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  • Tue, Dec 23 2008
  • 11:10 AM » Homeowner Aid May Double Under Bush Loan Initiative
    Published Tue, Dec 23 2008 11:10 AM by
    Voluntary modifications by mortgage lenders are “too little, too late,” said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts. As mounting job losses cause foreclosure rates to rise, “we clearly need a more activist government intervention,” he said. Hope Now projects 950,000 loan modifications for 2008, including 208,000 for [...]
    Click Here to Read the Full Article

  • 11:09 AM » Miracle on 34th Street and Commercial REITs
    Published Tue, Dec 23 2008 11:09 AM by Seeking Alpha
    submits: You have to love family movie night. Last night we watched the John Hughes version of Miracle on 34th Street . In the not too distant past, I distinctly remember going into the colossal department stores as a kid, sitting on Santa Claus' lap, getting a picture with Santa and taking a ride down the slide back to mom and dad. Big Cleveland Department stores like May Company, Hallie's, and The Bing Company stood as icons of a thriving 1970s era retail with big train displays, Winter Wonderland villages, and even a few elves. One scene from the movie which really caught my eye was the flood of people coming in these stores to visit Santa Claus. Cole's had the best Santa Claus, and everybody else was jealous. We went out to see the real Santa Claus the other night. This required a track to Great Northern Mall on the west side of Cleveland. All that I could think of was a 40 minute drive, and another hour wait to see Santa. However, much to my chagrin, we were met with a 10 minute wait. And this guy is supposed to be the best Santa in Cleveland. According to the photographers, business was down approximately 30% from last year. That would suggest that 30% less people found themselves in the mall thus far during Christmas and Hanukkah shopping.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 11:08 AM » When mortgage rescues go bad
    Published Tue, Dec 23 2008 11:08 AM by CNN
    That lenders are ramping up their attempts to help troubled home borrowers is the good news.
  • 11:08 AM » CIT to receive $2.33B from government program
    Published Tue, Dec 23 2008 11:08 AM by
    "Commercial financial firm CIT Group Inc. said Tuesday it received preliminary approval to obtain $2.33 billion as part of the government's $700 billion bank investment program. . . . CIT recently announced it was raising $300 million through a public stock offer and bolstering its capital through a debt exchange offer as it worked to win approval to become a bank holding company."
    Click Here to Read the Full Article

  • 8:34 AM » Check out these 2010 real estate prices
    Published Tue, Dec 23 2008 8:34 AM by
    It is not clear how they came up with these housing price forecasts over the next couple years in this Forbes on the the nation's ten worst real estate markets. It should be quite clear, however, that if these numbers are anywhere close to being accurate, things will be much, much worse in California before long.
    Click Here to Read the Full Article

  • 8:34 AM » Americans think Madoff's behavior is common - poll
    Published Tue, Dec 23 2008 8:34 AM by CNN
    Most Americans believe that investment fraud like the recently revealed Ponzi scheme run by Bernard Madoff happens regularly on Wall Street, according to a recent survey.
  • 8:17 AM » Bank of America: Optimism Is Unwarranted
    Published Tue, Dec 23 2008 8:17 AM by Seeking Alpha
    submits: Bank of America Corporation (BAC), a financial holding company, provides a wide range of banking and nonbanking financial services and products to customers in the United States and internationally. The pending merger with Merrill Lynch (MER) will make Bank of America one of the largest financial services companies in the world. Initiating with SELL Rating We believe that Bank of America’s balance sheet will ultimately have to be fortified by a Citigroup (C) type of government bailout. As a result, BAC's stock price continues to have substantial downside risk. We are initiating coverage with a SELL rating.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:16 AM » Sudden Upsurge in Demand for Mortgages May Not Be Met With Supply
    Published Tue, Dec 23 2008 8:16 AM by Google News
    Mortgage applications are up sharply as homeowners try to take advantage of low 30 year fixed rates. But tighter lending standards means that a fair number will be disappointed. Moreover, the surge in mortgage applications is for refinances rather than new home purchases. And while refis will indirectly help the economy by increasing consumer discretionary income, the newly low mortgage rates do not yet appear to be stabilizing the housing market. From the : Applications for home loans more than doubled in the two weeks after the Federal Reserve said it would buy mortgage bonds to help stabilise the market, prompting mortgage rates to fall by more than three-quarters of a percentage point. With average rates for a 30-year, fixed-rate mortgage now at about 5.2 per cent, growing numbers of borrowers have an incentive to refinance to bring down their mortgage costs. But tighter underwriting standards for prospective borrowers, combined with funding and staffing difficulties for mortgage originators, are likely to restrict the supply of new mortgages. “The mortgage industry is collectively unprepared to deal with a cascade of business; staffs were pared to the bone as the market for mortgages shrank over the past year,” analysts at HSH Associates wrote in a note to clients. Mahesh Swaminathan, mortgage analyst at Credit Suisse, said that as a result, lower rates would not necessarily create a wave of mortgage refinancing on the scale that was seen in 2003, when credit markets were healthy.
  • 8:15 AM » Irregularity Uncovered at IndyMac
    Published Tue, Dec 23 2008 8:15 AM by
    Two months before IndyMac Bancorp collapsed in July, at a cost of $8.9 billion to taxpayers, a top federal banking regulator allowed the bank to backdate a capital infusion and gloss over its deepening problems, the Treasury Department’s independent investigator said Monday. In what industry analysts said was an example of the excessively cozy relations between high-flying subprime lenders and federal bank regulators, the Office of Thrift Supervision’s West Coast director allowed IndyMac’s parent company to backdate an $18 million contribution to preserve its status as a “well-capitalized” institution. Investigators reported that similar officially approved backdating appears to have occurred at other financial institutions, though they did not name them. Not too surprising. It is pretty clear at this point that what happened -- from the Fed to the OTS to the OCC and beyond -- is that banking regulators kept lowering standards and loosening rules and enforcement until the "regulation" was practically absent. That is why the collapse is so widespread and defies remedy: with no safeguards in place, the system hit "endogenous" (collapsing from within) failure before it hit any stopgaps from regulators. And here is the guy at OTS responsible: Mr. Dochow played a central role in the savings-and-loan scandal of the 1980s, overriding a recommendation by federal bank examiners in San Francisco to seize Lincoln Savings, the giant savings and loan owned by Charles Keating. Lincoln became one of the biggest institutions to collapse. Mr. Keating served four and a half years in prison before his fraud and racketeering convictions were overturned. He later pleaded guilty to more limited charges, and was sentenced to the time already served. I think we are running out of fingers to count S&L scoundrels who came back (or remained in place) to wreak havoc within banks, lenders, or the regulators themselves, a second time around. Depressing. But perhaps the lesson...
    Click Here to Read the Full Article

  • 8:15 AM » New report delivers bad (and good) news on mortgages
    Published Tue, Dec 23 2008 8:15 AM by Google News
    <!– @page { margin: 0.79in } P { margin-bottom: 0.08in } A:link { so-language: zxx } –> The Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) issued their second on mortgage performance on December 22. As expected the number of delinquencies and foreclosures in process continued to rise. The number of newly initiated foreclosures, however, declined by 2.6 percent to 281,298 in the third quarter of 2008. The foreclosure process can take 6 months to complete and of the 127,738 foreclosures completed during the third quarter, nearly 44 percent represented foreclosures that were newly initiated during the first quarter. The number of new loan modifications increased 16 percent to more than 133,000 in the third quarter. As pointed out in “” the loan modification business is a growing. In fact, loan modifications continue to grow more quickly than any other loss mitigation strategy, with banks and thrifts work with borrowers to minimize losses and keep them in their homes. “This report on again provides valuable insights into foreclosure prevention efforts in this country,” said OTS Director John Reich. Who credited financial institutions for their continued cooperation and the depth of the data provided. “We hope future reports will continue to yield information on how best to modify troubled mortgage to preserve homeownership over the long term.” Among the new information in the report are the re-default rates on modified loans. The number of modified loans in the first quarter that were 30 or more days delinquent was 37 percent after three months and 55 percent after six months. The number of loans modified in the first quarter that were more than 60 days delinquent was 19 percent at three months and nearly 37 percent after six months. “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-fault rates increased each month and showed no signs of leveling off after six months and even eight...
  • 8:15 AM » White House: Hoocoodanode?
    Published Tue, Dec 23 2008 8:15 AM by Calculated Risk Blog
    Click on cartoon for larger image in new window. Cartoon from Eric G. Lewis (site coming soon)
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • Mon, Dec 22 2008
  • 6:59 PM » Fed designates CIT Group as bank holding company
    Published Mon, Dec 22 2008 6:59 PM by Washington Post
    WASHINGTON -- The Federal Reserve on Monday said it has approved CIT Group Inc. as a bank holding company, clearing a key hurdle for the firm to bolster its resources with loans and support from the government's financial rescue fund.
    Click Here to Read the Full Article

    Source: Washington Post
  • 6:43 PM » FDIC Publishes Report On What To Know About Reverse Mortgages
    Published Mon, Dec 22 2008 6:43 PM by
    The recently published Reverse Mortgages: What Consumers and Lenders Should Know. The report goes over the the history of reverse mortgages and why the aging population presents such an opportunity to banks. While there is big opportunity in catering to the aging demographic, the report notes that financial institutions have been slow to enter reverse mortgage lending due to the unique servicing and risk management challenges. For example, when the reverse mortgage was first introduced, banks were wary of booking potentially long-term loans that increase over time, do not have a predefined scheduled repayment stream, and for which there was no established secondary market. Lenders also faced uninsured crossover risk. However, the market changed in 1988 when the Federal Housing Administration launched the Home Equity Conversion Mortgage Insurance Demonstration. The pilot was eventually adopted permanently by HUD and the HECM was born. The HECM presented banks with a commercially viable loan product with strong consumer protections. The FDIC lists the following as concerns in regards to reverse mortgage lending: Property appraisals - Lenders must ensure that property appraisals are conducted in accordance with the requirements of the appraisal regulations in Part 323 of the FDIC Rules and Regulations. Real estate lending standards - Lenders must comply with Part 365 of the FDIC Rules and Regulations, which requires insured state nonmember banks to adopt and maintain written policies that establish appropriate limits and standards for extensions of credit that are secured by liens on or interests in real estate, or that are made for the purpose of financing permanent improvements to real estate. Third-party risks - Lenders must manage potential risks associated with third-party involvement. This is particularly relevant to situations in which lenders either conduct wholesale activities or act as brokers or agents themselves. Servicing complexity - Specialized loan servicing...
    Click Here to Read the Full Article

  • 6:43 PM » White House: No one could have known
    Published Mon, Dec 22 2008 6:43 PM by Calculated Risk Blog
    Never mind that many people saw this coming - obviously the White House wasn't listening. From the White House: Most people can accept that a news story recounting recent events will be reliant on '20-20 hindsight'. Today's front-page New York Times story relies on hindsight with blinders on and one eye closed. The Times' 'reporting' in this story amounted to finding selected quotes to support a story the reporters fully intended to write from the onset, while disregarding anything that didn't fit their point of view. To prove the point, when they filed their story, NYT reporters were completely unfamiliar with the President's prime time address to the nation where he laid out in detail all of the causes of the housing and financial crises. For example, the President highlighted a factor that economists agree on: that the most significant factor leading to the housing crisis was cheap money flowing into the U.S. from the rest of the world, so that there was no natural restraint on flush lenders to push loans on Americans in risky ways. This flow of funds into the U.S. was unprecedented. And because it was unprecedented, the conditions it created presented unprecedented questions for policymakers. In his address the President also explained in detail the failure of financial institutions to perform normal and necessary due diligence in creating, buying and selling new financial products -- a problem that almost no one saw as it was happening. The "most significant factor" was "cheap money flowing into the U.S."? Uh, no. The most significant causes of the credit crisis were innovation in mortgage securitization coupled with almost no regulatory oversight (because of ideologues who opposed oversight and regulation). This led to lax lending standards (liar loans, DAPs, widespread use of Option ARMs as affordability products, etc.) and . Oh well ... I agree the White House missed the story, but the idea that "no...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 4:20 PM » Financing The MBS Fix: The 800 Pound Gorilla
    Published Mon, Dec 22 2008 4:20 PM by
    by Scott J. Wilson and Anthony M. Freed Since the United States Government has (Mortgage Backed Securities), I have noticed in all of the debate and coverage that there is a serious on the part of our congressional membership and in the news media regarding the mechanics of such a plan, and no one has even come close to outlining the actual costs that will be incurred. I don’t expect government bureaucrats news jockeys to know and understand all the intricacies of the mortgage business, but someone, somewhere has to have wondered what exactly the long term costs required to administrate a program of this magnitude would be. What will happen when the government buys trillions and trillions of dollars of these in this MBS bailout? How many thousands of people will it take to do all the ? Will there have to be a new government division created just for this purpose? How many hundreds-of-millions of dollars will this plan need that has not been budgeted for - or even considered as of yet? Or will they contract this all out? Then the real corruption can begin! Can you imagine all that will be made with “friends” to get these huge government-paid contracts? Everybody, there is an 800 lbs gorilla sitting in the living room of this banking bailout, and the general public doesn’t see it. Trust me it’s there, and there are more than a few that have taken notice. I know Hank are quite aware of the situation. I worked for one of the three largest banks still standing, and I have done everything from marketing, originating, processing, closing, secondary markets, and even foreclosures - at one particular bank I would estimate that there were no less than 2000 people who work in foreclosures, loss mitigation, and short sales alone - and that was before the bubble popped when foreclosures were minimal. Thousands upon thousands people will be needed . In addition to this new government agency that will need to be created to manage these loans, there is also a highly complex computer...
    Click Here to Read the Full Article

  • 4:20 PM » Senior Federal Banking Regulator Removed
    Published Mon, Dec 22 2008 4:20 PM by Washington Post
    A senior federal banking regulator has been removed from his job after government investigators concluded that he knowingly permitted IndyMac Bancorp to present a misleading picture of its financial health in a federal filing only months before the California thrift was seized by regulators.
    Click Here to Read the Full Article

    Source: Washington Post
  • 4:20 PM » Mortgage activity surges at US banks
    Published Mon, Dec 22 2008 4:20 PM by
    Banks are having trouble dealing with a flurry of mortgage applications, after record loan defaults and job cuts have stretched resources to the limit
  • 3:17 PM » Lucky investor dodges Madoff
    Published Mon, Dec 22 2008 3:17 PM by CNN
    On Monday morning, Dec. 8th, Gilbert Harrison, chairman of investment bank Financo, was finally ready to start investing with Bernard Madoff. Luckily, his financial advisor pulled him in off the ledge.
  • 3:02 PM » Mortgage Brokers’ Association Sues HUD Over RESPA
    Published Mon, Dec 22 2008 3:02 PM by Google News
    The Real Estate Settlement Procedures Act (RESPA) Final Rule, issued Nov. 17 by the Department of Housing and Urban Development, disadvantages small businesses, according to a lawsuit filed by the National Association of Mortgage Brokers (NAMB). On Nov. 10, HUD announced it would now require lenders and mortgage brokers to provide consumers with a standard three-page [...]
  • 1:12 PM » REIS: Commercial Real Estate Loan Defaults May Triple
    Published Mon, Dec 22 2008 1:12 PM by Calculated Risk Blog
    From Bloomberg: U.S. commercial properties at risk of default could triple if rental income from office, retail and apartment buildings drops by even 5 percent, a likely possibility given the recession, according to research by New York-based real estate analysts at Reis Inc. Lenders that used optimistic rent estimates to grant mortgages beginning in 2005 stand to lose as much as $23.1 billion, or 7.02 percent, of total unpaid balances if landlords lose 5 percent of net operating income, according to Reis. ... [O]ffice vacancies are forecast to rise to 15.6 percent next year from an estimated 14.6 percent at the end of 2008. ... At the end of Q3, REIS reported office vacancy rates hit 13.6% (see WSJ: ). Clearly REIS expects a significant increase in the vacancy rate in Q4 2008 (to 14.6%), and then a further increase in 2009 to 15.6%. Although that 2009 projection might be low ... Click on graph for larger image in new window. This graph shows the office vacancy rate vs. the quarterly unemployment rate and recessions (hat tip Will) Changes in the unemployment rate and the office vacancy rate are highly correlated. As the unemployment rate continues to rise over the next year or more, I'd expect the office vacancy rate to rise sharply - possible to 17% or more by the end of 2009 (significantly higher than the REIS forecast). REIS believes the rise in defaults will primarily because of the overly optimistic projections used when properties were purchased in recent years: “A large decline in net operating income isn’t necessary to shift a lot of properties underlying CMBS loans into debt- service coverage ratios that would be worrisome,” [Victor Calanog, REIS director of research] said in an interview. ... Over the last three years, lenders raised income projections for commercial properties by as much as 15 percent more than those properties’ historical performance, he said. “That optimism might not be warranted,” Calanog said. “There’s a big pool of loans underwritten...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 12:57 PM » Was There Really a Financial Crisis ?
    Published Mon, Dec 22 2008 12:57 PM by The Big Picture
    Hale “Bonddad” Stewart is a former bond broker with several regional firms. He currently writes for the Huffington Post and Website: Law office: > ~~~~ > The paper is titled Facts and Myths About the Financial Crisis of 2008 and it argues there was in fact no credit crisis. Several people have used this paper to argue that Wall Street overstated the severity of the credit crisis in order to get a bail-out they didn’t need. What these commentators have failed to heed is this paper was widely criticized within the financial community, even drawing a rare rebuke from a sister Federal Reserve Bank. In short, to argue there was no credit crisis — to say we were “punked by Wall Street” — flies in the face of every available fact on the crisis. First, let’s provide some background for this debate. As of this writing The XLFs — the ETF that tracks the financial sector - is down almost 70% from a high in the summer of 2007. Total credit losses at the world’s financial institutions have The gauge is down 46 percent in 2008 as credit losses and writedowns at the world’s largest banks surpassed $1 trillion and the U.S., Europe and Japan entered the first simultaneous recessions since World War II. In other words, the financial sector’s economic position is terrible at best. But the evidence runs deeper. About every six weeks the Federal Reserve issues a paper titled This is a book complied from anecdotal evidence from the Federal Reserve Districts on the general economic environment. Every Beige book issued in 2008 has indicated credit conditions were tightening and loan demand was decreasing. Reports from banks and other financial institutions noted further declines in residential real estate lending, and lending to the commercial real estate sector was generally described as mixed. Some Districts reported lower consumer loan volumes, whereas the volume of commercial and industrial lending varied. Most Districts cited tighter credit standards. Most Districts reporting on...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 12:09 PM » Rent vs. Buy: Buying Becomes More Attractive
    Published Mon, Dec 22 2008 12:09 PM by Seeking Alpha
    submits: I've been playing around with mortgage calculators this morning, after getting an email from a renter in Long Island who wants to buy but isn't happy with falling mortgage rates: I have saved enough for a substantial down payment - and was looking forward to taking advantage of my savings and higher mortgage rates by buying a home for a lot less then current asking prices. Lowering rates will only keep these d_mn home prices artificially high. Prices need to come down. Why shouldn't renters have a chance to build equity over time in a home (with 4.5% mortgage rates - you'll never build equity, you'll just really be renting again!)
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 11:07 AM » Deconstructing the Fed's balance sheet
    Published Mon, Dec 22 2008 11:07 AM by
    Jim Hamilton at Econbrowser the balance sheet of the Federal Reserve, explaining in excruciating detail why you shouldn't be alarmed at the chart you see below. Here's the part that should make you feel better. That is, the part where Fed Chairman Ben Bernanke transforms from back in September to the $2.3 trillion man (and counting) in December without creating any new money. Beginning in September, the Fed decided it couldn't afford to sell off any more of its Treasuries, but wanted to lend more and still have no effect on the money supply. To do so it needed to find a way to funnel the reserves created by the new loans it would make into categories on the liabilities side that would not result in more cash held by the public. The first such device was to reach an for the Treasury to simply hold on to a huge volume of Federal Reserve deposits, some $484.6 billion as of last week. The way this worked is that two operations were implemented simultaneously. First, the Fed created a lot of new deposits, for example, $318.8 billion from the Commercial Paper Lending Facility alone. Second, the Treasury borrowed an additional half trillion from the public , forcing somebody in the public to send a check to the Treasury. In the aggregate, the reserves created by the Fed through the CPLF end up just being parked in the Treasury's account with the Fed, with no creation of money . ... The second measure that the Fed employed to allow this ballooning of its assets was to start paying banks an interest rate on reserves that is exactly equal to its target for the fed funds rate itself, essentially eliminating any incentive for the banks to lend fed funds and encouraging banks instead to simply let excess reserves accumulate. Last week, banks were sitting on about $800 billion in excess reserves with the Fed, doing absolutely nothing with them. The Fed was in effect lending those funds in place of the banks. It's good to know that the Treasury Department can just...
    Click Here to Read the Full Article

  • 11:07 AM » Mortgage re-defaults rising, no sign of slowing
    Published Mon, Dec 22 2008 11:07 AM by Reuters
    WASHINGTON (Reuters) - The rate of home mortgage borrowers defaulting after their loans are modified is rising and shows no signs of leveling off, U.S. banking regulators said on Monday.
  • 10:51 AM » Homeowner Associations: Another Housing Minefield
    Published Mon, Dec 22 2008 10:51 AM by Seeking Alpha
    Tom Lindmark submits: The housing crisis keeps finding more ways to bite homeowners in the butt. The Arizona Republic has a couple of good articles on the problems that homeowners are facing with their homeowner associations. For those of you unfamiliar with the concept, most new subdivisions in the Sunbelt are governed by homeowners' associations, or HOAs. These associations are responsible for the maintenance of the common areas of the subdivision. Often that amounts to no more than a border fence and a small amount of landscaping but in some it includes parks, playgrounds, community centers and swimming pools. Fees for each homeowner can range from a couple of hundred dollars a year to as much as $200 or $300 per month. Many cities now mandate that any new subdivision include a HOA and that it construct parks, bike paths and other recreational facilities thus relieving the municipalities of a burden they used to shoulder.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:46 AM » Morgan Stanley on Subprime (Still Hurting), Real Estate and More
    Published Mon, Dec 22 2008 8:46 AM by Seeking Alpha
    Key quotes from Morgan Stanley's (MS) : Subprime; where it all began, and where it still is:
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:30 AM » A Tale of Two Housing Bubbles
    Published Mon, Dec 22 2008 8:30 AM by Seeking Alpha
    submits: A good friend of mine named Steven loves the writings of , and has been sharing them with me. For those who do not know who Spengler is – welcome to the club. Steven claims: Spengler’s identity is not publicized. From comments he makes, he is well-connected. I don't know his real identity and I've never read anyone else who claims to know who he is but he is well-known by his columns.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:30 AM » Property Developers Request Bailout: Report
    Published Mon, Dec 22 2008 8:30 AM by CNBC
    Some of the biggest U.S. property developers are asking for government money in the face of $160 billion in maturing commercial mortgages next year, the Wall Street Journal reported Monday. Topics: | | | | | Sectors: MEDIA:
  • 1:14 AM » National Penn Bank's Rare Customers: No Credit, No Defaults
    Published Mon, Dec 22 2008 1:14 AM by Seeking Alpha
    submits: by David Fessler No Credit… No License… No History? No Problem?
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 12:27 AM » AP study finds $1.6B went to bailed-out bank execs
    Published Mon, Dec 22 2008 12:27 AM by Washington Post
    -- Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits in the calendar year 2007, an Associated Press analysis reveals.
    Click Here to Read the Full Article

    Source: Washington Post
  • 12:11 AM » NYT: Blaming Bush for the Wrong Things
    Published Mon, Dec 22 2008 12:11 AM by The Big Picture
    The Sunday New York Times has a more or less blaming Bush for the housing and credit crisis. Its part of their “” series, and it is in some ways, off base. The long article (written by 3 people) comes close to some real truths, but it veers off, focusing on some minor and irrelevant elements. One side note : Critics of newspapers never seem to understand that headlines are not by the article’s author(s), but by an editor. Hence, why the headline focus is sometimes misplaced or emphasizes the wrong issue. This discussion is very nuanced, so if you get most of your news and information from talk radio or any of the Faux channels, well, you shouldn’t bother reading any further. Pursuing this will only hurt make your brain hurt, or make you angry, or both. Let’s start out with a brief excerpt from : From Reagan to George W. Bush, each President of the past 25 years bears some responsibility for contributing to the belief that we can let markets govern themselves. Of the four Presidents over that period of time, President George W. Bush is the one with the seemingly greatest culpability. Not just because this crisis happened on his watch — although that is reason enough to give him a fair share of responsibility. More significantly, the basis of his culpability is that he shared Greenspan’s and Gramm’s radical belief system — that markets could police themselves, and that all regulation was inherently bad. This philosophy colored all of the President’s appointments to key supervisory positions, as well as his legislative agenda. That philosophy, and the executive, administrative and legislative acts, including political appointments, is where we should focus our ire at the soon the be former-President Bush. The belief system that leads to the conclusion that really bad behavior in the corporate world needs no proscribing is where you should look to place blame. That Bush had as a goal increased home ownership is, quite bluntly, irrelevant. It is a worthy goal, and certainly...
    Click Here to Read the Full Article

    Source: The Big Picture
  • Sun, Dec 21 2008
  • 3:21 PM » White House & Housing Crisis: Timeline
    Published Sun, Dec 21 2008 3:21 PM by The Big Picture
    Timeline: > courtesy of > Source : JO BECKER, SHERYL GAY STOLBERG and STEPHEN LABATON NYT, December 20, 2008
    Click Here to Read the Full Article

    Source: The Big Picture
  • 3:21 PM » The Power of TARP
    Published Sun, Dec 21 2008 3:21 PM by Seeking Alpha
    I for one didn’t realize how over the banks who take TARP funds might end up being. In particular, one provision of the program gives the government the right to “unilaterally amend” the terms under which it hands out its cash. Whoa! When you have a counterparty that happens to be the federal government, and it has a unilateral power to amend its contract with you, you have one powerful counterparty! You’d think banks that don’t absolutely need an infusion would be more wary: The government could increase the dividend it’s being paid for preferred shares, require caps on executive compensation or force banks to halt foreclosures, said David Baris, executive director for the American Association of Bank Directors, in a Nov. 3 letter to Treasury Secretary Henry Paulson. . . .
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 8:20 AM » CRA Reader Response
    Published Sun, Dec 21 2008 8:20 AM by Google News
    This is a reader response from Jim Brown (no relation) to our recent post: Jim Brown is a 25 year veteran of the mortgage business managing sales and marketing. If you’d like to respond at length to one of our posts send us an email at Please note responses may be edited for clarity and content. CRA is NOT responsible for this mortgage debacle. Absolutely not. These programs required full documentation at the time of origination. This means borrowers had jobs also known as employment, credit which also means 5 pieces of proven payment, and a down payment verified. Why is everyone looking back to 1977? The answer is right in front of us. Blame can go back to as early as 2000. Banks started the demise by offering option arms, negative amortization and started loosening underwriting eliminating the need for a down payment of 20%, waiving job verification, and accepting credit scores above 620 (today that won’t get you any kind of loan). And people thought “Hey, this Option ARM thing seems to be working,” and loans were coming in. People could afford to borrow more when they only had to pay at say 3% instead of a fully indexed 6.90%. And then what happened? Things started getting really good. The homeowners were losing equity on the low payment which everyone thought was no big deal in a rising market. But several years later they are now losing the equity due to the changes in the Real Estate market. No one was looking were they? In the mean time… The Wall Street companies came along and said we can enhance those old underwriting scenarios which now look like “tough underwriting requirements”. We will do loans to 100% as long as they have a credit score of 620. And if they don’t we can still give them a loan and just charge them higher fees to close. Hey when your down you need a punch to keep you down. This is exactly what a higher rate and more points did to those borrowers. You would also hear, we can do that loan self-employed too. Just get me...
  • 8:05 AM » Lawyers Sought to Help in Foreclosure Cases
    Published Sun, Dec 21 2008 8:05 AM by Washington Post
    When Maryland's chief judge asked the state's lawyers to help homeowners facing foreclosure over the summer, hundreds of lawyers across the state stepped forward, agreeing to provide free legal assistance.
    Click Here to Read the Full Article

    Source: Washington Post
  • 8:05 AM » Savers hit as banks slash rates
    Published Sun, Dec 21 2008 8:05 AM by
    Savers have been hit by the interest rate cuts with one in four deposit accounts now paying less than 1 per cent after banks reduced their rates this month, according...
  • Sat, Dec 20 2008
  • 9:13 PM » NY Times: Ideologues Aided Mortgage Crisis
    Published Sat, Dec 20 2008 9:13 PM by Calculated Risk Blog
    From the NY Times: The global financial system was teetering on the edge of collapse when President Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, “scared the hell out of everybody.” ... Mr. Bush, according to several people in the room, paused for a single, stunned moment to take it all in. “How,” he wondered aloud, “did we get here?” This article makes some interesting points, but misses some of the key causes of the crisis. As an example then Fed Chairman Alan Greenspan isn't even mentioned in the article, and he was counseling Mr. Bush on reducing regulations. The article incorrectly focuses on minority ownership and Fannie and Freddie (a small role in the crisis) and barely touches on Wall Street - and completely ignores the securitization process (a major enabler to the crisis). But there are some interesting quotes: "There is no question we did not recognize the severity of the problems,” said Al Hubbard, Mr. Bush’s former chief economics adviser, who left the White House in December 2007. “Had we, we would have attacked them.” Looking back, Keith B. Hennessey, Mr. Bush’s current chief economics adviser, says he and his colleagues did the best they could “with the information we had at the time.” But Mr. Hennessey did say he regretted that the administration did not pay more heed to the dangers of easy lending practices. And both Mr. Paulson and his predecessor, John W. Snow, say the housing push went too far. “The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.” I'd like to see a mea culpa from Greg Mankiw and few others too. Even this story is from early 2007 when the crisis should have been obvious to everyone: Jason Thomas had a nagging...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:13 PM » Executive Pay: Will inflated pay packages get slashed?
    Published Sat, Dec 20 2008 9:13 PM by Washington Post
    A ngelo R. Mozilo, whose Countrywide Financial came to symbolize the failings of the mortgage industry, took home more than half a billion dollars from 1998 to 2007, including $121.7 million from cashing in options last year alone. · Charles O. Prince, who led Citigroup to the brink of disaster, was awarded a retirement deal worth $28 million. · Now, in a show of purported restraint, top Wall Street executives are going without bonuses. · What are we to make of all this? · If you're angry that so many executives got paid so much for screwing up so spectacularly, you might take solace in the fact that shares they still hold have lost value, too. · But if you think executive pay is finally succumbing to the force of gravity -- if you'd like to believe that an epic destruction of investor wealth will fundamentally and permanently change the way chief executives are paid, or that you, dear shareholder, have the power to join forces with others just like you and create a more rational order -- don't bet on it. · The nation's financial crisis could change the rules of executive pay, but if history is any guide, you'll have a lot more to complain about in the years ahead.
    Click Here to Read the Full Article

    Source: Washington Post
  • 10:19 AM » So Now We Are Trying to Emulate Japan's Lost Decade?
    Published Sat, Dec 20 2008 10:19 AM by Google News
    US economists have relentlessly harangued the Japanese for their supposed mismanagement of their post bubble era, which has lead to nearly 20 years of low growth, borderline deflation, with a not-much-discussed, robust export sector. Along with others, we complained in the early days of the Fed/Treasury emergency response that they were taking one of the worst elements of the Japanese playbook, namely, trying to prop up the value of dud assets, rather than figuring out how to do more price discovery and ameliorate the attendant reaction (not damage, mind you, the damage was already done when the bad loans were made). Yes, the Treasury has made some capital injections into banks, but without cleaning up the balance sheets, the benefits are limited. Even with supposedly more aggressive action on realizing losses, our banks act a lot like their Japanese pre-writedown zombie counterparts. So in yet another "putting lipstick on a pig" initiatives, the authorities, having unwittingly copied the heretofore-seen-as-failed Japanese playbook, are now trying to reposition Japan as a source of valuable lessons. Trust me, you would never have seen anything along these lines two year ago, starting with the title of the New York Times story "" Pretty soon, we'll have our very own Ministry of Truth (I kid you not, read the article). From the New York Times: The Bank of Japan kept rates near zero for most of the last decade in an effort to end a long economic stagnation, and raised them only two years ago. Many economists say they believe that the zero interest-rate policy finally worked in Japan after regulators took aggressive steps that succeeded in restoring faith in Japan’s financial system and Tokyo’s ability to oversee it. Now, with the Fed and President-elect Barack Obama turning to the same sorts of unconventional policy tools to battle the worst global economic crisis since the Depression, economists and bankers say they hope that Japan’s lessons are...
  • 10:19 AM » M&T Agrees to Buy Provident Bank
    Published Sat, Dec 20 2008 10:19 AM by Washington Post
    M&T Bank has agreed to buy Baltimore's Provident Bankshares for stock valued at $401 million in a deal that will give the merged company a leading market position in Maryland and an expanded presence in Virginia.
    Click Here to Read the Full Article

    Source: Washington Post
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