By JOHN DUNBAR, Associated Press Writer
WASHINGTON – Some of the nation's largest banks sharing in the $700 billion government bailout of the financial industry tried to assure lawmakers Thursday they are using the money to make more loans and help financially strapped homeowners avoid foreclosure.
Barry L. Zubrow, chief risk officer with JP Morgan Chase, told the Senate Banking Committee that a portion of the $25 billion capital infusion it received from the Treasury Department was being deployed to "expand the flow of credit" and to assist with rewriting residential mortgages for up to 400,000 families.
Zubrow and executives with Goldman Sachs Inc., Bank of America and Wells Fargo & Co. told the committee that that none of the $85 billion they have received collectively from the government is being used to pay salaries or bonuses.
"The committee has asked whether (bailout) funds would be spent on executive compensation," said Jon Campbell, regional banking president for Wells Fargo & Co. in his testimony. "The answer is no. Wells Fargo doesn't need the government investment to pay for bonuses or compensation."
Despite the reassuring words, lawmakers pressed hard for commitments to more lending.
"Let me say as clearly as I can," said committee chairman Sen. Christopher Dodd, D-Conn. "Hoarding capital and acquiring healthy banks are not — I repeat are not — reasons why Congress authorized $700 billion in emergency funding."
Sen. Charles Schumer, D-N.Y., said he and other lawmakers are looking at requiring banks to make more loans as a condition for taking part in the $350 billion second half of the bailout. "Any new capital injections must come with tougher requirements," he said.
Treasury has already loaned out or committed $290 billion of the first half. Democrats are working on a bill they hope to pass next week that would devote another $25 billion to the beleaguered auto industry, with the specific intent of helping General Motors Corp. avoid bankruptcy.
Sen. Tim Johnson, D-S.D., said he was alarmed by reports of continued generous compensation packages and benefits for executives of companies getting bailout funds, as well as dividend bailouts to stockholders equal to more than half the bailout money they are getting.
"The intent of the bailout was to stabilize troubled financial institutions and help those businesses and individuals and Main Street affected by the credit freeze," said Johnson. "Those making the decisions on how to spend the $700 billion, and those receiving the funds, must remember this intended use.
Congress can block release of the second $350 billion. It can also rewrite the law to put new conditions on its use.
Thursday, November 13, 2008
Tuesday, November 4, 2008
DOWN BUT NOT OUT IN TEXAS
TEXAS (San Antonio Business Journal) – Annualized sales for commercial properties in Texas at the end of August 2008 showed a considerable drop from actual sales reported during the same period last year, according to a recent report by the Federal Reserve Bank of Dallas.
The report showed $14 billion in annualized sales as of the end of August 2008, compared with $31.6 billion in actual sales a year earlier.
The investment falloff in Texas has been felt in all types of commercial real estate, and the authors of the report said national economic woes will continue to weigh on investment activity.
However, they predict that the factors that brought investment money to the Lone Star State in the first place will bring investors back once the economy rebounds.
The report showed $14 billion in annualized sales as of the end of August 2008, compared with $31.6 billion in actual sales a year earlier.
The investment falloff in Texas has been felt in all types of commercial real estate, and the authors of the report said national economic woes will continue to weigh on investment activity.
However, they predict that the factors that brought investment money to the Lone Star State in the first place will bring investors back once the economy rebounds.
The National Association of Realtors® Challenges Lawmakers
WASHINGTON, October 31, 2008
The National Association of Realtors® has stepped up its challenge to lawmakers encouraging them to take new, decisive actions to address the continuing problems in the housing industry, as well as the ongoing economic crisis.
“Our members see firsthand the impact that an unstable housing market is having on communities all across this great country,” said Richard F. Gaylord, NAR president. “The U.S. Treasury and Congress need to work together to ensure that the American people – not Wall Street and large banks – benefit from the economic recovery plan.”
NAR sent a letter last week to U.S. Treasury Secretary Henry Paulson calling on him to refocus the Federal Housing Finance Agency’s efforts on restoring strength to the mortgage-backed securities market, which would help lower mortgage rates for all home buyers and for those who need to refinance.
NAR today provided an economic analysis demonstrating that a reduction, or a buydown, of interest rates by just 1 percentage point could result in up to 840,000 additional home sales and reduce the inventory of homes by as much as 20 percent. Inventories currently at 9.9 months’ supply would decrease to approximately a 7.5 month supply.
“These changes would help stabilize home values and the housing industry,” Gaylord said. “The Treasury Department has gotten off track by focusing too much attention and stimulus money on Wall Street and banks that are in turn using the money for mergers and acquisitions. The administration needs to get back to the original intent of the plan – stabilizing the mortgage and housing markets – to help families avoid foreclosure. Home price stabilization would bring clarity to the valuations of mortgage-backed securities, removing uncertainty in the financial markets and positively affecting the overall U.S. economy.”
Realogy President and CEO Richard A. Smith said that substantially lower mortgage rates would stimulate both existing- and new-home sales. “When home sales increase, housing-related consumer purchasing follows, and we would expect this to help lead our economy to a recovery,” he said. Both NAR and Realogy have called on the federal government to take corrective actions that will result in lower mortgage rates.
Federal Deposit Insurance Corp. Chairman Sheila Bair has presented some ideas aimed at helping millions of homeowners by guaranteeing their mortgages. “NAR would support this effort,” said Gaylord. “The government must focus on protecting homeowners and making the dream of homeownership once again attainable. This would help stabilize the housing market and strengthen the national economy.”
Toward this end, NAR submitted a stimulus plan to Congress and the administration earlier this month, calling on Congress to enact a new housing stimulus package that would help boost the economy. The plan includes consumer-driven provisions that would eliminate repayment of the first-time home buyer tax credit and expand the credit to all home buyers, make the increased mortgage loan limits permanent, and focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached.
Reducing the interest rate, combined with removing the home buyer tax credit repayment, would result in an additional 10 percent reduction in inventory, down to a 6.5-month supply, and would produce modest home price gains of 2 to 4 percent. Such price gains would provide up to $760 billion in housing equity recovery for the nation’s 75 million homeowners.
“There is no question – there cannot be an economic recovery without a stabilized housing market. Congress and the new administration need to act immediately to help America’s families protect their homes, savings and futures,” Gaylord said.
The National Association of Realtors® has stepped up its challenge to lawmakers encouraging them to take new, decisive actions to address the continuing problems in the housing industry, as well as the ongoing economic crisis.
“Our members see firsthand the impact that an unstable housing market is having on communities all across this great country,” said Richard F. Gaylord, NAR president. “The U.S. Treasury and Congress need to work together to ensure that the American people – not Wall Street and large banks – benefit from the economic recovery plan.”
NAR sent a letter last week to U.S. Treasury Secretary Henry Paulson calling on him to refocus the Federal Housing Finance Agency’s efforts on restoring strength to the mortgage-backed securities market, which would help lower mortgage rates for all home buyers and for those who need to refinance.
NAR today provided an economic analysis demonstrating that a reduction, or a buydown, of interest rates by just 1 percentage point could result in up to 840,000 additional home sales and reduce the inventory of homes by as much as 20 percent. Inventories currently at 9.9 months’ supply would decrease to approximately a 7.5 month supply.
“These changes would help stabilize home values and the housing industry,” Gaylord said. “The Treasury Department has gotten off track by focusing too much attention and stimulus money on Wall Street and banks that are in turn using the money for mergers and acquisitions. The administration needs to get back to the original intent of the plan – stabilizing the mortgage and housing markets – to help families avoid foreclosure. Home price stabilization would bring clarity to the valuations of mortgage-backed securities, removing uncertainty in the financial markets and positively affecting the overall U.S. economy.”
Realogy President and CEO Richard A. Smith said that substantially lower mortgage rates would stimulate both existing- and new-home sales. “When home sales increase, housing-related consumer purchasing follows, and we would expect this to help lead our economy to a recovery,” he said. Both NAR and Realogy have called on the federal government to take corrective actions that will result in lower mortgage rates.
Federal Deposit Insurance Corp. Chairman Sheila Bair has presented some ideas aimed at helping millions of homeowners by guaranteeing their mortgages. “NAR would support this effort,” said Gaylord. “The government must focus on protecting homeowners and making the dream of homeownership once again attainable. This would help stabilize the housing market and strengthen the national economy.”
Toward this end, NAR submitted a stimulus plan to Congress and the administration earlier this month, calling on Congress to enact a new housing stimulus package that would help boost the economy. The plan includes consumer-driven provisions that would eliminate repayment of the first-time home buyer tax credit and expand the credit to all home buyers, make the increased mortgage loan limits permanent, and focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached.
Reducing the interest rate, combined with removing the home buyer tax credit repayment, would result in an additional 10 percent reduction in inventory, down to a 6.5-month supply, and would produce modest home price gains of 2 to 4 percent. Such price gains would provide up to $760 billion in housing equity recovery for the nation’s 75 million homeowners.
“There is no question – there cannot be an economic recovery without a stabilized housing market. Congress and the new administration need to act immediately to help America’s families protect their homes, savings and futures,” Gaylord said.
Texas’ real estate markets healthier than most
Texas home prices holding steady
The good news for Texas homesellers is that prices are holding. That’s in stark contrast to what’s happening in other parts of the country. Texas’ real estate markets never caught the housing bust bug that spread like the flu across most of the United States. “Getting back to normal” is how many real estate people describe today’s Texas market. The Real Estate Center agrees with that diagnosis.
Compared to other markets across the country, Texas is still sitting pretty in many ways. By comparison, there are entire condo buildings in Miami that are empty – with not a single unit sold – and single-family homes in various phases of construction across Florida and Arizona, all shells waiting to be completed.
We’re not seeing that in Texas, nor do forecasters expect to see that degree of downturn. That’s because, according to Jim Gaines, Ph.D., research economist for the Real Estate Center at Texas A&M, we’ve got a lot of positive economic factors going for us, including affordability, reasonable cost of living, low overall cost of doing business, ample employment opportunities, and – the reason why a lot of us are Texans – a great lifestyle. Jim Gaines, Ph.D., keeps his finger on the pulse of the state’s major housing markets. If one market misses a beat, he knows it.
“Events and circumstances point toward a Texas-sized boom between now and 2030,” says Gaines. “The state’s population and economy – as well as its housing and commercial real estate markets – are poised to explode in volume and prices. Job growth is expected to be stimulated by overall U.S. economic growth and enhanced by Texas’ employment-friendly characteristics.”
Austin’s Dugg Tankersley echoes the positive outlook of many experts, putting the current Texas real estate market in perspective. “We’ve been doing 90 miles per hour for so long,” he says. “Now we’re at 65 miles per hour, but that’s still pretty fast.”
-David S. Jones
David S. Jones is communications director and senior editor with the Real Estate Center at Texas A&M University
The good news for Texas homesellers is that prices are holding. That’s in stark contrast to what’s happening in other parts of the country. Texas’ real estate markets never caught the housing bust bug that spread like the flu across most of the United States. “Getting back to normal” is how many real estate people describe today’s Texas market. The Real Estate Center agrees with that diagnosis.
Compared to other markets across the country, Texas is still sitting pretty in many ways. By comparison, there are entire condo buildings in Miami that are empty – with not a single unit sold – and single-family homes in various phases of construction across Florida and Arizona, all shells waiting to be completed.
We’re not seeing that in Texas, nor do forecasters expect to see that degree of downturn. That’s because, according to Jim Gaines, Ph.D., research economist for the Real Estate Center at Texas A&M, we’ve got a lot of positive economic factors going for us, including affordability, reasonable cost of living, low overall cost of doing business, ample employment opportunities, and – the reason why a lot of us are Texans – a great lifestyle. Jim Gaines, Ph.D., keeps his finger on the pulse of the state’s major housing markets. If one market misses a beat, he knows it.
“Events and circumstances point toward a Texas-sized boom between now and 2030,” says Gaines. “The state’s population and economy – as well as its housing and commercial real estate markets – are poised to explode in volume and prices. Job growth is expected to be stimulated by overall U.S. economic growth and enhanced by Texas’ employment-friendly characteristics.”
Austin’s Dugg Tankersley echoes the positive outlook of many experts, putting the current Texas real estate market in perspective. “We’ve been doing 90 miles per hour for so long,” he says. “Now we’re at 65 miles per hour, but that’s still pretty fast.”
-David S. Jones
David S. Jones is communications director and senior editor with the Real Estate Center at Texas A&M University
Tuesday, October 7, 2008
Burning Down The House: What Caused Our Economic Crisis?
This video is 10 minutes, but it is 10 minutes of usable material. I believe that all claims here can be easily validated, although some would not want us to do that. Don't stop before the end even if you think you've seen everything, it keeps going right up to the end and it has some valid points worth mentioning.
We hear Biden and Obama saying that the McCain regime would be 'more of the same' as far as the financial world and mortgage bail out crisis is concerned. It is nice to understand the genesis of an ideal and then to see who ends up with the 'end game' dumped in their laps. Hope you enjoy.
Burning Down The House: What Caused Our Economic Crisis?
We hear Biden and Obama saying that the McCain regime would be 'more of the same' as far as the financial world and mortgage bail out crisis is concerned. It is nice to understand the genesis of an ideal and then to see who ends up with the 'end game' dumped in their laps. Hope you enjoy.
Burning Down The House: What Caused Our Economic Crisis?
Tuesday, September 23, 2008
TEXAS METROS ARE TOP PERFORMERS
SANTA MONICA, CA (Milken Institute) – Texas made a strong showing in "America’s Best-Performing Cities," the Milken Institute’s annual ranking of metros based on economic growth.
Although Provo-Orem, Utah, came out the winner among the 200 large metros that were studied, six major Texas metros made the top 25. Austin–Round Rock was ranked fourth, McAllen-Edinburg-Mission seventh, Killeen–Temple–Fort Hood 13th, San Antonio 15th, Houston–Sugar Land–Baytown 16th and Dallas-Plano-Irving 23rd.
Within the small metros division, which included 124 areas, Texas dominated. Midland ranked first in the nation. Longview and Odessa came in at seventh and tenth, respectively. At 37th, El Paso showed the biggest gain among small metros, jumping 85 spots from its 2007 position.
Although Provo-Orem, Utah, came out the winner among the 200 large metros that were studied, six major Texas metros made the top 25. Austin–Round Rock was ranked fourth, McAllen-Edinburg-Mission seventh, Killeen–Temple–Fort Hood 13th, San Antonio 15th, Houston–Sugar Land–Baytown 16th and Dallas-Plano-Irving 23rd.
Within the small metros division, which included 124 areas, Texas dominated. Midland ranked first in the nation. Longview and Odessa came in at seventh and tenth, respectively. At 37th, El Paso showed the biggest gain among small metros, jumping 85 spots from its 2007 position.
Tuesday, September 16, 2008
DOTZOUR: STEP ONE, RECHARTER FRANNIE
COLLEGE STATION (Real Estate Center) – As long as the federal government continues to indicate they are willing to redraw the promises contained in mortgage loans, investors will be wary of buying more mortgage bonds. Hence the interest rates on mortgages will stay higher than normal. That's how the Real Estate Center's Chief Economist Dr. Mark Dotzour sees the recent government takeover of Fannie Mae and Freddie Mac.
"Fannie and Freddie were doing a great job of providing low cost mortgages to a large majority of American families for three decades of the 20th Centrury. Somewhere in recent years, they lost track of their mission and morphed into the largest mortgage bond speculators on the planet," said Dotzour. "They did this by veering away from their mission of 'packaging mortgages' into the risky waters of keeping mortgages and hoping they hold their value. That bet has completely failed, and now they become a part of the problem and not a part of the solution to the housing market."
Dotzour outlines what he thinks should be done.
BACK TO ORIGINAL PURPOSE
"First, they (Fannie and Freddie) should be re-chartered to their original purpose of serving as a conduit for mortgages. They shouldn’t be in the business of holding mortgages as investments.
"Second, the government should monitor the spread between FRANNIE mortgage rates and the ten-year treasury rate. Mortgage rates should be about 1.6 percent higher than the current ten-year Treasury. This means that 30-year mortgages should be about 5.1 percent today."
GLOBAL SKEPTICISM REDUCED
Dotzour says there are several reasons why mortgage rates are not down to around 5 to 5.25 percent already.
"First, mortgage bond investors have been very skeptical about the truthfulness of the quarterly earnings reports of FRANNIE for years. Now that they have been temporarily nationalized, this global skepticism should be greatly reduced."
"Second, members of Congress have been suggesting this year that the interest rates on troubled mortgages should be ‘frozen’ so that the homeowners are not hit with interest rate ‘resets’ that make their payments higher."
"This sounds great for homeowners that bought more house than they could afford, but it sounds terrible if you are a bond investor. When the federal government suggests interest rate freezes, this is like the government just took away part of your private property. You were expecting to get 2 percent interest for two years and then 6 percent interest on your bond and then the federal government threatens to freeze the rate at 2 percent indefinitely. Consequently, you won’t buy any more of those bonds when there is a threat that the contractual promise in the underlying mortgage could be abrogated."
CRAMMING DOWN HOME VALUE
Dotzour says the new housing law signed by the President recently allows certain existing mortgages to be “crammed down” to 90 percent of the current value of the home.
"This sounds great for homeowners as well. Say you bought a $500,000 house with a $500,000 mortgage. Today it’s worth $400,000 and the Federal Reserve and Congress both encourage banks to lower the principal amount to 90 percent of the current value. So the loan is reduced from $500,000 to $360,000.
"Who will want to buy any more U.S. mortgage securities when the government is willing to wipe away value of your investments with a stroke of the pen?" asks Dotzour.
"Fannie and Freddie were doing a great job of providing low cost mortgages to a large majority of American families for three decades of the 20th Centrury. Somewhere in recent years, they lost track of their mission and morphed into the largest mortgage bond speculators on the planet," said Dotzour. "They did this by veering away from their mission of 'packaging mortgages' into the risky waters of keeping mortgages and hoping they hold their value. That bet has completely failed, and now they become a part of the problem and not a part of the solution to the housing market."
Dotzour outlines what he thinks should be done.
BACK TO ORIGINAL PURPOSE
"First, they (Fannie and Freddie) should be re-chartered to their original purpose of serving as a conduit for mortgages. They shouldn’t be in the business of holding mortgages as investments.
"Second, the government should monitor the spread between FRANNIE mortgage rates and the ten-year treasury rate. Mortgage rates should be about 1.6 percent higher than the current ten-year Treasury. This means that 30-year mortgages should be about 5.1 percent today."
GLOBAL SKEPTICISM REDUCED
Dotzour says there are several reasons why mortgage rates are not down to around 5 to 5.25 percent already.
"First, mortgage bond investors have been very skeptical about the truthfulness of the quarterly earnings reports of FRANNIE for years. Now that they have been temporarily nationalized, this global skepticism should be greatly reduced."
"Second, members of Congress have been suggesting this year that the interest rates on troubled mortgages should be ‘frozen’ so that the homeowners are not hit with interest rate ‘resets’ that make their payments higher."
"This sounds great for homeowners that bought more house than they could afford, but it sounds terrible if you are a bond investor. When the federal government suggests interest rate freezes, this is like the government just took away part of your private property. You were expecting to get 2 percent interest for two years and then 6 percent interest on your bond and then the federal government threatens to freeze the rate at 2 percent indefinitely. Consequently, you won’t buy any more of those bonds when there is a threat that the contractual promise in the underlying mortgage could be abrogated."
CRAMMING DOWN HOME VALUE
Dotzour says the new housing law signed by the President recently allows certain existing mortgages to be “crammed down” to 90 percent of the current value of the home.
"This sounds great for homeowners as well. Say you bought a $500,000 house with a $500,000 mortgage. Today it’s worth $400,000 and the Federal Reserve and Congress both encourage banks to lower the principal amount to 90 percent of the current value. So the loan is reduced from $500,000 to $360,000.
"Who will want to buy any more U.S. mortgage securities when the government is willing to wipe away value of your investments with a stroke of the pen?" asks Dotzour.
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