Opinion

James Saft

Housing’s Humpty Dumpty moment

Jan 28, 2010 15:30 UTC

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

All the King’s horses and all the King’s men have been busy propping up the housing market but sometime this year, perhaps soon, it will face a Humpty Dumpty moment.

While it gets a lot less attention than the banking bailout, the official forces targeted at supporting house prices are truly vast; a generous tax break for buyers and a mortgage market that has essentially been nationalized.

That’s bought a recovery of sorts — Standard & Poor’s/Case-Shiller home-price index released on Tuesday showed that in 20 major cities home prices rose 0.2 percent on a seasonally adjusted basis between October and November, despite a national unemployment rate of 10 percent and a slow-motion cascade of foreclosures.

But like the egg in the nursery rhyme, which once broken cannot be reassembled, housing still faces some pretty horrendous fundamentals. It needs a strong recovery in employment to arrive before political consensus for housing support cools. (Full disclosure: I just bought a house, but hey, everybody’s got to live somewhere).

Already there are signs that housing may be faltering. Existing home sales declined sharply in December, though this was partly because many rushed to close purchases before a now extended deadline for tax rebates expired on Dec. 1.

There’s no way to hedge politics

Jan 26, 2010 18:22 UTC

Ben Bernanke in peril and the Volcker crackdown on proprietary trading by banks show two truths of the current dispensation: there is no effective hedge against politics and the reflation trade rests on fragile foundations.

Neither of these realities is particularly good for financial markets and neither is going away any time soon.

Both, too, are utterly related not just to each other, but to the Senate election in Massachusetts which installed a Republican into what had been a Kennedy seat, in the process terrifying Democrats who fear they will be sunk by association with a set of policies perceived to be favoring Wall Street.

Fed’s wondrous printing press profits

Jan 14, 2010 21:33 UTC

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– James Saft is a Reuters columnist. The opinions expressed are is own. –

Now finally we see what it takes to be a profitable bank with no capital worries and secure funding: own a printing press.

Sadly, since it is the Federal Reserve showing record $46 billion profits last year we have to conclude that, though it is a fool-proof plan, it’s not really scalable.

Fed’s wondrous printing press profits

Jan 14, 2010 21:33 UTC

cfcd208495d565ef66e7dff9f98764da.jpg

– James Saft is a Reuters columnist. The opinions expressed are is own. –

Now finally we see what it takes to be a profitable bank with no capital worries and secure funding: own a printing press.

Sadly, since it is the Federal Reserve showing record $46 billion profits last year we have to conclude that, though it is a fool-proof plan, it’s not really scalable.

Fed stuck doing the heavy lifting

Jan 12, 2010 18:21 UTC

-James Saft is a Reuters columnist. The opinions expressed are his own-
With employment weak and consumer credit weaker, look for extended official measures to support the U.S. economy.

Recent data show that despite emerging glimmers in manufacturing, de-stocking having reached its limit, and some strong showings globally, the U.S. recovery is far from self-sustaining.

With Congress serving as an effective roadblock to a comprehensively expanding fiscal stimulus, the heavy lifting, if any is to be done, may fall on monetary policy and “off balance sheet” forms of stimulus.

Icelandic, Greek sagas show sovereign risks

Jan 7, 2010 12:46 UTC

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

Developments in cash-strapped Iceland and Greece nicely illustrate two themes for 2010: sovereign risk and financial balkanization.

Iceland is balking at crushing terms demanded as part of its making whole overseas depositors in its ruined banking system, while Greece is involved in a game of chicken with the euro zone authorities over how, when and with whose assistance it heals its fiscal difficulties.

Bernanke’s fearful asymmetry

Jan 5, 2010 14:48 UTC

saft2.jpg – James Saft is a Reuters columnist. The opinions expressed are his own —

Ben Bernanke may minimize the role of monetary policy in the housing debacle, but he minimizes two key factors: the effect of low rates and the Fed’s policy of cleaning up after but not popping bubbles had on risk-taking.

In what amounts to a defense of his own and Alan Greenspan’s legacy, Bernanke maintains that low interest rates didn’t cause the bubble, which he says required a regulatory rather than monetary solution.

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