million, adding that the two failed banks represent just 0.3 percent of $13.4 trillion in total industry assets at about 8,500 FDIC-insured institutions.

Blogs Are Out Of Control, Or The FDIC? - (www.ml-implode.com) ``Personally, I see a lot more misinformation on the mainstream financial news than I do on the reputable blogs- I wonder why Bair doesn’t doesn’t worry about misinformation in the media, regardless of the source?''

FDIC Chairman Sheila Bair Is Out Of Control - (globaleconomicanalysis.blogspot.com) - "In a sad twist of irony Sheila Bair is accusing blogs of being "out of control". Sadder still is the fact that San Francisco Business Times writer Mark Calvey agrees. Please consider the incredibly inane article FDIC learns it ignores bloggers at its peril. The federal agency insuring bank deposits learned that it can't afford to ignore the blogs following its seizure this month of IndyMac Bank, the largest bank failure since the 1980s. "The blogs were a bit out of control," Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the San Francisco Business Times after a speech in San Francisco this week. That's putting it mildly. Following the FDIC's takeover of IndyMac on July 11, widely followed blogs were speculating on bank runs on some of California's largest banks based on nothing more than people waiting for their branch to open or large deposits moving between financial institutions. The FDIC plans to pay closer attention to the blogosphere in the future. "We're very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it," Bair said. "The misinformation that came out over the weekend fed a lot of depositors' fears."
Man stole ID to get $960,000 house loan - (www.ocregister.com) A Lake Forest man who used a stolen identity to obtain a nearly $1 million mortgage loan to purchase a home will serve more than five years in prison, prosecutors said. Micah Bachman, 37, was sentenced in U.S. District Court in San Diego Friday. He will serve 61 months in prison for bank fraud, false use of a Social Security account number, money laundering and aggravated identity theft in connection with the mortgage loan he obtained last year. Bachman admitted that he created the alter ego of "Tyler Jefferies" and built a credit profile for that identity based upon a Social Security number stolen from a child in Kentucky, according to Assistant U.S. Attorney Mitch Dembin, who prosecuted the case.

U.S. Congressman Warns Major Economic Disaster Imminent - (www.thetrumpet.com) Time is short for making a course correction before this grand experiment in liberty goes into deep hibernation,” the U.S. Congress was told earlier this month. On July 9, Texas Rep. Ron Paul warned the House Financial Services Committee that “big events” were about to occur. “… I have days, growing more frequent all the time, when I’m convinced the time is now upon us that some big events are about to occur,” he said. “These fast-approaching events … will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed” (emphasis ours throughout). Paul continued: There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. … The financial crisis, still in its early stages, is apparent to everyone: gasoline prices over $4 a gallon; skyrocketing education and medical care costs; the collapse of the housing bubble; the bursting of the nasdaq bubble; stock markets plunging; unemployment rising; massive underemployment; excessive government debt; and unmanageable personal debt. Little doubt exists as to whether we’ll get stagflation. The question that will soon be asked is: When will the stagflation become an inflationary depression?

Why wasn't IndyMac on FDIC problem list? - (www.sfgate.com) - Why wasn't IndyMac Bank, whose problems were well known in the financial community, not on the Federal Deposit Insurance Corp.'s list of troubled institutions until shortly before its failure this month? And if IndyMac - one of the three largest institutions ever seized by the FDIC - didn't make this list, could it be understating problems in the banking system? Each quarter, the FDIC discloses how many banks and thrifts are on its problem list. It does not name which institutions make the list because if it did, depositors would yank out their money and they would almost surely fail.


Other Stories:

Bank of Canada's Monkey See Monkey Do Policy - (www.ml-implode.com) - "The Bank of Canada says it is prepared to accept some of the riskiest assets on the market, giving it more power to fight the c...
Bernanke's, Paulson's, Bair's, and Cox's Next Step - (www.ml-implode.com) - "The Fed, the FDIC, the SEC, and the treasury department are all in panic mode. Here are the key players: Ben "Helicopter Drop" ...
WaMu: Liquidity Options Running Low - (www.ml-implode.com) - "(The title of this story may be misleading because they have they do have ‘options’ if you are speaking in terms of $10s of bil...
National Australia bank writes off US subprime exposure - (www.ml-implode.com) - "NATIONAL Australia Bank CEO John Stewart has said that while he expects US economic woes to worsen, his bank has no more exposu...
Ben Bernanke’s Hush Money - (www.ml-implode.com) - ``This could be a year away. This could be a month away. All we know is this: when the Federal Reserve system runs out of Treasu...
Treasury plan to rescue mortgage lenders (UK) - (www.ml-implode.com)
William Poole on Fannie & Freddie: Let Them Wither Away - (www.ml-implode.com)
Doing the Banks One Better - (www.ml-implode.com)
How housing rescue bill can help you - (www.ml-implode.com)
What's up with the covered bond push? - (www.ml-implode.com)
Video: Congress Helps Banks, but What About Homeowners? - (www.ml-implode.com)
As Housing Act Passes Congress, Questions Emerge - (www.ml-implode.com)
H.R. 3221 On Its Way For President's Signature - (www.ml-implode.com)

Taxpayer-killing housing bill passes in house - (marketplace.publicradio.org)
Disastrous Housing Bill Set to Become Law - (www.washingtonpost.com)
Slump persists: House sales tumble across US - (news.yahoo.com)
U.S. House Market Freezes In June - (www.forbes.com)
Existing-home sales fall 2.6% to 10-year low - (www.marketwatch.com)
U.S. Stocks Drop, Financials Have Biggest Decline in 8 Years - (www.bloomberg.com)
Stocks Drop Sharply; Banks Lead Decline - (www.nytimes.com)
Grand jury investigating subprime lenders - (www.businessweek.com)
Next Stop For Housing Crash: China - (www.clusterstock.com)
Half Of Employers Have Frozen Pension Plans - (www.kcra.com)
Housing Predictions - (www.opednews.com)


FCC Approves Satellite Radio Merger in 3-2 Vote - (www.cnbc.com)
Friday's Top Videos: Gold, WaMu & More - (www.cnbc.com)
'Stealth' Housing Bailout: It's Bigger Than You Think - (www.cnbc.com)

Calif. school districts curtail bus service - (www.latimes.com) - More students will have to walk or drive to class, as districts surrender to high fuel costs. Critics worry about safety.

City and State Brace for Drop in Wall Street Pay - (www.nytimes.com)
Senate Gives Final Approval to Sweeping Housing Bill - (www.nytimes.com)
Jobs, GDP, housing data on tap - (www.marketwatch.com)

Two More Banks Fail - (online.wsj.com)
U.S. regulators seize two more banks, engineer sale - (www.reuters.com)
US credit crunch set to last for months - (www.ft.com)
SEC's Assault on Illegal Short Selling Intensifies - (online.wsj.com)
After Delay, KKR Finds a Way to Go Public - (www.nytimes.com)
US home owners cut back refinancing - (www.ft.com)
Hedge funds reel as popular bets fail - (www.ft.com)
Can Hank Paulson Defuse This Crisis? - (www.nytimes.com)

Advertising slowdown weighs on media groups - (www.ft.com)
Chrysler Lending Arm In Weakened Position As It Refinances - (online.wsj.com)
Banks Rally, but Demons Still in Vault - (online.wsj.com)
Slowing US auto-finance market hits lenders - (www.ft.com)
As costs rise, inflation's next front is retailers - (www.ap.com)
Plummeting Resale Values Lead Chrysler to End Leases - (www.nytimes.com)
In Oil Debacle, Ex-Basketball Star - (online.wsj.com)
Citi paying departing Klein $42.6 million - (www.reuters.com)

Chrysler looks to drop high-end models - (www.chicagotribune.com)
Darling looks at new mortgage plan - (www.ft.com)
India's Deficit Is a Danger - (online.wsj.com)
Moody's warns on European credit quality - (www.ft.com)
Clashes between emerging economies dim trade talks hopes - (news.yahoo.com/s/afp)
Treasury plan to rescue mortgage lenders - (www.telegraph.co.uk)
ANZ Bank Profit to Fall as Much as 25% on Bad Debt Provision - (www.bloomberg.com)
House price values drop 10 months in a row - (www.telegraph.co.uk)
Moody's warns on European credit quality - (www.ft.com)
Eurozone mortgage lending at record low - (www.ft.com)

No Free Bubble - (www.nytimes.com)
Short measures - (www.ft.com)
Oil Shock: This Time, It's Different - (www.washingtonpost.com)
Fannie Mae and Freddie Mac: Congress backs rescue package - (www.telegraph.co.uk)
How One Borrower Beat the Foreclosure Machine - (www.nytimes.com)
A Deposit-Protection Primer - (online.wsj.com)

Friday July 25 Housing and Economic stories

Top Stories:

U.S. Congressman Warns Major Economic Disaster Imminent - (www.thetrumpet.com) Time is short for making a course correction before this grand experiment in liberty goes into deep hibernation,” the U.S. Congress was told earlier this month. On July 9, Texas Rep. Ron Paul warned the House Financial Services Committee that “big events” were about to occur. “… I have days, growing more frequent all the time, when I’m convinced the time is now upon us that some big events are about to occur,” he said. “These fast-approaching events … will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed” (emphasis ours throughout). Paul continued: There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. … The financial crisis, still in its early stages, is apparent to everyone: gasoline prices over $4 a gallon; skyrocketing education and medical care costs; the collapse of the housing bubble; the bursting of the nasdaq bubble; stock markets plunging; unemployment rising; massive underemployment; excessive government debt; and unmanageable personal debt. Little doubt exists as to whether we’ll get stagflation. The question that will soon be asked is: When will the stagflation become an inflationary depression?

FDIC Chairman Sheila Bair Is Out Of Control - (globaleconomicanalysis.blogspot.com) - "In a sad twist of irony Sheila Bair is accusing blogs of being "out of control". Sadder still is the fact that San Francisco Business Times writer Mark Calvey agrees. Please consider the incredibly inane article FDIC learns it ignores bloggers at its peril. The federal agency insuring bank deposits learned that it can't afford to ignore the blogs following its seizure this month of IndyMac Bank, the largest bank failure since the 1980s. "The blogs were a bit out of control," Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the San Francisco Business Times after a speech in San Francisco this week. That's putting it mildly. Following the FDIC's takeover of IndyMac on July 11, widely followed blogs were speculating on bank runs on some of California's largest banks based on nothing more than people waiting for their branch to open or large deposits moving between financial institutions. The FDIC plans to pay closer attention to the blogosphere in the future. "We're very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it," Bair said. "The misinformation that came out over the weekend fed a lot of depositors' fears."

Why wasn't IndyMac on FDIC problem list? - (www.sfgate.com) - Why wasn't IndyMac Bank, whose problems were well known in the financial community, not on the Federal Deposit Insurance Corp.'s list of troubled institutions until shortly before its failure this month? And if IndyMac - one of the three largest institutions ever seized by the FDIC - didn't make this list, could it be understating problems in the banking system? Each quarter, the FDIC discloses how many banks and thrifts are on its problem list. It does not name which institutions make the list because if it did, depositors would yank out their money and they would almost surely fail.

Ridiculous Lawsuits Fly At Taxpayer Expense - (globaleconomicanalysis.blogspot.com) In the last few days there has been a pair of ridiculous lawsuits that are no doubt a waste of time and money for all involved. Inquiring minds may wish to consider San Diego sues Bank of America to halt foreclosures. San Diego's city attorney Michael Aguirre said on Wednesday he filed a lawsuit against Bank of America Corp (BAC) and its Countrywide unit to prevent the mortgage lenders from foreclosing on homes in the city, which he aims to make a "foreclosure sanctuary." Here is my take: This is a needless waste of taxpayer money. All it does is make it look like the city attorneys have work to do. If this is typical of the "work" San Diego is paying its attorneys to do, San Diego ought to fire the whole lot of them.

Grand jury investigates subprime lenders - (cnn.money.com) Of course, they are only going after companies that have failed or been acquired. Pretty lame: A federal grand jury is investigating subprime mortgage lenders Countrywide Financial Corp., New Century Financial Corp. and IndyMac Federal Bank, a person familiar with the situation told The Associated Press on Thursday. Subpoenas seeking documents have been issued to all three companies, according to the person, who was not authorized to speak publicly about the case and requested anonymity.

Schwarzenegger To Slash State Workers' Pay Till Budget Passes - (globaleconomicanalysis.blogspot.com) - The situation in California is getting interesting. Three days ago I wrote Schwarzenegger Needs To Face Reality: California Is Insolvent. In a better late than never scenario, Schwarzenegger is getting tough. The LA Times is reporting Schwarzenegger plans to slash state workers' pay till budget passes. Gov. Arnold Schwarzenegger is planning to cut the pay of about 200,000 state workers to the federal minimum wage of $6.55 an hour until a budget is signed, according to a draft of the governor's order obtained by The Times. Administration officials said Schwarzenegger is expected to sign the order early next week as part of an effort to avert a cash crisis. The controversial move, likely to be challenged in court by public-employee unions, would save the state about $1 billion a month, the officials said. Workers would be repaid their lost earnings once a budget was in place.

2.2 million vacant homes for sale - (cnn.money.com) Some 2.8% of homes, excluding rental properties, were empty and on the market from April through June, according to Census Bureau figures released Thursday. The vacancy rate hit a record high of 2.9% in the first quarter of 2008. It was 2.6% a year ago. "They are still not showing a downward trend," said Christian Menegatti, U.S. lead analyst at RGEMonitor.com, an economic research and consulting group. "That's the bad news. The numbers are telling us that prices have to fall more."

The speculator sideshow U.S.: Oil shenanigans - (cnn.money.com) – It is a well-known fact the big US financials are the worst offenders of commodity speculation and manipulation. Of course, the CFTC goes after a small overseas speculator. As the CFTC trumpets its charges against a Dutch hedge fund, the fundamental supply-and-demand factors that govern the price of oil haven't changed. Watch out, speculators: The Commodity Futures Trading Commission is getting tough on crime. But since, as the CFTC has said, speculation hasn't pushed up prices, the crackdown will benefit its image more than the economy. Under increasing pressure from Congress in recent months to crack down on speculative activity in the oil futures markets, today the CFTC filed civil charges against Optiver, a Dutch hedge fund, plus two subsidiaries and three employees, alleging manipulation of crude oil, heating oil and gasoline futures prices on the NYMEX. According to the charges, the defendants attempted to manipulate short-term prices on 19 different occasions in March 2007, were successful at least five times, and netted an illicit profit of $1 million.

WaMu Slumps as Gimme Credit Cites Liquidity Concern - (www.bloomberg.com) - Washington Mutual Inc. tumbled more than 20 percent for a second day as Gimme Credit LLC said unsecured creditors were ``pulling funds'' from the biggest U.S. savings and loan.

San Diego sues Bank of America to block foreclosures - (www.ml-implode.com)


Other Stories:

Debt capitalism self-destructs - (www.ml-implode.com) - Quite the thesis by Liu. It is long, but worth reading for it history of the GSEs and many gems of insight. For example: The ...
Housing bill bonus: Alleviate debt ceiling - (www.ml-implode.com) - "The Treasury Department appeared open to the pending housing bill, since it would also expedite action this week on Secretary H...

Senate due to back housing bill, GSE shares slide - (www.ml-implode.com) - "The U.S. Senate is due to vote finally on Saturday to approve a major housing market rescue bill, including federal financial a...
Second Quarter Vacancy Rates Slip from Previous Quarter - (www.ml-implode.com)
Freddie Mac: 30-yr fixed-rate mortgage up on inflation woes - (www.ml-implode.com)
Existing-Home Sales Fall to 10 Year Low; Shadow Inventory Grows - (www.ml-implode.com)
The Philadelphia Manhole Cover Indicator - (www.ml-implode.com)
At Downey Savings, a Shake-Up as Losses Mount - (www.ml-implode.com)
No sign yet of a bottom in home prices - (www.ml-implode.com)
Existing Home Sales Fall 2.6% to 4.86 Million in June - (www.ml-implode.com)

Home sales at 10 year low Mortgage rates up - (cnn.money.com)
Fannie's new watchdog: All bark? - (cnn.money.com)
WaMu shares get pummeled again - (cnn.money.com)
UBS hit with multibillion-dollar suit Video - (cnn.money.com)
Ford's worst quarterly loss ever New Euro look - (cnn.money.com)
Oil: Magic price for a stock rally Drilling debate - (cnn.money.com)

U.S. Stocks Drop as Financials Have Biggest Decline in 8 Years - (www.bloomberg.com)
States Slammed by Tax Shortfalls - (online.wsj.com)
Sales of U.S. Existing Homes Fell to 10-Year Low - (www.bloomberg.com)
Fed Report Portrays Stressed Economy - (www.washingtonpost.com)
States Slammed by Tax Shortfalls - (online.wsj.com)
USDA Expects Higher Food Prices - (online.wsj.com)
Even now, retailers see a blue Christmas - (www.chicagotribune.com)
Minimum wage set to rise 70 cents, but higher costs across the board eat into the raise - (www.chicagotribune.com)
Will central banks act to rescue the dollar? - (www.financialweek.com)
Housing legislation a help but no magic wand - (www.reuters.com)

Potential downgrades are still at a historic high level - (www.cfo.com)
Mortgage rates rise for 6th straight week - (money.cnn.com)
Rule would require more info on 401(k) fees - (www.chicagotribune.com)
FDIC head says more banks skirting failure - (www.chicagotribune.com)
Toyota takes driver's seat in sales - (www.latimes.com)
MBIA, Ambac Sued by Los Angeles on `Unnecessary' Bond Insurance - (www.bloomberg.com)
Changes ahead for dollar menu - (www.chicagotribune.com)

Eurozone slowdown worsens - (www.ft.com)
German Business Confidence Drops Most Since Sept. 11 - (www.bloomberg.com)
U.K. June Retail Sales Drop Most Since at Least 1986 - (www.bloomberg.com)
Eurozone slowdown worsens - (www.ft.com)
Malaysia's inflation soars to 26-year high in June - (www.marketwatch.com)
Inflation Alarms Ring Out - (online.wsj.com)

Doctors switch to 'concierge' practices - (www.azcentral.com)
Plan turns Habitat for Humanity into an investment - (www.ajc.com)

Thursday July 24 Housing and Economic stories

Top Stories:

Fannie Mae Unsold $5 Billion Homes Bring Peril to Shareholders - (www.bloomberg.com) Fannie Mae, the largest U.S. mortgage finance company, couldn't find a buyer who would pay $6,900 for the three-bedroom house at 1916 Prospect St. in Flint, Michigan. So broker Raymond Megie, who is handling the foreclosure sale, advised cutting the price to $5,000. Megie still couldn't sell it. ``There's oversupply,'' he said. The home sold in 2005 for $110,000. Fannie Mae acquired twice as many homes through foreclosure in the first quarter as it sold, regulatory filings show. Unsold properties may weigh on the company's stock, which lost almost half its value since June 5, said Moshe Orenbuch, managing director of equity research at Credit Suisse Group AG in New York. Late payments on the company's home loans, a harbinger of foreclosures, almost doubled in the past year. Together, Fannie Mae and Freddie Mac, the two biggest U.S. mortgage finance companies, owned a record $6.9 billion of foreclosed homes on March 31, compared with $8.56 billion held by all 8,500 U.S. commercial banks and savings and loans. Foreclosed houses sell at an average discount of about 20 percent, according to economists Ethan Harris and Michelle Meyer at New York-based Lehman Brothers Holdings Inc. At that rate, the two mortgage companies stand to lose $1.39 billion on the foreclosed houses they currently own. ``Progress on this is probably one of, if not the single most important economic process right now,'' Orenbuch said. ``With prices decreasing, it's better to get rid of houses quickly.''

Philadelphia Streets Unsafe for Manhole Covers - (www.bloomberg.com) – Another side effect of the Fed inflationary policies. City crews tried screwing down the covers with hexagonal bolts, but the thieves responded with Allen wrenches to unscrew them. The city pressed scrap dealers to refuse material marked as city property; but the thieves adapted again, using blow torches to partially cut up or melt off the city labels. One thing has helped. A Water Department worker, Fred Feoli, designed a way to lock the manhole covers from the inside. But so far, only 300 of the city’s more than 70,000 manhole and inlet covers have been locked.

Collapse of loan market, change in rules have families scrambling - (www.boston.com) Maria Ferraguto is finding it difficult to relax this summer. She's too busy figuring out how to pay for her son Michael's senior year at the College of the Holy Cross. Some of the stress feels familiar. Maria and her husband, Paul, have been writing checks to Holy Cross for eight years. Their older son, Mark, graduated from the private Worcester college in 2005, and the Woburn family has always struggled to keep up with rising tuition and fees, which now total about $47,500 annually. But this year, with first semester payments due Aug. 1, the Ferragutos, like many families, are especially concerned. Since the unprecedented collapse of the student loan market, financing a college education has become more complicated than ever. For the Ferragutos, it started in April with a letter from the Massachusetts Educational Financing Authority, the nonprofit lender for thousands of students who attend colleges and universities in Massachusetts. The letter said the authority would no longer offer federal loans, including low-interest Stafford and parent loans. Even worse, the authority said money for private student loans was in doubt.

CA Central Valley foreclosures continue to skyrocket - (www.modbee.com) The number of homes repossessed by lenders continues to skyrocket throughout Stanislaus, San Joaquin and Merced counties, according to DataQuick Information Systems.
This April, May and June, for instance, 2,207 homes were foreclosed on in Stanislaus, pushing the county's one-year total to 5,554. That's five-times higher than the number of homes foreclosure on during the previous year.
In San Joaquin, 3,185 homeowners lost property to foreclosure this spring, pushing its one-year total to 8,366.

Lender-Liability Suits Rise - (online.wsj.com) The love affair between banks and builders during the housing boom has deteriorated into a series of divorces now spilling into the courts. As lenders rush to curtail their real-estate exposure and preserve sorely needed capital, they are triggering lawsuits from builders that say the banks have unfairly cut off their construction financing, stopped their projects midstream and forced their companies to the brink of bankruptcy. "Lender-liability lawsuits are coming. It's only just beginning," says Michael Hackard, a lawyer in Sacramento, Calif., who focuses on real-estate law. "There are going to be builders who argue that the lender forced me into insolvency by not acting in good faith."

A Mortgage Rescue Strains Calculations - (www.nytimes.com) The proposed government rescue of the nation’s two mortgage finance giants should appear on the federal budget as a $25 billion expense, the independent Congressional Budget Office said on Tuesday, but officials conceded that there was no way to really know what, if anything, a bailout might cost taxpayers. The budget office said the chances were better than even that a rescue would not be needed before the end of 2009 and would not cost any money. But the office also said there was a 5 percent chance that the mortgage giants, Fannie Mae and Freddie Mac, could lose $100 billion. Lawmakers said that the $25 billion cost would not have to be offset with spending cuts or tax increases as would normally be required by “pay as you go” budget rules, and instead would be regarded as emergency spending and added to the national debt.

Some Hit Hardest Are Looking To Sell Mutual-Fund Arms - (online.wsj.com) - Despite the rally in banks stocks, struggling banks are still trying to raise capital, and some of the hardest hit are now considering selling their lucrative money-management units to raise cash.
National City Corp. is working with Morgan Stanley to shop its Allegiant Funds operation, according to people familiar with the matter. The division manages about $30 billion, about half of which is in its more than 30 mutual funds. The possibility of such a sale arose ...

2nd Mortgage Holders (Banks) Now to be Bailed Out Too - Breaking! - (www.ml-implode.com) - Our nations largest banks are being weighed down by 2nd mortgage liens (Home Equity Lines/Loans or HELOCs). You have heard this in many of their earnings calls recently. The home equity market is thought to be as large as $1.3 trillion. For many banks this is their largest residential mortgage exposure. For example, Wells Fargo still carries $84 billion and Bank of America and Chase about $100 billion a piece. The banks were very touchy in their recent earnings reports on this topic. Wells Fargo actually changed the definition of ‘default’ from 120 days to 180 days to push out defaults further consequently hiding losses. See my report on Wells Fargo’s mystery earnings. Real losses on 2nd mortgage portfolios will befall the banks, as values continue to fall and these now unsecured loans default. But now it looks as though the tax payers could shoulder much of the risks FHA will assume when doing all of these ‘underwater refis’. How much can FHA shoulder when they even admitted lately that they were on the brink after a $4.6 billion loss. Mish wrote about it recently. Our nations largest banks are being weighed down by second mortgage liens (Home Equity Lines/Loans). You have heard this in m... 2nd Lien Provision Added to Housing Bill - Source: National Mortgage News: “Second lien holders could benefit from permitting the refinancing of struggling homeowners under a special Federal Housing Administration foreclosure rescue program contained in a massive housing bill the House is expected to pass Wednesday. A provision added during final negotiations on the bill will allow second lien holders to share in a portion of future appreciation on the property. However, they have to agree to the restructuring and refinancing of the existing first mortgages, which would extinguish any second or subordinated liens”….

Other Stories:

More Than 1 Trillion Needed to Solve Housing Crisis - (finance.yahoo.com)
Bush Caves In On Housing Bill That Won't Save Housing Market - (www.clusterstock.com)
Bunning criticizes support for mortgage giants - (www.ml-implode.com) - "U.S. Sen. Jim Bunning again condemned a support package for troubled mortgage giants Fannie Mae and Freddie Mac, saying the pla...
Bloomberg Discovers the REO Industry - (www.ml-implode.com) - "A piece today at Bloomberg co-authored by Bob Ivry marks the financial news outlet’s “come to Jesus” moment with the REO indust...
Fannie, Freddie Race Banks To Bottom - (www.ml-implode.com) - "Fannie Mae and Freddie Mac may be unintentionally driving down prices in already depressed markets to the detriment of commerc...
Plunger Alert - (www.ml-implode.com)
**RED ALERT** RAPE BY CONGRESS IMMINENT - (www.ml-implode.com)
Fannie Mae Unsold $5 Billion Homes Bring Peril to Shareholders - (www.ml-implode.com)
California Real Estate in Perspective: 2008-2012 - (www.reochronicle.com)
How to buy the whole US for no money down - (www.solari.com)
House improvements are a waste of money - (www.telegraph.co.uk)
Wachovia CEO Steel's Plan Boosts Stock $7.7 Billion - (www.ml-implode.com)
Moody’s Warns on Weakening Credit Quality - (www.ml-implode.com) The strain of increased debt and falling home prices is pushing the U.S. economy to a breaking point, setting up consumers and investors for a nasty fall later this year, according to new research published Wednesday by Moody’s Economy.com
Freddie, Fannie Should Split, Not Get Aid, Faber Says - (www.ml-implode.com)
Fannie, Freddie Rise After Lawmakers Agree on Bill - (www.ml-implode.com)
Time to Get Political Folks…Massive Bailouts Front and Center - (www.ml-implode.com) what is going on with the Fannie/Freddie, housing, mortgage, Treasury, Fed, Wall St, Washington, rich investor and foreign Gov’t bailout plan could turn out to be nothing short of the largest fraud ever perpetrated on the taxpayers, at least in my lifetime. I feel compelled to use whatever soapbox I have here to get this message out there to as many as I can

You Know The Banking System Is Unsound When.... - (Mish at globaleconomicanalysis.blogspot.com)
500 Year Housing Hurricane Gets Worse - (Mike Morgan)
Woes Afflicting Mortgage Giants Raise Loan Rates - (www.nytimes.com)
Fannie Mae Has $5 Billion In Unsold Houses - (www.bloomberg.com)
Fannie Mae and Freddie Mac bailout makes matters worse - (www.newsweek.com)
New Fed rules miss key lending abuse - (money.cnn.com)
Housing implosion has Texans recalling banking collapse of '80s - (www.dallasnews.com)
Why Its Worse Than You Think - (www.newsweek.com)
Builders Dislike Taste Of Own Medicine - (www.minyanville.com)
Beachside real estate no guarantee of value - (lansner.freedomblogging.com)

Most foreclosures in at least 20 years in CA - (www.sfgate.com)
Housing Package Deal Reached - (online.wsj.com)
Fed sees prices rising even as economy slows - (www.marketwatch.com)
Phila. Fed chief urges rate increase - (www.philly.com)
Moody's Economy.com: Rising Household Debt, Defaults Straining US Economy - (www.marketwatch.com)

Vote looms in Congress on housing rescue plan - (www.reuters.com)
Supervision, not media coverage, is reprehensible - (www.chron.com)
Record home losses in California - (www.latimes.com)

Moody's: More firms found with weakest liquidity - (www.signonsandiego.com)
County foreclosures soar in June - (www.signonsandiego.com)
UPS says profit fell nearly 21 percent in second quarter, lowers outlook for year - (www.chicagotribune.com)
Whirlpool reports 27 percent dip in 2Q profit - (www.startribune.com)
Autos Face More Woes, Ghosn Says - (online.wsj.com)
High Costs Put Sara Lee CEO in a Bind - (online.wsj.com)
Banks' Health Questioned as Wachovia Posts $8.9 Billion Loss - (www.washingtonpost.com)
Supervalu says fiscal 1st-quarter earnings rise 9 percent, cuts 2009 profit guidance - (www.chicagotribune.com)

Stagflation in Britain: Things can only get worse - (www.economist.com)
Japan's Exports Fall for First Time in Four Years - (www.bloomberg.com)
Australia's Quarterly Inflation Accelerates to 1.5% - (www.bloomberg.com)

Wednesday July 23 Housing and Economic stories

Top Stories:

Desperate times, desperate measures for condo associations - (www.dailybusinessrevue.com) Interesting as condo associations are trying to accelerate foreclosures. Facing a spike in delinquencies and the need to pay the bills, the Bentley’s condo association opted to take a hard line with lenders that took over units there — many from investors who went into foreclosure. In one instance, the condo association took legal action against a lender that it said was dragging out the foreclosure process to avoid paying maintenance fees. Condos like Bentley Bay are increasingly resorting to such desperate measures to collect enough money to keep their buildings operating. It’s also proof that even upscale condos in areas considered insulated to a market downturn are feeling the pinch. As more units go into foreclosure, communities — especially newly built or converted projects — are struggling with rising nonpayment of association fees. Beleaguered board members are ratcheting up legal pressure on lenders who’ve launched foreclosure action against units but are slow to take title to the properties — a move that helps lenders delay taking on responsibility for condo fees. Unit 212 at the Bentley was mired in a drawn-out foreclosure process, and fees were mounting. The cash-strapped condo association finally asked Miami-Dade Circuit Judge Daryl Trawick, who was overseeing the foreclosure case, to force U.S. Bank to take title to the unit or immediately start paying maintenance fees.

Mervyns may file for bankruptcy, sources say - (www.latimes.com) - The Hayward, Calif.-based retailer stopped providing its financial information to at least two credit-monitoring firms -- prompting some vendors to halt merchandise shipments and triggering speculation that the chain might file for bankruptcy. "I'm advising my clients to hold all shipments at this time due to a lack of communication from Mervyns management," said Bob Carbonell, chief credit officer at Bernard Sands, a credit monitoring company. "To the best of my knowledge, virtually all of my clients have stopped shipping goods." Mervyns declined to comment on its current troubles, first reported Monday by the Wall Street Journal, which quoted anonymous sources saying the chain could ultimately be forced to seek bankruptcy protection.

Ed McMahon sues hospital, two doctors, investment tycoon over neck injury – (ap.google.com) – I have lost all respect for Ed. Not that I had any previously, but at least his character was funny in the SNL skit. He lived way above his means for years and now is suing everyone for his problems. Previously, he accepted responsibility for his problems but has more recently changed his tune. He previously said: "If you spend more money than you make, you know what happens. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen." Moe recently, Ed McMahon has sued a hospital, two doctors and an investment tycoon Friday over a neck injury he has said has left him unable to work, a circumstance he has blamed for his recent money woes. The lawsuit seeks an unspecified amount, claiming negligence, battery, elder abuse and intentional infliction of emotional distress. It was filed in Los Angeles Superior Court against Cedars-Sinai Medical Center, two doctors, and the owner of a home where he says he fell in March 2007.

Freddie Mac May Slow Mortgage Buys to Prop Up Capital - (www.bloomberg.com) - Freddie Mac, the second-largest U.S. mortgage-finance company, may cut purchases of home loans from banks and bonds backed by housing debt to shore up its capital amid record delinquencies. The government-sponsored company is also considering selling securities and reducing its dividend while it prepares to issue $5.5 billion of stock, McLean, Virginia-based Freddie Mac said in a July 18 filing with the U.S. Securities and Exchange Commission. JPMorgan Chase & Co. analyst Matthew Jozoff said in a report last week that growth in mortgage holdings of Freddie Mac and the larger Fannie Mae will be ``weak.'' ``This just means much less credit availability for mortgage borrowers,'' said Paul Colonna, who manages more than $100 billion as chief investment officer for fixed income at GE Asset Management in Stamford, Connecticut. ``They were teed up to be saviors of the mortgage crisis, but now they've got their own capital issues.''

Angelo's Many "Friends" - (www.portfolio.com) In January 2004, Richard Aldrich, a California state appeals court judge, decided to refinance his 8,200-square-foot house next to a Jack Nicklaus-designed golf course at the Sherwood Country Club in Westlake Village. He turned to a prominent Sherwood member: Countrywide Financial chief executive Angelo Mozilo. Aldrich’s application was assigned to a loan officer named Robert Feinberg; the judge was seeking a $1 million loan and a $900,000 line of credit. By email, Feinberg alerted Mozilo that the credit line was “above what guidelines allow.” Mozilo responded, “Go ahead and approve the loan, and close it as soon as possible. Don’t worry about this deal, it’s golden.” Countrywide further waived half a point, or $5,000 on the million-dollar loan. (Homebuyers can reduce their interest rates by paying points, which are equal to 1 percent of the value of a loan.) That wasn’t Aldrich’s only contact with Countrywide. At the time he refinanced, a class action lawsuit against Countrywide was pending before the appellate court, brought by borrowers contending that the company offered an inadequate payment to settle allegations that it charged excessive fees for credit reports. That August, Aldrich was part of a three-judge panel that unanimously rejected the borrowers’ appeal. According to a person familiar with the case, Aldrich did not disclose his relationship with Countrywide to the plaintiffs or offer to recuse himself. California’s judicial code of ethics states that judges cannot accept gifts or favors from donors “whose interests have come or are reasonably likely” to come before them, nor can they take out a loan at better terms than are available to other borrowers. Reached by phone, Aldrich denied receiving a below-market loan and hung up.

Bailout means poor states pay for rich states' mortgages - (www.tomahjournal.com) Yes, it’s a win-win situation for big-fat bankers and citizens of Manhattan, etc. When times are good, the investment bankers and lenders are making a good $200-500K a year. When things go south, they look to the rest of the country to bail them out. Another financial crisis, and another bailout that sends money from the Frost Belt to the Sun Belt. Twenty years ago, it was the savings & loan crisis. Today, it’s the mortgage meltdown. While both are long-term financial disasters triggered by faith-based deregulation, they are also stories of demographic and regional redistribution. If a mortgage bailout bill that’s winding through Congress becomes law, Wisconsin will, broadly speaking, bail out Las Vegas. The causes of the mortgage meltdown are clear: Lenders and borrowers made bad bets on whether real estate in several “hot” markets -- Las Vegas, Southern California, South Florida, exurban Atlanta, etc. -- would continue to rapidly escalate in price. The lending triggered an orgy of development -- too many subdivisions with too many houses that had too much square footage. Was it something these areas could sustain? Of course not. But the bailout legislation allows a Las Vegas family to stay in a $600,000 home it never should have bought, and it bails out the lending institution and its investors for a mortgage loan that never should have been made.

Sales of Southern California companies drop sharply - (www.latimes.com) - Sales of retail shops, restaurants, beauty salons and other small and medium-size businesses in Los Angeles County are down by almost a third in the first six months of the year compared with the same period last year, according to BizBen.com, a San Ramon, Calif.-based clearinghouse that lists small, private California businesses for sale and reports statewide sales data. The 30.2% decline, to 2,968 L.A. businesses sold in January through June, is more than double the statewide drop of 13.7% in the same period. Some 11,654 California businesses have sold this year. In Orange County, 1,274 businesses sold in the first six months, down 22.6% from the year-earlier period. San Bernardino County experienced an 11.9% drop, to 651, and Riverside County sales declined to 391, a 47.3% plunge, according to BizBen.com. (San Diego was a Southern California exception: Sales jumped by more than 50%, to 1,275.). Business brokers blame the sharp drops on the credit crunch. Banks began to tighten credit standards last summer for the government-backed loans that fuel the purchase of many small businesses.

Critical financial problems spreading – (www.ft.com) - The number of companies facing "critical problems" surged by more than a quarter between the first and second quarter of the year as tightening credit conditions continued to bite, according to Begbies Traynor, the corporate insolvency and restructuring specialist. Year-on-year comparisons in the company's Red Flag Alert survey show a near eightfold rise in financially troubled companies in the second quarter. The survey showed 4,258 companies facing winding-up petitions from creditors or county court judgments in excess of £5,000, compared with just 542 in the same period a year ago. Quarter-on-quarter, the number of companies facing critical problems increased by 29 per cent.

New Regulator in Rescue Plan Spurs Debate - (www.nytimes.com) When the Treasury secretary, Henry M. Paulson Jr., orchestrated a rescue effort for the nation’s two largest mortgage finance companies last week, most of the attention was focused on the infusion of cash and credit that the government would provide. But his plan also relies on the creation of a new regulatory agency to control the companies more tightly over the long term and to limit the risk they pose to the country’s financial system. Skip to next paragraphUnder the measure, Congress would lose some of its authority to oversee the companies, Fannie Mae and Freddie Mac, including the right to determine how much capital they must keep as a cushion against losses. That role would shift to the new regulator, which would be called the Federal Housing Finance Agency; the director of the agency would be appointed by the president and confirmed by the Senate.

Economy hobbles Calif. town - (www.usatoday.com) The mortgage crisis, the limping economy and a recent bankruptcy filing by Vallejo — the first municipality to do so since Desert Hot Springs, Calif., in 2001 — have hobbled this town of 120,000. Golovich's business is hurting. Jobs and phone calls from customers have dried up. He's cut his staff and fleet of trucks in half, to six employees and four vehicles. Golovich also could lose his home. When the interest rate on his $500,000 adjustable-rate mortgage rose to 10% from 7%, his monthly payment shot up to $4,000, and he could not afford it. Hoping to ward off foreclosure, he and counselors at the non-profit Vallejo Neighborhood Housing Services are working with his lender on a new payment plan.

Huge oil trading loss sinks energy trader SemGroup - (www.reuters.com) SemGroup LP declared bankruptcy on Tuesday after $3.2 billion in oil trading losses torpedoed the formerly 12th-largest private U.S. company. The Tulsa-based company racked up the massive losses as oil prices ran up record gains, undercutting short crude futures positions SemGroup bought to hedge against its 500,000 barrel-per-day trading business. To meet obligations, SemGroup plans to sell off oil and natural gas gathering, transportation, and storage assets worth an estimated $6.14 billion that were purchased in a whirlwind of acquisitions since it was founded in 2000.

More socialism and stupidity from the Republic of California:
Beer-tax debate isn't going stale – (www.insidebayarea.com) – Another method of raising taxes on CA residents. It is getting close to 70% for high income individuals and these taxes (called levies by these morons) will help put it over 80%. Also, notice the socialistic aspect to only tax big brewers and not the small guys. Beall proposed to raise the current 2-cents-per-can-or-bottle levy by 30 cents, but he has since scaled it back to 15 cents per can. Put differently, a six-pack would cost nearly a dollar more.
Additionally, the assemblyman now says the tax should apply only to brewers that produce more than 60,000 barrels annually, thus excluding small craft brewers. He estimates it would generate $500 million annually for programs
to curb alcoholism and underage drinking, causes to which Beall has devoted years of work. The money would be set aside in a "lockbox" and could not be spent for other purposes.

Public service employees get free gas - (www.sfgate.com) Even as gas prices go through the roof, hundreds of public employees who work for San Francisco and Oakland are commuting in city vehicles, complete with free fill-ups. Some are coming from as far away as the Central Valley. San Francisco city records show that no fewer than 246 workers, including police brass, airport employees and Muni managers, have take-home car privileges. A district attorney's investigator commutes in his city-issued 2004 Ford Taurus from Manteca in San Joaquin County - a round trip of about 150 miles - with the city picking up the gas tab. Still another investigator is averaging 133 miles a day commuting from Tracy, and another 88 miles from Antioch. One D.A.'s investigator, commuting some 70 miles round trip from his home north of Petaluma, rang up $1,900 in annual fuel costs when the city officials first tracked his mileage back in 2003. Today, the bill has more than doubled, to $4,000-plus a year.

Supes readying tax hikes for November ballot - (www.sfgate.com). Another socialistic tax in downtown SF. Downtown businesses, law firms and wealthy property owners in San Francisco could be forced to pay more in taxes - in some case tens of thousands of dollars more - under proposals being debated today at City Hall. But the measure could give a break to small businesses, exempting them from city payroll taxes if they pay employees a total of $250,000 or less each year. Board of Supervisors President Aaron Peskin wants voters to decide this fall whether the city should double its real estate transfer tax on properties valued at more than $5 million. Under the measure, someone selling a $5.1 million property, for example, would pay $76,500 in transfer taxes, or 1.5 percent of the sale price. Peskin also hopes to get a second measure on the November ballot that would force law, accounting and other firms to pay taxes on the compensation of the partners in their offices, something most limited-liability partnerships operating in the city do not do.


Other Stories:

After Massive Financials-Led Rally, WAMU Drops Bomb - (www.ml-implode.com) - After a mega-rally led by the financials that left the XLF up 8.4%, WAMU drops the bomb: WAMU 2Q Non-GAAP EPS ($3.34) vs ($1.05)...
MBA's Kempner Out; Courson To Step Up - (www.ml-implode.com) - On the heels of Option ARMegeddon's recent article about MBA's financial difficulties, we learn today that President and CEO Jon...
Wachovia Update: 10,750 Jobs Cut - (www.ml-implode.com) - Wachovia acknowledged it is "exiting the General Bank wholesale mortgage origination channel" in a press release today...
Dubious Assumptions in CBO's Fannie, Freddie $25 Billion Rescue Cost Estimate - (www.ml-implode.com) - "I am curious: what expertise does the CBO have in developing an independent view of the two GSE's exposures? The CBO was no dou...
Fannie, Freddie Pare Losses on CBO Bailout Report - (www.ml-implode.com) - "- Fannie Mae and Freddie Mac pared losses after the non-partisan Congressional Budget Office said there's a better than 50 perc...
When retail therapy fails - (www.ml-implode.com)
Phoenix Foreclosures: They’re Not Just For Outlying Areas Anymore - (www.ml-implode.com)
Option ARMageddon: Kempner doubling-down on MBA’s future? - (www.ml-implode.com)
Pimco's Gross: Fannie, Freddie Mortgages 'Excellent Video' - (www.ml-implode.com)
Regulators check Fannie, Freddie books - (www.ml-implode.com)
The FHA Delinquency Crisis: 1 in 6 Borrowers in Default - (www.ml-implode.com)
Wachovia Swings To 2Q Loss; Dividend Cut To 5 Cents/Share - (www.ml-implode.com)
Thousands with criminal records work unlicensed as loan originators - (www.ml-implode.com)
Update: Wachovia's Wholesale Shutdown Confirmed - (www.ml-implode.com)

Icelandic CDS costs surge again - (www.ft.com) - The cost of insuring Icelandic bank debt against default climbed to near-record levels on Monday, as traders again targeted the embattled island economy. Credit default swaps, contracts between two parties to insure debt against default, hit 1,000 basis points on the major Icelandic banks Glitnir and Kaupthing. This means traders were paying €1m per year to insure €10m of each bank's debt over five years, more than double the price two months ago. A year ago, they paid €30,000.
Troubled economy has Texans recalling banking collapse of the '80s – (www.dallasnews.com) The economy collapsed after years of growth. Can't-miss investments turned to dust. And banks, gorged on years of aggressive lending, careened toward the breach.
A portrait of today's U.S. economy? Time will tell. But with analysts predicting as many as 300 U.S. bank failures in the next few years, many Texans will recall another banking crash. In the state's 1980s collapse, an energy bust and a subsequent real-estate wreck leveled hundreds of Texas banks, including longtime pillars of the economy.

Replace the word "oil" with "housing" - (patrick.net)
GSEs: Toxic fudge - (www.economist.com)
All US Senator Email Addresses - (patrick.net)
Little foreclosure relief seen from housing bill - (msnbc.msn.com)
Nothing Sacrosanct About U.S. AAA Rating - (www.bloomberg.com)
America, Too Big to Fail . . . Probably - (www.city-journal.org)
Derivatives, banks, and bailouts - (www.guildinvestment.com)
Market still far from bottom - (www.marketwatch.com)
House equity continued to deteriorate - (calculatedrisk.blogspot.com)
California's median house price plummets in June - (www.latimes.com)
Southern California Half-Off Sale - (www.mybudget360.com)
San Diego County House Sales Fall - (realestate.signonsandiego.com)
The Meltdown Lowdown - (www.prospect.org)
The death-knell of Bernankeism - (www.prudentbear.com)
Global economy at point of maximum danger - (www.telegraph.co.uk)
Blame U.S. housing finance - (www.economist.com)
Fed seems focused on inflation over growth - (www.ft.com)
California foreclosures soar to 20-year high - (www.businessweek.com)
On Economy, Bush Faults 'Drunk' Wall Street - (online.wsj.com)

How free market ideology backfired - (www.marketwatch.com)
Job Market Idles Many Teens - (online.wsj.com)

Cost of Loan Bailout, if Needed, Could Be $25 Billion - (www.nytimes.com)
Problems at Loan Giants Push Mortgage Rates Higher - (www.nytimes.com)
Why the oil crunch may grow worse - (www.latimes.com)
Oil trading company files for bankruptcy - (www.ft.com)
Junk bond hiatus shows the depth of credit squeeze - (www.ft.com)

Former SEC head wants broader short-selling rules - (www.boston.com)
CLO managers under pressure - (www.ft.com)

Two Troubled Banks Each Post Billions in Losses - (www.nytimes.com)
Fannie, Freddie bailout may have $25 billion tag – (www.reuters.com)
U.S. combing books of mortgage finance companies - (www.iht.com)
Wachovia Has Record $8.9 Billion Loss, Cuts Dividend - (www.bloomberg.com)
U.S. Lawmakers Reach Deal on Fannie, Freddie Bill - (www.bloomberg.com)
Fannie, Freddie May Record More Losses, Ofheo Says - (www.bloomberg.com)
SunTrust Profit Declines as Borrowers Fall Behind - (www.bloomberg.com)
Losses Mount, and Airlines Plan Steeper Spending Cuts - (www.nytimes.com)

Food and Gas Prices Taking a Toll in Asia - (www.nytimes.com)
Italian Consumer Confidence Plunges to 15-Year Low - (www.bloomberg.com)
Global credit crisis takes hold in Japan - (www.telegraph.co.uk)