Economic stimulus/tax rebates

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Fannie Mae sees sharper home-price declines, loses $2.2B...

Loan Backer Fannie Mae Loses $2.2B
WASHINGTON May 6, 2008 - Fannie Mae reports $2.2B loss in first quarter and warns of "severe weakness" in market

The steeper slide in home prices is accelerating the pace of foreclosures, Fannie Mae said Tuesday as it outlined plans for shoring up its finances following a $2.2 billion first quarter loss. While the nation's largest buyer of home loans will slice its dividend and attempt to raise $6 billion, mostly by issuing new shares, federal regulators loosened Fannie's capital requirements as the government looks for ways to bolster the housing market.

Moody's Investors Service downgraded the company's financial strength rating because of the potential for further losses from soured home loans over the next two years, but investors pushed Fannie's shares higher, in anticipation of the bigger role Fannie will play in the mortgage market. Fannie's president and CEO, Daniel Mudd, said during a conference call with analysts that "right now we are in the belly of the cycle," meaning losses from defaulted mortgages are likely to worsen next year.

Mudd said home prices in the January-March period fell "faster than anyone anticipated," and the company now foresees a nationwide drop of 7 percent to 9 percent in 2008. Previously, Fannie had been looking this year for a drop of 5 percent to 7 percent. As a result, Fannie said it expects to lose money this year on 13 to 17 of every 1,000 mortgages held on its $3 trillion book, up from its earlier expectation of 11 to 15 and a steep increase from four to six in 2007.

Despite the gloomy outlook, Fannie's federal regulator, the Office of Federal Housing Enterprise Oversight said it will reduce the capital cushion the company has to maintain. After it raises an anticipated $6 billion in a stock sale, Fannie will be required to keep surplus capital of 15 percent of their total mortgage debt, down from the current 20 percent. Another five-point cut will come in September, provided there is "no material adverse change" in the company's regulatory compliance.

More ABC News: Loan Backer Fannie Mae Loses $2.2B

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Bernanke urges more action to stem home foreclosure crisis

Fed Fears Another Wave of Foreclosures
WASHINGTON May 6, 2008 - Bernanke warns of dangers posed by surging home foreclosures, urges Congress to act

A rising tide of late mortgage payments and home foreclosures poses considerable dangers to the national economy, Federal Reserve Chairman Ben Bernanke warned anew Monday as he urged Congress to take additional steps to alleviate the problems. "High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy," Bernanke said in a dinner speech to Columbia Business School in New York. "Therefore, doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest," he said.

Some 1.5 million U.S. homes entered into the foreclosure process last year, up 53 percent from 2006, Bernanke said. The rate of new foreclosures looks likely to be even higher this year, he said. To provide more relief, Bernanke again called on Congress to give the Federal Housing Administration, which insures mortgages, more flexibility to help distressed borrowers at risk of losing their homes. He also again urged lawmakers to move ahead on legislation revamping Fannie Mae and Freddie Mac, which finance mortgages. And, he called on the two mortgage giants to quickly raise new capital.

House leaders plan action on those and other housing measures this week. "Conditions in mortgage markets remain quite difficult," the Fed chief said. A copy of the speech was made available in Washington. The reasons behind surging late payments and foreclosures can vary and that needs to be taken into account when developing solutions, Bernanke said. For instance, parts of New England, states in the Great Lakes, including Minnesota, Michigan and Wisconsin, show increased mortgage delinquencies and "notable increases" in unemployment rates, he said.

More ABC News: Fed Fears Another Wave of Foreclosures

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Lil' man with a big plan...

Kucinich Announces $14B Plan To Fight Foreclosure Crisis
May 9, 2008 -- The foreclosure crisis is threatening to destroy cities, but there is now some hope of getting some help locally to curb the problem.

Boarded up, bank-owned homes are plaguing Cleveland neighborhoods. Values are down, crime is up and even the tax base for schools has taken a hit.

In an effort to help relieve the crisis, Rep. Dennis Kucinich and state, county and local leaders announced a $14 billion plan to buy vacant homes. Kucinich, who had a key role in the plan, said it's one of the most important issues facing us.

"We're fighting to save our cities. We're fighting to save our neighborhoods. And this is a fight we can't lose," Kucinich said. The plan still needs to get through the Senate, and President George W. Bush is threatening a veto.

Kucinich Announces $14B Plan To Fight Foreclosure Crisis - News Story - WEWS Cleveland

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Why your tax rate is going up
May 9, 2008: Taxes are likely to head higher. And a return to historical levels could derail your retirement savings - unless you protect yourself now.

Last week, the federal government began sending out more than $100 billion in "tax rebates" to millions of Americans in an effort to stimulate the sluggish economy. If you're among the 130 million people who qualify for the rebate, that's great. But you should savor the feeling. Regardless of what happens over the next few months, your taxes have nowhere to go but up in the long-term future.

And if you didn't qualify for the tax rebate because you make too much money (it phased out at an adjusted gross income of $75,000 for singles or $150,000 for married couples) you're even more vulnerable. A little trip down memory lane can help explain why. You might not remember it - perhaps you blocked it out - but as recently as 1980, the top federal income tax bracket was a mind-numbing 70%, or double today's rate. Even if you were in the middle class, earning $100,000 in today's dollars, you fell in the 49% marginal bracket. Today, if you earn $100,000, you're in the 28% bracket.

That is a monumental cut in taxes over a relatively short period of time. And the same story holds true for taxes on investment income: the maximum rate on long-term capital gains has plunged, from 28% in 1980 to 15% today. Today's low rates can't last. The tax cuts of the past decades were supposed to lift economic growth (which they did) and hike tax receipts faster than federal spending (which they did not). Not even close. The resulting tsunami of federal debt is one reason to expect your taxes to rise over the next quarter-century.

And then there's the looming retirement of 77 million Baby Boomers. The oldest Boomers have already become eligible for Social Security, and they'll become entitled to Medicare in three years. According to research by the National Center for Policy Analysis, if today's low tax rates remain in place, a staggering 76% of all federal income tax revenue in 2050 will be soaked up by those two programs alone - before a penny is spent on defense, national parks, health care for the poor or haircuts for congressmen.

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Stuck in Congress...

Housing rescue stokes partisan split
May 14, 2008: GOP pushes back against Dodd bill to expand government role in helping at-risk borrowers and tighten control over big mortgage players.

The momentum behind congressional efforts to let the government offer more aid to struggling homeowners has hit stiff resistance. The Senate Banking Committee is scheduled to debate and possibly vote Thursday on a housing bill sponsored by Committee Chairman Christopher Dodd, D-Conn.

The Senate proposal has been propelled by mounting concern about foreclosures. But its prospects have turned murky as some Republican senators have come out against the bill. The wild-card: it's an election year. Republicans who hail from states with big subprime problems could be on the hot seat with constituents if the housing picture doesn't improve and Congress lets the bill die. The full Senate is not expected to address the housing issue before early June.

Dodd's bill would let the Federal Housing Administration back mortgages of at-risk borrowers if lenders voluntarily write them down to an affordable level, a proposal similar to one passed by the House last week. Republicans have said the plan amounts to a bailout that would put taxpayer dollars at risk and help lenders and borrowers who took imprudent risks.

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IRS flubs up to 350,000 tax rebate checks...

IRS says up to 350,000 tax rebate checks wrong
Thurs., May. 15, 2008 WASHINGTON - Human error, computer glitches are omitting $300 per-child credit

Up to 350,000 households aren't getting the $300 per child owed them as part of their economic stimulus rebate payments, the Internal Revenue Service said Thursday. The tax agency says taxpayer human error and computer glitches were responsible for the problem affecting a tiny percentage of the 130 million taxpayers expected to benefit from the refunds the government began sending out last month.

IRS spokesman Terry Lemons said the agency was confident it had identified all the people affected by the mistake. He said the IRS will send letters to those who missed out on the refund and that checks for the child credit will be mailed out in July. People need not contact the IRS or file additional paperwork, he said. The rebates, the centerpiece of the government's $168 billion plan to revive the faltering economy, provide up to $600 for an individual and $1,200 for married couples, based on income levels. In addition, people are entitled to $300 for eligible children younger than 17.

He said the problem on the child payments was traced to taxpayers failing to check a box on their paper tax returns and to two computer software systems, less than 1 percent of those in use, that weren't capturing the information needed to trigger the payment. The IRS has already refunded some $27 billion to about 30 million taxpayers. It expects to hit 130 million refunds by the end of June, with the last checks — except for those who requested extensions in filing their returns and a few other exceptions — going out in July.

IRS says up to 350,000 tax rebate checks wrong - Tax Tactics - MSNBC.com

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America's decline is self-inflicted...

An Unnatural Disaster
May 15, 2008 - America bears much of the blame for its waning global clout.

In a month of horrific natural disasters—the China quake, the Burma cyclone—it's instructive to consider what one of the biggest unnatural disasters in memory looks like. That is the decline in America's position in the world from where we were when George W. Bush inherited power on Jan. 20, 2001, to what he will bequeath to the next president eight months from now.

In many articles and in book after book American "declinists" nowadays tend to portray America's reduced stature as a largely natural phenomenon. Never mind that on the eve of the Bush presidency we were still seen as the most powerful nation in the history of the world. Decadent powers always wane in influence, and it seems we've just been doing a lot of waning very quickly. As other countries around the world partook of the ideas we pressed on them in the post-cold war era—free markets, democracy—they started to prosper and catch up to us. Meanwhile we grew fatter (literally) and more spoiled. It was all very organic.

Sure, there's something to this thesis. I argued it myself in a book—“At War With Ourselves"—I published back in 2003. Some relative U.S. decline was always inevitable. But these ruminations still miss the main point. Most of what has happened over the last seven years is the result of strategic misconceptions, awful policy decisions, and botched opportunities for leadership by the major players in Washington. What happened to America wasn't natural, it was almost entirely self-inflicted.

More America?s Decline Is Largely Self-Inflicted | Newsweek Voices - Michael Hirsh | Newsweek.com

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Super Rich: 'It's Not About Necessity'...

What Recession? Super Rich Still Spending
May 16, 2008 - Economic Downturn Has Little Impact on Wealthy Americans Who Specialize in Spending

You probably wouldn't recognize Paul Parmar, but he is one of the fresh new faces of the super rich, and he says he's "not really" affected by the current economic downturn. Robert Frank, the personal wealth columnist for The Wall Street Journal and the author of "Richistan," said there's a new model for wealth in America.

"Since the 1930s, more than half of America's wealth came from inherited wealth, so we all know about the Rockefellers and the Astors and the DuPonts," he said. "But in the last 10 years, it's all new money." Parmar, 37, is a prime example of a modern-day multimillionaire, living a life most people could only dream of. Home for Parmar is a 40,000 square foot mansion in Colts Neck, N.J., complete with four swimming pools (one indoor, three outdoor), a tennis court and a two-lane bowling alley.

Residing in 'Richistan'

"They truly live in their own world or their own country that I call Richistan," said Frank. "And even I underestimated the degree to which the wealthy are almost oblivious to the fact that we are in a recession. The super rich are unaffected." Parmar founded Pegasus Consulting Group in 1995 and, according to his firm's Web site, guided the company's growth to a staff of more than 700. Parmar is also the founder and Chairman of Pegasus Blue Star Fund, and his fortune is spread across a portfolio of investments from finance to aviation to movies, both Bollywood and Hollywood.

More ABC News: What Recession? Super Rich Still Spending

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Mortgage deal worked out...

Senate deal struck on mortgage aid
May 20, 2008: Plan would let government back loans for at-risk borrowers. Key lawmakers reach compromise: Taxpayers will not be on the hook if loans go bad.

Senate Banking Committee leaders said Monday that they have come to a deal on a housing bill that would prevent foreclosures, create affordable housing and revamp oversight of two of the mortgage market's biggest players: Fannie Mae and Freddie Mac. A major part of the legislation would allow the Federal Housing Administration to insure $300 billion in new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers' homes.

The deal came as pressure has been building in Washington to respond to the huge increases in foreclosure filings. It was struck between the top Democrat and Republican on the Banking Committee: Chairman Christopher Dodd, D-Conn., and Ranking Member Richard Shelby, R-Ala. "This legislation is good news for both the markets and homeowners," Dodd said in a statement. "The bill addresses the root of our current economic problems - the foreclosure crisis - by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes."

Dodd and Shelby had been in prolonged negotiations over the bill. A key sticking point has been Shelby's push to shield taxpayers if borrowers default on their payments after getting government-backed loans. He has said that he wants the FHA plan funded by redirecting money that Dodd's original bill earmarked for a new affordable housing trust fund. The funds would be paid by Fannie Mae and Freddie Mac. "My primary consideration ... has been to protect the American taxpayer, and I believe we've made significant progress toward that goal," Shelby said in a statement.

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Looks like the tax rebate didn't help much...

Fed sees economy getting worse
May 21, 2008: Ben Bernanke & Co. lower 2008 economic growth forecast and raise their projections for inflation and unemployment; says last rate cut was a "close call."

The Federal Reserve sees worse economic problems ahead, according to new forecasts from the central bank released Wednesday. But even so, the Fed may be reluctant to cut interest rates any further than it already has, the minutes from its last meeting show. (The minutes were also released Wednesday.)

The Fed lowered its economic growth forecast for the year. At the same time, it raised its projections for inflation and unemployment. The combination of slowing growth and rising prices created a difficult situation that made the Fed's latest decision to cut rates on April 30 a "close call." Stocks, which were trading a bit lower before the release of the minutes, fell even further after the new forecast was revealed. The Dow finished the day with a more than 220 point loss.

The central bank said it now believes full-year economic growth will be between 0.3% and 1.2% this year, significantly below its previous forecast of 1.3% to 2% growth in January. The Fed said in its minutes that members now expect the economy to shrink in the first half of the year -- the clearest signal yet that Federal Reserve chairman Ben Bernanke and other bankers believe the economy is in a recession.

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Lawmaker Calls Foreclosure of Her Home Improper...

Dem. Congresswoman Battles Foreclosure on Her Home
WASHINGTON May 24, 2008 - Congresswoman Claims Sale Into Foreclosure of Her California Home Should Not Have Happened

California Rep. Laura Richardson claimed Friday that her Sacramento, Calif., home was sold into foreclosure without her knowledge and contrary to an agreement with her lender. She said she is like any other American suffering in the mortgage crisis and wants to testify to Congress about her experience as lawmakers craft a foreclosure-prevention bill. In a lengthy interview Friday night with The Associated Press, the Southern California Democrat struck back against several days of negative publicity over reports she defaulted on her mortgage, allowing the house to be sold at auction.

Richardson, who won her seat in a special election last August, acknowledged turmoil in her life in the months after incumbent Rep. Juanita Millender-McDonald's death in April opened up her Los Angeles-area House seat. Richardson used her money to finance her campaign and fell behind in mortgage payments. But now, Richardson said, she has renegotiated her loan and promised to fully pay it off, along with $9,000 in delinquent property taxes. She insisted she's not getting special terms because she's a congresswoman.

"I'm Laura Richardson. I'm an American, I'm a single woman who had four employment changes in less than four months," Richardson said. "I had to figure out just like every other American how I could restructure the obligations that I had with the income I had." Richardson bought the 1,600-square-foot home in Sacramento's desirable Curtis Park neighborhood for $535,500 in January 2007. It was sold at auction earlier this month to a Sacramento mortgage lender who paid $388,000, according to the Sacramento County Recorder's Office. A default notice sent to Richardson in March put her unpaid balance at $578,384.

More ABC News: Dem. Congresswoman Battles Foreclosecure on Her Home

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U.S. not yet half way through home mortgage trouble: Seidman
Fri May 23, 2008 (William Seidman is the former chairman of the Resolution Trust Corp., the agency Congress set up in the 1980s to clean up the savings-and-loan lending mess. He's also a former chairman of the FDIC. He spoke with Reuters this week on the housing rescue plan taking shape in Congress and on the state of banking in the United States.)

How important is this Senate housing rescue plan?

The Senate plan will certainly be some help. It will take a part of the problem in the financial system and perhaps cure 25 percent of it. It isn't an answer to all the problems we have.

Were you expecting to see a lot more, at least coming from Washington?

I think it's as much as they can do with the subprime mortgage issue. The real job will be to get the financial system back on its feet and that's going to be largely a private sector exercise, I think, with a substantial number of bank failures.

Where are we on that curve now?

Generally banks start to fail about a year after the events which cause the trouble. We're probably about seven or eight months down that year. So before the end of the year, we'll probably see a number of bank failures, particularly in Florida, Texas, California, Nevada, where the housing boom was.

More U.S. not yet half way through home mortgage trouble: Seidman | Special Coverage | Reuters

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When Warren speaks - people listen...

Buffet believes the recession is here
Sunday 25th May, 2008 - The world's richest man has made his own decision about America’s current economic status.

Warren Buffett has told the German magazine Der Spiegel the US is already in recession. Buffett, the 77-year-old chief of the Berkshire Hathaway company, on a trip to Germany, said the effect of the so-called recession would be deeper and longer than people think.

He blamed financial institutions for introducing instruments they could no longer control.

US economic growth has slowed dramatically in recent months and a growing number of economists believe the world's largest economy will experience a recession during 2008 amidst the current credit crunch.

Buffet believes the recession is here

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Fearless W say hang in there, it gonna work...

Bush Says Stimulus Will Help
27 May 2008 - U.S. President George Bush says tax rebates and business incentives will help revive an American economy hurt by higher energy costs and falling home values.

President Bush told workers at a cable television company in the southwest state of Arizona that business incentives and tax refunds to more than 130 million households should help the economy by July. "The stimulus package that we passed in Congress is just beginning to kick in and it is going to make a positive contribution to economic growth," said President Bush. The president is trying to reassure Americans about the long-term health of the U.S. economy at a time when concern about the economic slowdown has replaced the war in Iraq as the biggest issue on the minds of voters.

A regular survey of thousands of American households found consumer confidence in May at its lowest level in 16 years. Much of the current slowdown follows the crisis in the U.S. housing market earlier this year. Many new home buyers got low introductory rates but were unable to meet their mortgage payments once those rates went up, leading to record foreclosures. U.S. housing prices posted their steepest drop in 20 years last month. A government report says new homes sales rose in April but remain near their lowest level in 17 years.

Higher food and energy prices are also depressing retail sales. The Automobile Association of America says U.S. gas prices have reached a record high $1.04 a liter average nationwide. Opposition Democrats in Congress are calling for a second economic stimulus plan to extend unemployment benefits. President Bush wants to see the affects of the current stimulus plan before considering further government intervention in a sagging economy.

VOA News - Bush Says Stimulus Will Help

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Foreclosures Hit a Record High and More Coming...

Home Foreclosures Set Record in First Quarter
More Americans are struggling to pay their mortgages; Foreclosures surge to a record high - late payments, too, signaling worse to come

The foreclosure hammer is hitting ever harder. People lost their homes at the highest rate on record in the first three months of the year, and late payments soared to a new high, too — an alarming sign that the housing crisis and its damage to the national economy may only get worse. Dumping more empty homes on an already glutted market also is likely to put a further drag on home prices — extending a vicious cycle. Slumping home values are being blamed in large part for the rising tide of foreclosures. Troubled borrowers are left owing more to the bank than their homes are worth. They can't sell without taking a huge financial hit, so they just walk away.

In fact, Americans' equity in their homes — usually their single biggest asset — now has dropped to the lowest level on record in figures going back to the end of World War II. Homeowners' portion of equity fell to 46.2 percent, which means the amount of debt tied up in their homes exceeds the equity they have built up. Watching their home values sink, consumers have pulled back on spending, a factor in the economy's slowdown. Buoyed by rebate checks, shoppers did get back in the buying groove in May, but analysts predict that consumers — pounded by galloping gasoline prices — will still be cautious.

"The economy is treading water, and the housing market is one of the undercurrents trying to pull it down," said Stuart Hoffman, chief economist at PNC Financial Services Group. Nearly 1 percent, or roughly 447,723 loans, fell into foreclosure during the January-to-March period, the Mortgage Bankers Association said Thursday in its quarterly snapshot of the mortgage market. That surpassed the previous high of 0.83 percent over the last three months in 2007.

More ABC News: Home Foreclosures Set Record in First Quarter