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Monday, March 31, 2008

Housing/Subprime Roundup — March 31, 2008

Items of interest:

Bloomberg:
Paulson Plan: Paulson Backs Regulatory Overhaul, Broader Fed Role -- Treasury Secretary Henry Paulson proposed the broadest overhaul of U.S. financial regulation since the Great Depression, saying American capitalism needs to be better prepared for ``inevitable market disruptions.''

``Our current regulatory regime is almost solely focused above ground at the tree level,'' Paulson said in remarks at the Treasury in Washington. ``The real threat to market stability is below ground, at the root level where the health of financial firms is intertwined.''

Paulson's 218-page ``Blueprint for Regulatory Reform,'' commissioned two months before credit markets seized up in August, said more rules aren't the answer to the current period of turmoil. The former chairman of Goldman Sachs Group Inc. said the system of regulating banks, securities firms and insurance companies is outmoded, and the Federal Reserve should expand its oversight of financial services beyond banks...

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David Usborne / The Independent:
USA 2008: The Great Depression
-- Food stamps are the symbol of poverty in the US. In the era of the credit crunch, a record 28 million Americans are now relying on them to survive - a sure sign the world's richest country faces economic crisis...
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NY Times:
Foreclosure Machine Thrives on Woes -- NOBODY wins when a home enters foreclosure — neither the borrower, who is evicted, nor the lender, who takes a loss when the home is resold. That’s the conventional wisdom, anyway.

The reality is very different. Behind the scenes in these dramas, a small army of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits. These little-known firms assess legal fees and a host of other charges, calculate what the borrowers owe and draw up the documents required to remove them from their homes.

As the subprime mortgage crisis has spread, the volume of the business has soared, and firms that handle loan defaults have been the primary beneficiaries. Law firms, paid by the number of motions filed in foreclosure cases, have sometimes issued a flurry of claims without regard for the requirements of bankruptcy law, several judges say...
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NY Times:
Homeowners’ Pleas Put G.O.P. Lawmakers in Bind on Defaults -- Senate Democrats, hoping to leverage their argument that average Americans deserve just as much help as Wall Street, on Tuesday will bring back to the floor housing legislation that the Republicans blocked on Feb. 28.

That bill includes a change in bankruptcy laws to allow judges to modify interest rates and other mortgage terms for primary homes, a provision that the White House and Senate Republicans have denounced. It would also provide $200 million for counseling struggling homeowners; authorize $10 billion in bonds to refinance bad loans; and give local governments $4 billion to buy foreclosed properties...
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Gretchen Morgenson / NY Times:
If You Can’t Sell, Good Luck — WHERE’S my bailout? --That’s what thousands of individual investors, stuck with auction-rate securities that brokers had told them were “as good as cash,” might have wondered as they watched the Federal Reserve take on $29 billion of malodorous assets from the balance sheet of Bear Stearns.

Everybody knows, though, that only big guys get bailouts.

Long-suffering small investors, unable to sell these supposedly liquid securities, have to look elsewhere for satisfaction.Unfortunately, satisfaction is elusive for these investors...
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