The Great Debate UK

from The Great Debate:

It’s tough to modify your way out of a hole

jamessaft1(James Saft is a Reuters columnist. The opinions expressed are his own)

If you thought the U.S. housing crash could be blunted if only lenders would cut delinquent borrowers a break, it is perhaps time to move on to another vain hope.

That's right, the loan modification movement - pushed by the U.S. administration and others as a means of keeping non-paying borrowers in their houses, keeping those same houses from flooding the market as foreclosures, and even helping beleaguered lenders - is running into a reality-shaped wall.

An exhaustive study of loan modifications by economists at the Boston Federal Reserve, under which delinquent borrowers are given lower rates, more time, or even cuts in the principal amount owed, showed fundamental problems with the way that idea works when put into practice.

Looking at data that covers about 60 percent of U.S. mortgages the authors, Manuel Adelino, Kristopher Gerardi, and Paul S. Willen, came up with two important conclusions.

from The Great Debate:

The dollar’s Tinkerbell moment

James Saft (James Saft is a Reuters columnist. The opinions expressed are his own.)

Repeat after me: "I believe in a strong dollar as the primary global reserve currency, I believe in a strong dollar as the primary global reserve currency."

Better hope it works, because the current debate over a far-in-the-future new monetary system may bring on a here-and-now dollar selloff and a whole new leg of the crisis.

from The Great Debate:

Bonds swamped in fair weather or foul

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

Come good news or bad, the U.S. treasury market is taking a sell now and wait for inflation later strategy.

Since May 21, Treasuries have been battered, sending the yield on 10-year bonds up by nearly 40 basis points to 3.53 percent, an enormous move in bond market terms.

from The Great Debate:

California, harbinger of hard U.S. choices

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

California's fiscal train wreck should be watched warily by investors in U.S. Treasuries; as the start of a trend among states seeking bailouts, as a source of pressure on Federal funds and as a harbinger of hard choices at national level.

California voters last week rejected a finance bolstering proposal, setting the stage for billions of dollars worth of  cuts in services, layoffs and a shortened school year.

UK property: a pig that won’t fly

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james-saft1- James Saft is a Reuters columnist. The opinions expressed are his own –

The pig that is British property is furiously flapping its wings, but despite signs of a recovery in prices and activity, rest assured there will be no take-off.

The country, which witnessed a property bubble that made the U.S. seem sober and sensible in comparison, has seen prices fall by about 20 percent but still faces a tough recession, rising unemployment and serious short and long term questions about the price of financing.

from The Great Debate:

The ugly attraction of fast shrinking Japan

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

Sure, seeing your economy shrink at a 15 percent annual clip is depressing, quite literally, but if you believe in even a tepid global economic recovery in the second half, then Japan is actually attractive.

There is no way to sugar coat the first quarter Japanese gross domestic product figures released on Wednesday: they are breathtakingly bad viewed from virtually any angle.

from The Great Debate:

U.S. should batten down the TARP

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

The U.S. faces a lengthening series of request from industries and interests seeking shelter under the Troubled Asset Relief Program, most of which it should dismiss out of hand.

YRC Worldwide, a large trucking company, told the Wall Street Journal it will seek $1 billion in TARP funds to help relive it of its pension obligations.

from The Great Debate:

Get ready for the “Great Immoderation”

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

The recession will soon be dead, laid to rest alongside the idea of the "Great Moderation", a set of hopeful assumptions that underpins expectations about economic growth and asset valuations.

This, when investors, bankers and executives ultimately realise it will cause them to pull in their horns, take less risks and be less willing to pay high prices for assets.

from The Great Debate:

Fishing for the housing bottom in San Diego

-- James Saft is a Reuters columnist. The opinions expressed are his own --
jimsaftcolumn6
When prophetic long time bears turn a bit cuddly, it is usually best to take notice.  A real estate maven who rejoices in the "nom-de-blog" of Professor Piggington has now, after five years of correctly shouting bubble, labelled San Diego housing prices "reasonable" based on the latest available housing data.

Remember, San Diego has been, along with Phoenix, Las Vegas and parts of Florida, among the most bubbleicious markets in the U.S., and the massive busts there still represent a huge problem for bank balance sheets, for employment and for the U.S. economy generally.

from The Great Debate:

Accounting change won’t save banking

James Saft Great Debate —James Saft is a Reuters columnist. The opinions expressed are his own. –

By all means reform accounting, but for pity's sake take your time and keep your expectations low.

Suspending mark-to-market accounting immediately as a means of levitating banks out of peril simply won't work. While transparency may or may not be the foundation of banking, trust undoubtedly is.

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