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Construction of new homes posted the biggest increase in more than two years in April. While it was a rare spot of good news for the housing market, analysts said it's far too soon to declare an end to the prolonged slump. The Commerce Department reported Friday that housing construction rose by 8.2 percent in April to a seasonally adjusted annual rate of 1.03 million units. Building of single-family homes continued to weaken, however. The growth came from a big jump in apartment construction. Analysts predicted the surprising rebound in April would be temporary given the headwinds builders are still...

Commercial banks and other financial institutions need to beef up their ability to detect and protect themselves against risks like the credit and mortgage debacles, Federal Reserve Chairman Ben Bernanke said Thursday. The trio of crises -- housing, credit and financial -- have exposed weaknesses in financial firms' so-called risk-management practices. That is their ability to sufficiently detect and hedge against risks. Banks and other financial players have racked up multibillion-dollar losses when investments in complex mortgage-backed securities soured with the collapse of the housing market. Credit problems in housing quickly spread to other areas, intensifying the turmoil. "Improvements in...

There may be no cuts in interest rates until 2010, the Bank of England has indicated. However, inflation is predicted to rise far above previous forecasts and stay well above the Government's target of two per cent for up to two years. Mervyn King, the Bank governor, said price increases would cause "a squeeze on real take-home pay, which will slow consumer spending and output growth, perhaps sharply". Saying that "the nice decade is behind us", he added that it was "quite possible we may get the odd quarter or two of negative growth". Presenting the UK quarterly forecasts, the...

Inflation pressures ease in April despite biggest jump in food prices in 18 years WASHINGTON (AP) -- Inflation pressures eased a bit in April despite the biggest jump in food prices in 18 years.The Labor Department reported Wednesday that consumer prices edged up 0.2 percent last month, compared to a 0.3 percent rise in March. The lower inflation reflected a flat reading for energy, which helped offset a 0.9 percent jump in food costs as prices climbed for many basic items, from bread and milk to coffee and fresh fruits.The unchanged reading for energy reflected a big 4.8 percent jump...

Paulson Says Worst Of Credit Crisis May Be OverCBS News Interactive: Eye On The Economy WASHINGTON (AP) - The worst of the nation's credit crisis may have passed, Treasury Secretary Henry Paulson said Wednesday, though he acknowledged rising gas prices will blunt the effect of 130 million economic stimulus checks. He ruled out a second stimulus package for now. In an interview with The Associated Press, Paulson said the turmoil that has gripped Wall Street and that took a turn for the worse again in March has eased somewhat. "There's progress," he said. "I think we're closer to the end...

WASHINGTON (MarketWatch) -- In this downturn, the Federal Reserve is fighting on two interrelated fronts simultaneously, battling to keep the real economy growing and to revive the credit markets. The Fed has won some victories on both fronts. A serious recession has been prevented so far, and the worse fears of a systemic credit meltdown have been put to rest. However, if health isn't restored to the credit system, the downturn could worsen......................

NEW YORK (MarketWatch) -- The Federal Reserve, along with other central banks, said Friday that it was increasing the funding it is providing to banks and announced that, for the first time, it was willing to accept bonds backed by auto loans and credit cards. "In view of the persistent liquidity pressures in some term funding markets, the European Central Bank, the Federal Reserve and the Swiss National Bank are announcing an expansion of their liquidity measures," the Fed said in a statement. The Fed took the move in an attempt to flood the market with supply and lower short-term...

Starbucks, the coffee house chain, on Wednesday blamed a “sharp weakening” in the consumer economy for an unexpected decline in its US sales, sending its shares plunging more than 10 per cent in after-hours trading. Howard Schultz, who returned to the role of chief executive in January, said “the current economic environment is the weakest in our company’s history”, citing the housing slump and rising energy and food costs. The company said conditions were particularly bad in California and Florida, which account for 32 per cent of its retail revenues and have been hard hit by the slump in the...

A turning point in managing the world’s economy By Martin WolfPublished: April 22 2008 19:24 | Last updated: April 22 2008 19:24 As the latest World Economic Outlook from the International Monetary Fund remarks, “the world economy has entered new and precarious territory”. What are perhaps most remarkable are the contrasts between booming commodity prices and credit-market collapses and between buoyant growth in emerging economies and incipient recession in the US. So where are we? How did we get here? And what should we be doing?The WEO’s answer to the first question is that the US economy may shrink...

“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.� -Thomas Jefferson The Founding Fathers put Congress in control of the the U.S. monetary system. In 1913 Congress relinquished this awesome power and gave it to a private cartel with the passage of the Federal Reserve Act. For almost 100 years, Federal Reserve policy has swindled Americans...

SEC readies report on credit rating agencies Stephanie Baum 23 Apr 2008 The US Securities and Exchange Commission will issue a report this summer following an examination of credit rating agencies and their roles in the credit crunch as they prepare new rules governing their behavior. SEC chairman Christopher Cox told the US Senate Committee on Banking, Housing and Urban Affairs that the focus of the SEC’s research is to determine whether the ratings agencies violated their conflict of interest rules to determine their clients’ credit ratings. Cox told the committee that the SEC is looking at requiring more transparency...

As Lenders Tighten Standards, Potential Borrowers Focus On Ways to Raise Their Ratings; Joining the '700 Club'...So when Mr. Sheldon was shopping for an auto loan last fall, he first compared rates online. Then, he allowed only two lenders to pull his credit report because he knew that lots of inquiries could drag down his score. Now, he's making extra payments so he can pay off the five-year auto loan in 3½ or four years. He figures the lower debt level will boost his score, which already is near the upper end of the 300-to-850 range of the FICO score,...

Bank of America, slammed by writedowns and rising credit costs, on Monday said earnings dropped nearly 80 per cent in the first quarter to $1.2bn. The largest US bank by market value said provision for credit losses soared by $4.78bn to $6.01bn, driven by problems in home equity and small business loans as well as loans to homebuilders. The bank had $1.47bn in writedowns on its collateralised debt obligations and $439m on its leveraged loan commitments. The numbers were down significantly from the fourth quarter, in which BofA had $5.15bn in writedowns leading executives at the bank to stage a...

Bank of America Corp , the second-largest U.S. bank, on Monday said quarterly profit fell 77 percent, hurt by more than $5 billion of write-downs and credit-related costs as more borrowers fell behind on payments. First-quarter net income fell to $1.21 billion, or 23 cents per share, from $5.26 billion, or $1.16, a year earlier. Excluding merger costs, profit was 26 cents per share, below the average analyst forecast of 45 cents, according to Reuters Estimates. Results included a $776 million gain from credit card network Visa Inc's initial public offering last month. Net revenue dropped 6 percent to $17...

Sears Holdings Corp., the retailer being reorganized by hedge fund investor Edward Lampert, said Bank of America Corp. refused to renew a $1-billion letter of credit under existing terms, sending the shares down 3.2% in after-hours trading Friday. Losing the credit probably won't affect Sears' access to cash, the Hoffman Estates, Ill., company said in a regulatory filing. The retailer had $1.62 billion in cash as of Feb. 2, a 58% decline from a year earlier. Retailers use letters of credit to assure vendors that they have money to pay for goods, and losing a bank's backing may mean having...

The Wachovia Corporation, the country’s fourth largest bank, is raising several billion dollars from outside investors because of mounting housing losses and an ill-timed acquisition of a big California mortgage lender, people briefed on the matter said Sunday night. It is unclear whether the investment will come from the issuing of new shares of stock to the public or from private investors. Wachovia said Sunday night that it would move up the release of its first-quarter earnings to Monday from Friday, without explanation. That has led to speculation that an announcement of an investment deal could come with its earnings...

IT was the nation’s lending institutions and mortgage originators that got us into this credit mess, but it is consumers, taxpayers and those companies’ shareholders who will end up shouldering most of the costs. The latest example of this is in the mass freezing of home equity lines of credit going on across the country. Reeling from losses on their wretched loan decisions of recent years, lenders are preventing borrowers with pristine credit and significant equity in their homes from tapping into credit lines that they paid dearly to secure. In the last 30 days, lenders have sent several hundred...

There is definitely a shift from cash to credit cards worldwide, just as there was a shift from renting to home ownership based on the wide availability of mortgages, but is only a matter of time before this comes to a screeching halt. Visa (V) and MasterCard (MA) get paid a fee which is equal to a percentage of each transaction, and have no credit risk. Mortgage brokers have no direct credit risk either and they get an upfront fee when the transaction closes. If a borrower defaults, mortgage brokers do not lose a penny. The losers are those who...

Alan Greenspan may be correct that a glut of global saving pumped up the housing bubble by keeping long-term interest rates low. If so, then watch out, because the situation has gotten worse: Foreign stockpiles of U.S. dollars are fatter and interest rates lower than at housing's zenith in 2005. Global central-bank reserves surged to a record $6.4 trillion in the fourth quarter of 2007, according to the International Monetary Fund, up from about $4 trillion in 2005. Those reserves are pouring into U.S. Treasury bonds for safekeeping. Foreigners held $2.32 trillion in Treasurys in the fourth quarter, compared with...

NEW YORK (AP) — Republican Sen. John McCain called for federal aid for well-meaning homeowners who can't pay their mortgages, an attempt to fend off criticism that he has been indifferent to the housing crisis and the market upheaval it has spawned. The likely GOP presidential nominee sketched out a plan Thursday to help 200,000 to 400,000 homeowners trade burdensome mortgages for manageable loans in a speech in Brooklyn, N.Y. Aides said the plan could cost from $3 billion to $10 billion. Still missing were details on exactly who would be eligible for help; McCain said he wants to aid...

The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail. Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed; issuing debt under the Fed's name rather than the Treasury's; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011. No moves are imminent because the Fed still has plenty of balance sheet room for...

SEATTLE (AP) -- Washington Mutual Inc., the country's largest savings and loan, said Tuesday it will receive $7 billion in new capital from an investment group led by private equity firm TPG. The new investment will boost the Seattle-based bank's capital at a time when it has been hit hard by rising delinquencies and defaults among mortgages. The bank said it will lose $1.1 billion during the first quarter and take a provision for loan losses of $3.5 billion. Washington Mutual will sell equity securities to an investment fund managed by TPG Capital and to other investors in order to...

THERE IS NO question that the federal government plus many lenders and financial professionals shoulder a lot of the blame for our current economic crisis. But many of the individuals who are overloaded with debt need to take responsibility for their bad choices, too. Take credit card debt, for example. Certainly there has been a tremendous push -- for decades -- by financial institutions to get people to view credit cards as indispensable. And consumers gladly went along with no complaint, using other people's money until life's hardships -- a job loss, illness or divorce -- got in the way...

...But the real cause of the housing mess is a classic bubble in the housing market, the bursting of which has hammered lenders as well as borrowers. If the market had continued to rise, we never would have heard complaints about subprime loans. In fact, Washington had long encouraged these sorts of loans through the Community Reinvestment Act (CRA) as a way to make marginal - largely minority - borrowers into homeowners. What's the difference between socially responsible loans extending the American dream to deserving people with poor credit histories and predatory lending? It's whether those loans work out or...

College students want credit card companies to market themselves more fairly, according to a nationwide survey taken by a credit card watchdog group. 1500 students from 40 different colleges were polled and 80% of the students felt they were lured into bad credit card deals and have been racking up big bills before they graduate. Second year student Carol Castillo feels the credit card companies tricked her and that hidden interest rates and other fees not made clear by credit card companies put her in a bind. "Well, now I am in trouble and now I owe over $3000 in...

WASHINGTON — Homebuilders and the mortgage industry are emerging as big victors in a bipartisan agreement reached by Senate leaders on legislation designed to limit the housing crisis. The $15 billion Foreclosure Prevention Act of 2008, expected to be debated Thursday afternoon on the Senate floor, is drawing fire from critics who say it would do little to actually prevent foreclosures. The bill contains a $6 billion emergency tax break that would let companies use losses from 2008 and 2009 to offset profits earned over the previous four years, instead of the usual two-year timeframe. That's good news for big...

NEW YORK (Reuters) - More Americans have fallen behind on consumer loans than at any time in nearly 16 years, as credit problems once concentrated in mortgages spread into other forms of debt. In a quarterly study, the American Bankers Association said the percentage of loans at least 30 days past due rose to 2.65 percent in the fourth quarter from 2.44 percent in the third quarter, and from 2.23 percent a year earlier. The rate of delinquencies was the highest since a 2.75 percent rate in the first quarter of 1992. It provides a fresh sign the nation's economy...

MERCED, Calif. (AP) - The end came in a blink outside the Merced County courthouse. Only six people showed up for the foreclosure auction, Janice Pimentel and her son Nick included. By chance, the Pimentels' dairy farm was the first property offered. The auctioneer, a young man in aviator sunglasses and blue jeans, read their address and paused for bids. When none came, the Joe T and Janice R Pimentel Dairy Farm, 21 years in the life of the family, officially became the property of its main creditor, a local lender. "Well," Janice Pimentel said, "that's that." The Pimentels' farm...

WASHINGTON (Reuters) - The U.S. Senate on Thursday voted against adding an amendment to a housing market rescue bill that would have given bankruptcy judges the power to ease mortgage payment terms for some distressed borrowers. Offered as an amendment by Illinois Democratic Sen. Richard Durbin to a broad bill hammered out earlier this week, the amendment was opposed by Republicans and the banking industry. The overall bill, estimated to cost $15 billion to $20 billion, would give homebuilders and other businesses hit hard by the recent housing slump a $6 billion temporary tax break. It would also give the...

The Fed on SteroidsGeoff Metcalf "Giving money and power to government is like giving whiskey and car keys to teenage boys." ~ P.J. O’Rourke So the Treasury Department wants Congress to gift the Federal Reserve with broad new authority and power to ride rough shod over financial market stability (or lack thereof). The New York Times described it as “allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.” Giving the Fed more power is like giving crack cocaine to Jihadists…it’s NOT a good idea. This latest bureaucratic brain...

The former comptroller general of the United States, David Walker, said in a recent interview that the unfunded liability for Social Security and Medicare was $20 trillion in 1990. The Social Security and Medicare trustees issued their annual report last week indicating that the unfunded liability for those two programs is now $53 trillion. Congress has done absolutely nothing to curtail this national financial tidal wave. For decades, some members have talked – only talked – about the problem. But all of them have allowed the unfunded liabilities to explode, and the national debt to grow to almost $10 trillion....

The US administration Monday proposed a broad overhaul of financial market regulation in an effort to restore confidence in a system reeling from the subprime mortgage mayhem. The announcement comes as the US regulatory system is blamed for failing to prevent rampant excesses in mortgage lending that set off what is now seen as the worst financial crisis in decades. "Government has a responsibility to make sure our financial system is regulated effectively. And in this area, we can do a better job," Treasury Secretary Henry Paulson said in unveiling the plan. Although the plan was announced amid a crisis...

Two months ago, Lisa and Eric Jacobs of Brockton attended a regional seminar on how to avoid foreclosure, hoping they would soon see their way clear. Two weeks ago, they gave up. Buried in debt, with a condo worth far less than what they owed in mortgages, the Jacobses, both in their 40s and without children, figured it made more sense to let the bank foreclose. They owe $180,000 and believe their two-bedroom in Madrid Square is worth $140,000. With a combined annual income of about $60,000, they figured they could afford to pay about $1,100 a month - but...

Treasury Secretary Henry Paulson's proposed sweep of financial regulation would emphasize more control at the federal level, at the expense of state oversight, and consolidate an alphabet soup of existing agencies. It is an idea that has been kicking around for a while, and one that is bound to provoke heated debate on Capitol Hill and among the various banking and market oversight agencies, which are already tripping over each others' turf. It is also bound to please some circles of Wall Street because the plan, while strengthening the Federal Reserve's role over certain aspects of the markets, like risk...

This is a powerpoint presentation which explains the subprime debacle graphically (warning: graphic language, specifically a Norwegian villager using the F word). To view online using google click here: http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true To download and view with powerpoint or save, click here: http://boombustblog.com/images/stories/what_happened_in_stick_figure_simplicity.pps

WASHINGTON — The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system. The proposal is part of a sweeping blueprint to overhaul the nation’s hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades.

WASHINGTON - The Bush administration Friday proposed a sweeping overhaul of the way the nation's financial industry is regulated. In an effort to deal with the problems highlighted by the current severe credit crisis, the new plan would give major new powers to the Federal Reserve, according to a 26-page executive summary obtained by The Associated Press. The proposal would designate the Fed as the primary regulator of market stability, greatly expanding the central bank's ability to examine not just commercial banks but all segments of the financial services industry. The administration proposal, which was to be formally unveiled in...

The Bush administration is finalizing details of a plan to rescue thousands of homeowners at risk of foreclosure, by helping them refinance into more affordable mortgages backed by public funds, government officials said. The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth due to plummeting prices, an issue at the heart of the nation's housing crisis. Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of those loans and issue new, smaller mortgages in exchange for the financial backing of the federal government.

Fears that an abrupt consumer downturn will undercut the economy grew yesterday after confirmation that households' spending growth virtually ground to a halt at the end of last year as fretful Britons boosted their savings. Updated official data showed that a sharp retreat by Britain's previously irrepressible consumers saw growth in their spending slump to a two-year low of 0.1 per cent in the final quarter of last year (Q4). This was just half the pace previously estimated, and drastically down from 0.8 per cent gain in the previous quarter. The bleak figures stoked market speculation that a cut in...

WASHINGTON - The Bush administration is proposing a sweeping overhaul of the way the U.S. financial industry is regulated. In an effort to deal with the problems highlighted by the current severe credit crisis, the new plan would give major new powers to the Federal Reserve,SNIP The plan would shut down the Office of Thrift Supervision, which supervises thrift institutions, and transfer its functions to the Office of the Comptroller of the Currency, which regulates banks. The plan would eliminate the distinction between banks and thrift institutions. The Fed would become the government's "market stability regulator," given sweeping powers to...

The Federal Reserve announced Friday it will auction another $100 billion in April to cash-strapped banks as it continues to combat the effects of a credit crisis. The central bank said it would make $50 billion available at each of two auctions, on April 7 and April 21. Through the end of March, the Fed has provided $260 billion in short-term loans to commercial banks through the innovative auction process. It also has employed Depression-era provisions to provide money to investment banks. All the moves have been designed to cope with a serious financial crisis that has roiled U.S. and...

Hopefully someone will have an answer for this. I'm starting the process of refinancing my house. First step obviously was checking my credit score. I haven't done it since I purchased the house two years ago. I'm on a fixed rate so I'm not concerned about interest rates going up. I just want to save a few hundred a month. Now here becomes the problem. Seems that my creditor on my home loan has not been reporting to any of the three credit agencies, course you know the second I'm late they will though. I purchased in 8/06 so that's...

"If the Fed can extend $30 billion to help Bear Stearns address their financial crisis," Hillary Rodham Clinton argued, "the federal government should provide at least that much emergency help to families and communities to address theirs." That's a savvy appeal to Americans' strong sense of fundamental fairness - that if goodies go to Wall Street, then they also should go to Main Street. Voters, like buyers, should beware. You might think that Democrats oppose the $30 billion Bear Stearns bonanza, because it's a big government bailout that rewards bad business practices. Wrong. Like Republican presidential candidate John McCain, Clinton...

LONDON (Reuters) - Maybe, just maybe, the financial world is not about to implode. Such is the level of disaster mongering surrounding the latest phase of the eight-month-old credit crisis that you could be forgiven for thinking we will all soon be hoarding food and reverting to a barter economy. At the very least, some market pricing and financial commentary has invoked a systemic collapse akin to 1929's stock market crash and the Great Depression that followed. Let's put that in context. U.S. historians estimate that in the first 10 months of 1930 some 744 U.S. banks failed -- rising...

AUSTIN — The nation's credit crunch is taking a toll on a sector of the population that tends to be unemployed and untested when it comes to repaying debt: college students. Nationally, nearly two dozen student loan lenders have announced they are restricting, suspending or terminating new loans to students through the Federal Family Education Loan Program, or FFEL, the federally-guaranteed, low-cost initiative that provided college financing last year to 7 million students around the country.

As the subprime saga has unfolded in recent months, it has packed a powerful – and somewhat unexpected – ­globalisation punch. For while subprime loans are rooted in the heart of the US, the credit risk from mortgage-backed securities based on such loans has been scattered all over the world – and losses have ­consequently cropped up in institutions ranging from Australia to Norway. Now, however, the globalisation issue is moving to the so-called “agency” sector of the mortgage market – or mortgage securities underwritten by Fannie Mae and Freddie Mac. In recent years, this type of agency debt has...

The US is sending in the ­cavalry to fight the crisis in the credit and housing markets – unleashing government-sponsored enterprises to buy and hold mortgage-backed securities (MBS) for which there is little private demand. The move marks a new stage in the policy response to the credit crisis, in which the US government is increasingly deploying all the tools at its disposal – short of an outright public purchase of mortgage securities – to prevent a full-blown credit crunch. It also marks an expansion of what Michael Feroli, an economist at JPMorgan, calls the “socialisation of housing finance” in...

The Bank of England is poised to take revolutionary action to find a “resolution” to the problems faced by British banks unable to sell or refinance portfolios of mortgage-backed debt, Mervyn King, the governor, signalled on Wednesday. Mr King also suggested that the Bank was becoming more open to interest rate cuts. His comments came as Hank Paulson, US Treasury secretary, offered strong support for the Federal Reserve’s handling of the Bear Stearns crisis. Mr Paulson said it would be necessary to examine the regulatory implications of providing emergency finance to investment banks, but stopped short of calling for permanent...

THE SUBPRIME PRIMERFour Letter Words Alert, you've been warned!!!!Slide #21 is my fave.

WASHINGTON (Reuters) - Sales of existing homes rose in February for the first time since July as prices posted a record drop from their year-ago level, but economists said it was unlikely the market had reached a bottom. The National Association of Realtors on Monday said sales of previously owned homes rose 2.9 percent in February to a 5.03 million-unit annual rate, bucking expectations on Wall Street for a decrease. While the rise broke a six-month streak of declining sales, prices continued to slip. The trade group said median prices fell 8.2 percent from their year-ago level to $195,900. It...