October 24, 2008


Reuters - Sales of previously owned U.S. homes rose 5.5 percent last month, the biggest gain since July 2003, and the inventory of unsold homes fell, a hopeful sign for a housing market mired in a long slump. . . The surprisingly large jump in sales pushed the inventory of unsold homes down by 1.6 percent to 4.27 million, or a 9.9 months' supply at the current pace, the lowest since February. ". . . Home prices, however, showed no signs of escaping their long, deep slide and economists said the number of homes on the market would likely have to fall further before they do. The median national home price declined 9 percent from a year ago to $191,600, the lowest level since April 2004.

LA Times -
The number of people losing their homes in California hit a record high of nearly 80,000 in the last three months, but a new state law appears to be dramatically slowing the foreclosure process -- at least for now. Loan default notices, the first step toward foreclosure, fell to 94,240 for the three months that ended Sept. 30. That's down sharply from the record 121,673 for the previous quarter, according to research firm MDA DataQuick.

The big drop came in September, when a new state law took effect that blocks lenders from initiating foreclosure proceedings until 30 days after contacting the borrower or making "due diligence" efforts to do so.

Default notices sank to 14,995 in September, after averaging more than 40,000 for each of the five preceding months.

"That new law virtually slammed the brakes on mortgage default filings," said Andrew LePage, a DataQuick analyst. "We don't know yet how many of those loans will get worked out versus just shifted to late this year or early next year."

State Senate President Pro Tem Don Perata (D-Oakland) introduced the bill after hearing numerous complaints from homeowners who said they had been unable to make contact with their lenders, or the firms servicing their loans, to avert foreclosure.

"Once all this stuff exploded and you realized how these mortgages were sold, packaged and resold, it was no wonder that the homeowner was confused," he said. "There wasn't anybody to talk to about their condition."

Denver Post - [Ralph] Nader placed much of the economic meltdown at the feet of a greedy Wall Street intent on making money at the expense of people worldwide.

"It is corporate greed tied to the ability to dominate the same corporate power," said Nader. "These guys knew exactly what they were doing. They were stretching the rubber band. . . to get another million and another $5 million, another $10 million." It was a spree, and they got caught - their thumb in the trap. They went over the brink. It's massive greed"

Nader said that Wall Street bundled together new financial instruments that were "risky, pretty worthless and abstract" and using the brand names of Merrill Lynch, Citibank, Bear Stearns and Lehman Brothers "sold them to towns in northern Norway and China when they were really bets on bets on bets."

Nader said that the one thing that the corporate speculators did was a create a "high velocity in expansion of the money, which means they are perfect objects for transaction tax," which he advocates. "Credit-default swaps alone are about $80 trillion in these computer trades. So the beauty of it is a tiny tax - one-tenth of one percent - of $500 trillion is $500 billion a year," said Nader.

He said that President Franklin Roosevelt had a transaction tax, and the United States helped finance the Civil War and Spanish American War with transaction taxes. He said the United States abandoned transaction taxes after World War II but now has a chance to reinstate the tax.

"That is how you get money to build real things from the paper economy to the public works," said the five-time presidential candidate.

He said that he and others will push Congress when it is back in session to make the speculators pay for their own bailout.

And it will be up to the enhanced Democratic-controlled Congress and President Obama to make it work, he said. "They finally have no excuses," said Nader. "This is the final test of the Democratic Party. They can't blame the Republicans in the Congress. They can't blame the White House."

Dirt Diggers Digest - It's now clear that Treasury Secretary Henry Paulson is seeking to use the Big Bailout not only to resolve the credit crunch but also to remake the banking sector of the U.S. economy. Going on the dubious theory that bigger means better and stronger, Paulson is encouraging giant banks to use federal money to take over their smaller counterparts. In an interview with Charlie Rose last night, Paulson said: "There will be some situations where it's best for the economy and for the banking system for there to be a consolidation."

The big players are getting the message. The Wall Street Journal and the Washington Post have pointed out that executives at major banks such as J.P. Morgan Chase and BB&T are openly considering using capital infusions from the feds not to make more loans but to purchase competitors.

It's odd there is not more of an uproar over this development, the way there has been in response to reports that the big banks have been stepping up their federal lobbying activities at the same time they are taking public money.

USA Today - More families with children are becoming homeless as they face mounting economic pressures, including mortgage foreclosures, according to a USA Today survey of a dozen of the largest cities in the nation. Local authorities say the number of families seeking help has risen in Atlanta, Boston, Denver, Minneapolis, New York, Phoenix, Portland, Seattle and Washington. "Everywhere I go, I hear there is an increase" in the need for housing aid, especially for families, says Philip Mangano, executive director of the U.S. Interagency Council on Homelessness, which coordinates federal programs. He says the main causes are job losses and foreclosures. USA Today found: In New York City, 2,747 families applied for shelter in September 2008, up from 2,087 in September 2007. . . In Hennepin County, including Minneapolis, 880 families were in shelters from January through August 2008, up from 698 in that period last year.

NY Times
- Facing a firing line of questions from Washington lawmakers, Alan Greenspan, the former Federal Reserve chairman once considered the infallible maestro of the financial system, admitted on Thursday that he "made a mistake" in trusting that free markets could regulate themselves without government oversight. A fervent proponent of deregulation during his 18- year tenure at the Fed's helm, Mr. Greenspan has faced mounting criticism this year for having refused to consider cracking down on credit derivatives, an unchecked market whose excesses partly led to the current financial crisis. Although he defended the use of derivatives in general, Mr. Greenspan, who left office in 2006, told members of the House Committee of Government Oversight and Reform that he was "partially" wrong in not having tried to regulate the market for credit-default swaps. . . Referring to his free-market ideology, Mr. Greenspan added: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact."

Washington Post -
The federal government may start guaranteeing home mortgages to persuade lenders to ease the monthly financial burden on struggling homeowners, Federal Deposit Insurance Corp. Chairman Sheila C. Bair said. The proposal, presented to the Senate Banking Committee, represents the most detailed idea yet on how the $700 billion federal rescue package might directly address the blight of foreclosures sweeping the nation. While the federal government has adopted a series of unprecedented measures in recent months to guarantee the investments and transactions of financial firms, the FDIC's proposal would vastly expand the role of the Treasury in standing behind the mortgages of struggling borrowers.

The plan, which won a warm reception from some senators, comes as demands grow on Capitol Hill for an ambitious initiative to help distressed homeowners, whose ailing mortgages are at the root of the financial crisis. The committee hearing yesterday continued a long-standing debate between lawmakers and the administration over how much to aid these borrowers. Citing the mortgage troubles of their constituents, some members of the Senate committee repeatedly complained that the administration has overlooked homeowners while placing emphasis on helping banks.


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