Thursday, July 24, 2008

"Privatize the Profits, Socialize the Losses"

1. Thursday, and we're waiting for the National report on existing home sales for June, due today.

2. The House has passed the Housing Bill after "W" says he will sign it.
  • Mr. Bush was opposed due to the $4B earmarked for local governments to buy and refurbish foreclosed properties--because he considers it a bailout. This kind of plan is already in place near us--and even closer to Mr. Bush himself--in Fairfax County, VA.
  • The legislation leaves many unanswered questions, perhaps the biggest being whether it will be sufficient to slow the downward spiral of home prices.
3. Of course, mortgage rates are up due to "the troubles" at Fan and Fred.
  • Average rate for 30-year fixed rose to 6.71 from 6.44 percent last Friday. Average rate f jumbo loans, which cannot be sold to Fannie Mae and Freddie Mac, was 7.8%, the highest since Dec. 2000.
  • This is of greatest concern for interest-only mortgages for the first few years of their loans. If these borrowers can't refi into lower-cost loans, many of them will face the prospect of having to pay both interest and principal at higher, adjustable rates.
4. Wall Street: Drunk, Evil, or Stupid? Here.

5. Now that we need him again, he wants to go to Washington.


Montpellier said...

Well, we'll see - this was lobbied for heavily by the Homebuilders Assn. and NAR - bailout for the crowd that fed on this mess in the first place.

I'm furious that the taxpayer is going to foot the bill for imprudence at Fannie and Freddie, but I'm skeptical this will change much if anything about the current market dynamic. I think it will stabilize things where they are now, which means the roaring bubble times aren't coming back, and prices will fall.

I love that statutory 13% cram-down - for all the specu-vestors out there: the Congress just mandated a house price slash in your 'lifesaver'.

Anonymous said...

Virginia home sales report out. Ugly numbers, especially in Greater Augusta. Guess the exburbs are losing their appeal with high gas prices...

matt s. said...

Stabilize? Stabilize...? OHHOHO HAHAHA!!!

"July 24 (Bloomberg) -- U.S. stocks tumbled, sending financial shares to their worst drop in eight years, after home sales slid more than forecast and investor Bill Gross predicted the housing slump will cost banks and brokerages $1 trillion."

"Financial stocks in the S&P 500 fell 6.7 percent as a group, the third drop in the past three weeks greater than 5 percent. Today's slump follows a six-day, 30 percent rally spurred by better-than-estimated earnings reports from Citigroup, JPMorgan and Wells Fargo and legislation to rescue Fannie Mae and Freddie Mac."

You see the $1T Bill Gross estimated? Notice how it matches the $1T Paulson is getting? Coincidence? (Yes Paulson is getting $1T+ not $800B because the deficit is not yet at the debt ceiling. You could look at it like he's getting $800B PLUS the $300B bailout previously announced.)

The banks are going to chew up that money and make it disappear the same as they did with the hundreds of billions that Helicopter Ben threw out the window to them. You see that money keeping the mortgage brokers busy?

Sure it'll give the market a temporary bulge in the waistline as it digests it and shi... errrr... ships it out to foreign investments, banks, carry trades... there are a serious drawbacks to these actions.

That $1T isn't just sitting in a bank saying "spennnd meeee." Hank has to sell T-bills to investors, the majority of whome are foreign, to raise this money. Too bad foreign investors are already tiring of their US investments. The only way to attract investors to T-bills is to RAISE INTEREST RATES.

Now why aren't people hot for T-bills anymore? Because it is harder to make money in US investments when the dollar is falling.

Now we are at the crucial issue, the falling dollar, already down 25% That is what is causing our painful price inflation. The only hope for getting out of this mess in less than ten years (look up Japan's economy) is to save the dollar.

Raising the debt ceiling above $10 trillion dollars is huge symbolic and will have a strong psychological impact on everyone watching. This is not Hank and Ben defending the dollar as they promised (lied). This is them defending the bankers and crushing average people under a hyper-inflation "solution."

Call Senator Webb and STRONGLY OPPOSE the RAISING of the National Debt Ceiling and the bailout of the bankers who created this mess.

1-202-228-6363 (fax)



"US faces global funding crisis, warns Merrill Lynch"

"The US Treasury is running out of time before foreign patience snaps, writes Ambrose Evans-Pritchard"

"The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst. Britain and other Anglo-Saxon deficit states could face a similar retreat by foreign investors."

"Roughly $1.5 trillion of Fannie and Freddie AAA-rated debt - as well as other US "government-sponsored enterprises" - is now in foreign hands. The great unknown is whether foreign patience will snap as losses mount and the dollar slides."

"Hiroshi Watanabe, Japan's chief regulator, rattled the markets yesterday when he urged Japanese banks and life insurance companies to treat US agency debt with caution. The two sets of institutions hold an estimated $56bn of these bonds. Mitsubishi UFJ holds $3bn. Nippon Life has $2.5bn."

"But the lion's share is held by the central banks of China, Russia and petro-powers. These countries could all too easily precipitate a run on the dollar in the current climate and bring the United States to its knees, should they decide that it is in their strategic interest to do so."

"Mr Patelis said it was unlikely that any would want to trigger a fire-sale by dumping their holdings on the market. Instead, they will probably accumulate US and Anglo-Saxon debt at a slower rate. That alone will be enough to leave deficit countries struggling to plug the capital gap. "I don't see how the current situation can continue beyond six months," he said."

Dave Phillips said...

the numbers in the state report for Augusta were wrong. I spoke with a reporter yesterday who had noticed a major difference between the numbers CAAR reported for that region and the state report. The state report was wrong, but i do not know the correct numbers. CAAR reported year to date (thru June) and the state report was supposed to be 2nd quarter. I do know the numbers are not as bad as reported. We showed them only down 16% for the first half.