Lunchtime Links 8-6

August 6, 2009

More homeowners upside down on mortgages (CR)  According to a Deutsche Bank report published yesterday, 16 million homeowners owe more on their mortgage than their home is worth.  And the figure will go to 25 million by 2011 as house prices keep falling.  These folks don’t actually own anything, since their home equity is negative.  What they own is a pile of debt that is owed to the bank, which itself owns ALL of the home’s value.  This is bad news for bank balance sheets, which will be seeing write-downs on bad loans for a while.

Board Meeting Handout (FASB)  This appears to be the outline of the new fair value rules FASB is kicking around internally.  Just to warn you, it’s pretty wonky.  Currently trying to make heads/tails of it in order to calculate potential impact on bank balance sheets.  If there are any accountants, analysts reading the blog please take a look and let me know your thoughts.

U.S. considers remaking mortgage giants (WaPo)  Plans aren’t fully formed, but the idea is to split Fannie/Freddie into good/bad banks, shoveling bad mortgages into the bad bank where the losses will be funded with tax dollars.  It’s early innings yet, but any proposal that doesn’t see the companies eventually privatized would be pretty unfortunate.

Killer app for clunkers spurs market (WSJ)  Clunkers have to be killed when they’re traded for cash.  Here’s how that’s done.

One dead in ear-cleaning salon attack (Reuters)

Paul Romer on “charter cities.”  Incubating development … (ht Kedrosky)

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