Why bother? That’s the question more underwater Americans are asking themselves about their mortgage.
from Rolfe Winkler:
Was the global financial crisis a mathematical error? (Steve Keen, Business Spectator) Keen's latest. Another great piece explaining the flaws of neoclassical economics. (ht Yves)
The downwardly revised 3rd quarter GDP certainly didn’t shock economists who were expecting a softer reading than the initial 3.5 percent, but the 2.8 percent certainly isn’t pretty especially considering the psychological blow of losing of the 3 handle. (Speaking of symbolic numbers, the FDIC also reported that its reserve fund is now in the red.) There’s still one more revision ahead though, so maybe it will inch back to 3 percent.
The Federal Housing Administration – the U.S. agency that actually enjoys full faith and credit of the government – is in quite a pickle. Reuters reporting that its capital reserves stand at a scant 0.53 percent, below the 2 percent regulatory minimum and without spitting distance of the “help me” threshold.
I know that the government already leaked the plan, but seeing it actually launched I can’t help but feel a little despair that the Obama Administration continues to use Fannie and Freddie to implement new housing policy. I wrote a column when the idea was first floated to help state and local housing agencies access financing.
Donald Kohn, the Fed’s number 2, has a lot to say about the economic outlook but not a whole lot new in terms of when the central bank will reverse course on its extraordinary easy monetary policy. Full speech at the National Association for Business Economics in St. Louis can be found here.
The latest S&P Case-Shiller home price data is feeding into the feel-good vibe of the moment, of mergers the Dow approaching 10,000 and other green shoots. The composite index of home prices for 20 U.S. metropolitan regions rose 1.6 percent in July from June — a stronger gain than expected and the third consecutive monthly gain. As the release notes, there have now been “six months of improved readings,” and this is giving some early support to stocks and the dollar.
When the subprime lending market fell off a cliff and the housing market with it, trying to figure out what the mortgage loans and bonds were truly worth became a pointless exercise since no one could agree when home prices would stop falling. Banks didn’t want to sell the assets at a steep loss since they hoped (and prayed) in the long run many of these loans and bonds would continue to perform. Buyers, of course, wanted to be compensated handsomely for the risk of taking on these loans when prices continued to plummet and the ranks of jobless swelled.