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Friday, February 8, 2008

Housing/Subprime Roundup — Economic Stimulus Bill Passes Congress

Items of interest:

Congress Sends $168 Billion Economic Stimulus to Bush -- The U.S. Congress passed and sent to President George W. Bush a $168 billion economic stimulus package that he said is needed to help boost the slowing economy.

The legislation would send tax rebate checks to more than 111 million households, probably beginning in May. Lawmakers yesterday altered an earlier plan by making 20 million senior citizens and 250,000 disabled veterans eligible for the rebates. Bush said he will sign the measure. [...]

Communities that will benefit from mortgage loan limit increaseDevelopments blog / Wall Street Journal:
New Mortgage Rules Benefit Californians, Sort Of -- Just when Californians are tossed a long-sought bone in the mortgage market, conditions on the ground threaten to erode the proposed benefit.

The Bush administration’s fiscal stimulus package would raise the limits on loans that Fannie Mae and Freddie Mac can guarantee or buy. About half of the high-cost areas eligible for the larger loans – up to $729,750 from the current ceiling of $417,000 – are in California. Reviving the market for so-called jumbo mortgage should make credit less expensive and more available. (”Will New Rules On Mortgages Help Borrowers?“) [...]

Refinancing: Only for the privileged few -- Sure, now is a great time to refinance - that is, if you can still qualify. Here is what lenders are looking for. [...]

CNBC: Homeowners May Be Big Winners In Stimulus Plan
NY Times:
Congress Sends Economic Aid Plan to Bush -- Congress, facing the prospect of an election-year recession, passed an emergency plan that rushes rebates of $600 to $1,200 to most taxpayers and $300 checks to disabled veterans, the elderly and other low-income people. President Bush indicated he would sign the measure.

House passage by a 380-34 vote Thursday came a few hours after Senate leaders ended a drawn-out stalemate over the bill. Still, by congressional standards, lawmakers approved the legislation with exceptional speed to jolt the weak economy. The plan, which adds $168 billion to the deficit over two years, is intended to provide cash for people to spend and tax relief for businesses to make new investments -- boosts for an economy battered by a housing downturn and credit crunch. [...]
The Citizens for Economic Responsibility (CER), a registered 501 (c)(4) non-profit organization, have started a website to track subprime issues. It's called the Subprime Newsroom.

The CER is based in California and their mission statement says:
Citizens for Economic Responsibility (CER) is a coalition of consumers, taxpayers, businesses and other individuals and organizations dedicated to the principles of corporate and individual responsibility, free enterprise, and individual rights.

At the core of those values is the right of individuals, businesses and other entities to enter into enforceable, binding contracts.

CER strives to protect and enhance the integrity and the rights of all parties to enter into lawful contractual relationships. This ability is a cornerstone of our economic, social and legal well-being. [...]
The CER website highlighted this recent Washington Post opinion.

Steven E. Landsburg / prof. of economics at the University of Rochester:
Why the Stimulus Shouldn't Stimulate You -- . . . Here, then, is the great irony: To stimulate spending, tax cuts have to make people feel richer -- but the richer people feel, the slower they'll be to rejoin the workforce. The more effective the tax cuts, the longer they threaten to prolong the expected recession.

That's why the stimulus package is unlikely to work.

Now let's talk about why we shouldn't want it to. [...]
At Amazon.com: Bill Fleckenstein/Fredrick Sheehan - Greenspans Bubbles interview / FastMoney / CNBC:
This Bubble Is Worse -- The Fed’s monetary policy could take the market considerably lower according to strategic investor Bill Fleckenstein, President Of Fleckenstein Capital. (It’s worth noting that he’s a well known bear.) Following is a synopsis of his main points.

Fleckenstein believes that the central bank behaved recklessly under both Bernanke and Greenspan by substantially lowering interest rates. By creating excess liquidity, they ultimately swapped one bubble (tech stocks) for another (homes), he says.

I don’t think the Fed is in control, they need to step aside and let the chips fall where the chips fall. Greenspan has led everyone to believe there aren't going to be anymore tough times. But that’s not the way capitalism works. [...]

Fleckenstein has co-written a book entitled, Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve, that will be published on February 11, 2008 by McGraw-Hill.

Happy Birthday?

First Anniversary of the Subprime Meltdown -- Today is the one year anniversary of HSBC's first subprime meltdown related write-down. HSBC was amongst the first to actually increase write offs due to the subprime mess. Here are some 1 year stats since Feb 8 2007 [...]
Update: The table of subprime losses that was posted here on Wednesday was old and not accurate. Wikipedia has the most updated list of total subprime losses:

Subprime Writedowns in billions as of February 2008above total: $138.55 billion

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