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Monday, July 28, 2008

Housing/Subprime/Credit Roundup — July 28, 2008

Items of Interest:

Countrywide Financial peddled influence to Congress.Dan Golden / Portfolio.com:
Angelo's Many "Friends" -- Countrywide Financial didn’t just make bad loans to bad customers, it peddled influence to Congress. Inside the scandal that rocked the Hill.

The Countrywide V.I.P.-loan scandal went far beyond a few members of Congress. An exclusive look inside C.E.O. Angelo Mozilo's secret effort to curry favor with lawmakers, politicians, and others who could influence the company's fortunes...

In January 2004, Richard Aldrich, a California state appeals court judge, decided to refinance his 8,200-square-foot house next to a Jack Nicklaus-designed golf course at the Sherwood Country Club in Westlake Village. He turned to a prominent Sherwood member: Countrywide Financial chief executive Angelo Mozilo. . .

Countrywide’s generosity to Aldrich reflected a broader strategy. Through a program that provided loans on favorable terms to V.I.P. borrowers, the nation’s largest mortgage lender curried favor with politicians, government officials, and business partners who were in a position to influence policy, profits, or public opinion. While some may not have been fully aware of the special terms, many took the bait. Some, including Aldrich, appear to have skirted or violated conflict-of-interest rules or ethics policies. . .

Senate passes landmark housing bill -- Controversial measure aims to help borrowers, bolster the housing market and provide a fail-safe for Fannie and Freddie. Bush is likely to sign it soon.

The Senate on Saturday overwhelmingly passed a landmark housing bill that will offer up to $300 billion in loans for troubled homeowners and establish a government rescue plan for mortgage finance giants Fannie Mae and Freddie Mac.

The House passed the bill on Wednesday just hours after President Bush reversed his long-standing vow to veto the bill. Bush is expected to sign it soon. . .
How housing rescue bill can help you -- The legislation - likely to be enacted soon - devotes $300 billion to helping troubled homeowners avoid foreclosure...

Wall Street Journal
Two Alternatives to Foreclosure
-- The housing legislation that is close to becoming law may help as many as 500,000 cash-strapped homeowners avoid foreclosure, by assisting them in refinancing into more-affordable government-backed mortgages.

But since many struggling borrowers may not qualify, people facing foreclosure should also familiarize themselves with two other options: "short sales" and "deed in lieu of foreclosure" transactions. . .
Bill Fleckenstein, MSN Money:
The Repugnant Bailout Nation -- There seems to be little outrage as the US, a country where free enterprise is supposed to reign, moves to nationalize losses without even contemplating reform.

We are at another moment when those of a bullish persuasion, whose financial muscle memory was developed under former Federal Reserve Chairman Alan Greenspan, are determined to put lipstick on the pig at every opportunity.

As soon as any facet of each financial minicrisis ends -- whether that be in certain subprime lenders, certain Alt-A lenders, certain monoline insurers or certain banks -- folks act as though all is well, even as financial institutions continue to implode. . .
The Big Picture
Revisiting Housing Seasonality & Bottom Callers -- Recall that back in March, we noted in passing that both Bloomberg and the WSJ had misinterpreted the Existing Home Sales data. I said bluntly they both "got it wrong." The spin doctors at the NAR scored an unquestionable propaganda victory, with a front page WSJ article that omitted the year over year data.

That led to some back and forth between myself, the reporters, and a senior editor. Our email conversations led me to the inescapable conclusion that many finance journalists simply don't understand statistics, especially seasonality. (See Existing Home Sales, Non Seasonally Adjusted, Explained). . .
Calculated Risk:
Graphs: Existing Home Sales
Gary North / Lew Rockwell:
Ben Bernanke’s Hush Money -- The bailout of IndyMac’s depositors will probably deplete 10% of the FDIC’s reserves.

Congress will back up the FDIC if the FDIC ever (1) runs out of T-bills to sell (2) to raise money (3) to pay off depositors of insolvent banks. But where will Congress get this money? From the Federal Reserve System, if lenders will not fork over the money.

The Federal Reserve System backs up Congress. This is the heart of the threat to the solvency of the dollar.

The $4 billion that the FDIC will pay to a handful of depositors at IndyMac is hush money. It is paid to them to silence every other depositor in the country. "Don’t spread rumors about any insolvent bank." Why not? "Because, in a fractionally reserved system, all of them are technically insolvent." They are all borrowed short and lent long...

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia