07/31/2008 (8:27 am)

Spain

Filed under: term |

Spain's economy expanded the least in 15 years in the second quarter as record oil prices and the collapse in homebuilding destroyed jobs and sapped spending, the central bank said.

The economy grew 0.1 percent compared with a 0.3 percent pace in the first quarter, the Bank of Spain estimated in its quarterly bulletin today. From a year earlier, the economy expanded 1.8 percent. The National Statistics Institute will provide the first official growth figures for the second quarter on Aug. 14.

Spain is suffering “a more pronounced adjustment, which is particularly intense in private consumption and employment, in a context in which the prolongation of the financial turbulence and the increase in the price of crude are increasing the uncertainty over the economic outlook,'' the central bank said.

Spain's construction industry is struggling to shift a million unsold homes just as banks scale back mortgage lending. Banks' reluctance to lend to each other after the U.S. subprime mortgage market collapsed turned a soft landing for the Spanish housing market into a “sharp correction,'' Finance Minister Pedro Solbes said July 22.

“When you switch to a situation of scarce and more expensive credit, the whole economy feels it,'' said Jose Carlos Diez, chief economist at Intermoney SA in Madrid. “The damage from the credit crunch is spreading quickly.''

Construction Jobs

Unemployment in Spain, where half the euro region's new jobs were created between 2001 and 2006, rose to 10.4 percent in the second quarter, the highest in 3 1/2 years. The number of construction jobs declined 4.5 percent to 2.55 million. Building permits slumped 58 percent in May from the year earlier.

“We're working on the basis that there will be no recession,'' Solbes said today in an interview with Cadena Ser radio. “But we're also working on the assumption that growth will be very close to zero in the next few quarters.''

Solbes last week cut his forecast for growth in 2009 by more than half to 1 percent. The economy will grow 1.6 percent this year after 3.8 percent in 2007, he said easy payday loans.

Across the euro region, economic growth will be “clearly below potential'' by the end of the year, the Bank of Spain said today.

`More Restrictive'

“The effect of a weaker external environment, financial conditions that have become more restrictive as a result of the prolongation of the period of financial instability, the increase in the price of oil and food commodities and the appreciation of the euro'' are slowing Europe's expansion, the bank said. At the same time, “upside risks to inflation in the area are elevated.''

The surge in the price of oil since April will cut about 0.5 percentage point, or 5.5 billion euros ($8.6 billion), from Spain's economic output this year, Solbes said. Oil almost doubled in the past year and touched a record $147.27 on July 11, eroding the spending power of households and companies.

Madrid-based Telefonica SA, the euro region's biggest phone company, posted its biggest decline in six months last week after Vodafone Group Plc Chief Executive Officer Arun Sarin said slower growth in Spain will hurt sales.

Business activity is crumbling across the service industry in Spain, according to a gauge of purchasing managers that fell to a record low in June. Banco Popular Espanol SA, the third- largest Spanish lender, missed analysts' estimates for second- quarter profit July 24 and scrapped its earnings forecast after bad loans jumped.

Borrowing Costs

Manufacturing is also feeling the pinch as higher borrowing costs and falling home-values curb spending. Industrial output fell by the most in six years in May while June car sales were down a third on the previous year.

“Spain is going through a very difficult period,'' Carl- Peter Forster, head of General Motors Corp. in Europe, said July 8. “Real-estate prices are plummeting, and that immediately hits demand for new cars. I would call Spain the most difficult market right now in Europe.''

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07/29/2008 (8:24 pm)

Home sales at 10 year low

Filed under: money |

Sales of existing homes in June slowed more than expected and hit their lowest level in 10 years, according to an industry trade group report released on Thursday.

The National Association of Realtors reported that sales by homeowners dipped in June to an annual pace of 4.86 million, down 2.6% from a pace of 4.99 million in May.

That’s the lowest rate on record since the first quarter of 1998, when existing home sales fell to an annual pace of 4.83 million, according to Walter Molony, spokesman for NAR.

The existing home sales rate - including single-family, town homes, condominiums and co-ops - is down 15.5% from the 5.75 million units sold in June 2007.

The 4.86 million sales figure came in well below the 4.95 million estimate forecast by economists surveyed by Briefing.com.

"The factors that are weighing on the housing market remain in place - weak consumer confidence, a weak labor market and rising mortgage rates - so there are some strong fundamental headwinds still weighing on the market," said Robert Dye, senior economist at PNC Financial Services Group.

"We are hoping for a bottom, but we are not expecting any significant rebound from that bottom until the labor market and consumer confidence starts to improve," he added.

But with inventory still on the rise, home prices are falling further. The number of homes available for sale at the end of June rose 0.2% to 4.49 million, which represented an 11.1-month supply of inventory at the current sales pace, up from a 10.8-month supply in May.

Meanwhile, the median price of a home sold in June fell to $215,100, down 6.1% from $229,000 a year earlier.

Single family homes. Sales of single-family homes declined 3.2% to an annual rate of 4.27 million in June from 4.41 million in May. That’s 14.8% below the 5.01 million-unit pace in June 2007.

The median existing single-family home price was $213,800 in June, down 6.7% from a year ago.

New homeowners. First-time home buyers are not confident that this is the best time to enter the market. "A recent online survey of Realtors shows nearly a quarter of potential home buyers are waiting on the sidelines," NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said in a written statement.

"About four in 10 homes are purchased by first-time buyers, which frees existing owners to trade up," according to Lawrence Yun, NAR’s chief economist.

Rising rates. Higher interest rates are also holding buyers back cash advance in one hour. "Even as prices are coming down, the total mortgage price is under upward pressure from rising mortgage rates," said Dye.

On Thursday, Freddie Mac (FRE, Fortune 500) said that the 30-year fixed-rate mortgage jumped to 6.63% for the week ending July 24, 2008, up from 6.26% last week.

"Market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve will raise short-term rates this year all combined to push mortgage rates higher this week," Frank Nothaft, Freddie Mac vice president and chief economist, said in a written statement.

Regional sales breakdown. Existing-home sales in the West actually rose 1.0% in June, but were 6.4% lower than a year ago. Buyers were attracted to bargain prices, with are down 17.2% from June 2007.

In the South, existing-home sales fell 3.1% from May to June, and 18.1% year-over-year. Home prices in the South have only fallen 2.4% from a year ago.

Midwest existing-home sales declined 3.4% in June, and slid 17.6% from a year ago. But the median price there was actually up 2.8% from June 2007.

June existing-home sales fell 6.6% in the Northeast on a month-to-month basis and dipped 15.8% from June 2007. The median price was also down sharply, 12.6% below June 2007.

Despite the decline in the housing market as a whole, there are a few bright spots. The NAR says that existing-home sales are actually rising significantly from a year ago in areas that have been particularly hard-hit by the housing bust, such as Bakersfield, Calif.; Fort Myers, Fla.; and Las Vegas, Nev.

In addition, "sales are now beginning to pick up in Orlando, Fla., Phoenix, and Oakland, Calif.," Yun said in a written statement. "Interestingly, sales fell in Atlanta, Houston, and Kansas City, Mo., despite affordable home prices and solid local employment conditions."

Housing bill. The report came a day after the House passed a bill that will provide up to $300 billion to help struggling homeowners and will back the mortgage finance giants Fannie Mae and Freddie Mac. The bill will go to the Senate next for vote.

"The housing stimulus package working its way through Congress would go a long way toward helping consumers and boosting the overall economy," Yun said in a written statement.  

Source

07/28/2008 (8:51 pm)

Middle class:

Filed under: economics |

America’s middle class is increasingly squeezed by sagging incomes and soaring expenses, experts told Congress on Wednesday.

Adjusted for inflation, median household income dropped by $1,175 between 2000 and 2007, said Elizabeth Warren, professor at Harvard Law School, in written testimony before the Joint Economic Committee.

At the same time, the average family is spending $4,655 more on basic expenses, such as gas, housing, food and health insurance. Gas alone costs $2,195 more for a family making the same commute in May 2008 as it did eight years earlier.

Families with children saw their child care costs soar. Those with children under age 5 spent an additional $1,508 a month, while after-school costs for older children rose $622.

To cover these soaring expenses, many people have had to turn to credit cards. Nearly 10% of total disposable income in the United States goes to paying off such debt, Warren said.

"There have never been since the Depression so many families standing right on the edge," Warren said. "Families have tightened their belts. They have cut down in every discretionary spending area they possibly can."

"These costs are tearing a hole in the family they simply can’t make up," she added. "You can’t cut out enough lattes to pay for health insurance in America."

Gains go to the wealthy

Sen. Charles Schumer, D-N.Y., who chairs the committee, convened the hearing to examine the impact of rising costs and stagnant wages on the economy.

"There is a silent cry going out as middle class families gather around their dinner tables each night to talk about how to pay their ballooning bills," he said. "Middle class families are the engine of our economy, but their earning power and economic security has actually declined in the last seven years."

Lawmakers focused their questions on comparing the great strides made in productivity with stagnation of wages.

Increasing economic inequality is to blame, testified Jared Bernstein, senior economist with the liberal-leaning Economic Policy Institute fast cash advance loan. While the middle class is contributing to productivity, the rewards are increasingly going to the wealthy.

But David Kreutzer, senior policy analyst for the more conservative Heritage Foundation, said it’s more accurate to follow the wages of actual workers over time, not to compare the median wage figure. A Treasury Department study released last year, which followed nearly 170,000 taxpayers, found median income of those workers rose 24% between 1996 and 2005.

To help those struggling, Congress should pass a second stimulus package, Bernstein said. But this effort should funnel funds to the states, particularly for infrastructure projects. This could serve as an important source for much-needed jobs.

"Smartly crafted, it has the potential to help generate more economic growth until the imbalances and necessary corrections in key markets play themselves out," Bernstein said. "Infrastructure investment serves a dual role of deepening investments in public capital while creating good jobs for workers that might otherwise be un- or underemployed."

Warren and Bernstein also called for more regulation and oversight of the financial markets, particularly the credit industry, to avoid abuses that lead to bubbles. The last two or three economic downturns were caused by such runups.

These bubbles are "a major contributor to the middle class squeeze," Bernstein said.

Are you buried under a pile of debt and need help getting out? Did you recently manage to pull yourself out of debt and want to share your story? Tell us about your experience with debt and how the current credit crisis is affecting you.  

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07/25/2008 (10:21 am)

Nasdaq index coming to Ireland

Filed under: legal |

The Nasdaq OMX Group Inc. will introduce the Nasdaq OMX Ireland Index on July 28, 2008.

CEO Bob Greifeld announced the index at the Business & Finance US-Ireland Business awards lunch Thursday in New York. "The Nasdaq OMX Ireland Index will provide investors with a benchmark to track companies in a country that has experience consistently high levels of economic growth," Greifeld said.

Invesco PowerShares Capital Management LLC, which provides exchange-traded funds (ETFs), will develop an ETF based on the new Ireland index and will list it on the Nasdaq Stock Market.

The Ireland Index will be calculated in real-time across combined exchanges in dollars and it will start with a value of 250.000. It will consist of 23 components and have a market capitalization of $97 billion.

Major companies that will be listed include Ryanair Holdings, a successful European budget airline, and Skillsoft Corp payday loans.

This comes just one month after Ireland rejected the Lisbon Treaty, which would have served as a constitution for the European Union. French foreign minister Bernard Kouchner warned that "Ireland would be the first to suffer from a no vote" on the treaty.

The new Nasdaq index seems to belie claims that the Emerald Isle will suffer financially for the vote.



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07/25/2008 (12:30 am)

GM, utilities team up on electric cars

Filed under: marketing |

General Motors Corp. has joined with more than 30 utility companies across the U.S. to help work out electricity issues that will crop up when it rolls out new electric vehicles in a little more than two years.

The Detroit automaker said the partnership, which includes the Electric Vehicle Research Institute and large utilities such as Southern California Edison and Duke Energy Corp. (DUK, Fortune 500), will deal with issues from tax incentives for the vehicles to where and when they can be plugged in for recharging.

GM (GM, Fortune 500) is working to bring the Chevrolet Volt rechargeable car to showrooms in late 2010. It’s being designed to run on an electric motor powered by lithium-ion batteries. When fully charged, it will be able to go 40 miles on battery power. For longer trips, a small internal combustion engine will recharge the batteries to keep the Volt moving.

"This vehicle is real. It’s coming into production," said Britta Gross, a GM engineer who is helping to build the infrastructure for cars of the future. "We know that when the vehicle is in the showroom and ready for sale, it’s got to work seamlessly with the infrastructure. It’s the whole picture. We’ve got to make sure the infrastructure is ready."

GM and the utilities planned to announcement the partnership Tuesday at a conference on plug-in hybrid electric vehicles in San Jose.

The consortium will work on everything from policy issues including tax incentives for purchasing what is likely to be an expensive car to whether the electric generation system can handle the increased power demand.

The cars will have to be designed so recharging them can be timed to low-demand periods for electricity, Gross said. The speed of the recharging, voltage, amperage and other issues all have to be worked out, she said. The group also will address issues such as how apartment dwellers can charge their cars and where the vehicles will be charged at work or on trips - and who pays for the electricity, Gross said.

"We want this to sell in just huge volumes, so we want to get it right," she said.

A team of GM engineers and designers is working on the Volt, hoping to be the leader in plug-in electric vehicles pay day loan. Other automakers, including Toyota Motor Corp. (TM), also are working on similar vehicles.

GM already is showing Volt prototypes to focus groups and is testing a new generation of batteries that can carry enough juice to run the vehicles 40 miles. It is being designed so it can be recharged from a conventional household electrical outlet.

But the car will be priced anywhere from $30,000 to $40,000, far more expensive than most conventional cars.

The group, Gross said, likely will seek government tax incentives for buyers because of the benefits the car brings to society, such as lowered greenhouse gas emissions and reduced dependence on foreign oil.

"The price to the consumer has got to be affordable," she said.

Utilities, she said, can benefit from the cars because they will sell more electricity during off-peak hours when they have idle generating capacity.

But automakers and utilities will have to work out ways to decide how to stagger recharging so local substations do not become overloaded, Gross said.

The Volt likely will need about 8 kilowatt-hours of energy to recharge, Gross said. The average U.S. utility charges about 10 cents per kilowatt-hour, so it would cost the consumer about 80 cents to go the 40 miles, she said. 

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07/23/2008 (2:27 pm)

Singapore Inflation Holds at 26-Year High of 7.5% for 3rd Month

Filed under: economics |

Singapore's inflation held at a 26- year high for a third straight month in June, increasing pressure on the central bank to allow further gains in the currency at a time when exports are slowing.

The consumer price index jumped 7.5 percent from a year earlier, matching May's gain, the Department of Statistics said today. That was lower than the median forecast of an 8 percent increase in a Bloomberg News survey of 18 economists. Prices fell 0.3 percent from May.

The Monetary Authority of Singapore in May raised its 2008 inflation forecast, predicting consumer prices will gain between 5 percent and 6 percent as record oil and food pushed up costs across Asia. Higher taxi fares and road-access fees and costlier food from neighboring Malaysia may keep prices elevated.

“We do not expect inflation to fall sharply'' in coming months, said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. “It is more likely to exhibit a downward crawl, especially with new sources of inflationary pressure, mainly policy-induced, coming into the picture.''

The government has in recent months introduced new road tariffs or raised existing ones to ease congestion in the city- state of 4.6 million people. Singapore, which imports 90 percent of its food needs, may also face price pressures on the goods it brings in from Malaysia, where the government estimates June's inflation rate may have jumped to the highest since 1982 after it raised fuel prices.

`Decisive Tightening'

Inflation will continue to “plague'' most Asian economies on record global energy and food prices, the Asian Development Bank said yesterday. Central banks in the region need “decisive tightening of monetary policies'' to combat the rise in prices, the Manila-based lender said.

Australian inflation accelerated in the second quarter to the fastest pace in two years, the government said today.

Singapore's inflation averaged 7.1 percent in the first half. Record oil prices are increasing fuel and transport costs for consumers. The Singapore government doesn't subsidize pump prices, leading petrol companies to pass on the rising gasoline and diesel costs to car owners. Crude reached an unprecedented $147.27 a barrel on July 11.

The central bank, which expects Singapore's inflation rate to ease in the second half of the year, may review its forecast for price gains in 2008, Khor Hoe Ee, an assistant managing director at the monetary authority, said yesterday.

Stronger Currency

The central bank in April said it would allow its currency to strengthen at a faster pace against the U.S. dollar, saying the exchange rate remains its most effective tool to fight inflation. The Singapore dollar has climbed 5.8 percent in 2008.

Food prices, which make up 23 percent of the index, rose 9.2 percent in June from a year ago, following May's 9 percent increase. From May, food prices gained 0.6 percent.

Transport and communication costs, the second-biggest component accounting for 22 percent of the consumer price index, climbed 5.1 percent in June from a year earlier. From May, transport and communication prices fell 0.2 percent.

ComfortDelGro Corp., Singapore's biggest taxi company, last week introduced a 30 Singapore cents (22 U.S. cents) fuel surcharge on cab rides to help its drivers offset the rising cost of oil. The company operates more than 15,000 cabs in the city-state.

Housing costs, the third-largest component of the price index, climbed 13.4 percent from a year earlier. From the previous month, housing prices declined 1.7 percent.

Sourse

07/22/2008 (9:39 pm)

U.S. Expansion May Be First Without Income Recovery

Filed under: business |

For six years, Tom Stechmiller's 2 percent annual pay raises didn't keep up with increases in the cost of living. Now, with prices rising faster and the economy slowing, his wages have been frozen.

“I'm terrified,'' said the 47-year-old father of two, an embalmer for Service Corp. International from the Chicago suburb of Berwyn, Illinois. “This isn't the American dream.''

The current U.S. economic expansion is the first in 60 years that may end before many Americans have recovered from the last slowdown. Annual family incomes adjusted for inflation have grown just 0.8 percent since the end of 2001 even as the economy expanded an average 2.7 percent a year, leaving households little cushion to absorb higher food and fuel prices.

“The average family hasn't made up for lost ground,'' said James Glassman, senior economist at JPMorgan Chase & Co. in New York. “We're discovering people aren't protected from inflation like they used to be.''

Median U.S. family income, adjusted for inflation, was $58,407 in 2006, according to the most recent Census Bureau data, down from $59,398 in 2000. Competition from low-wage countries such as China, combined with the waning power of organized labor, kept a lid on compensation during the latest expansion.

“The world has seen, over the past 20 years, an increase in the supply of labor,'' said Robert Solow, a winner of the Nobel Prize in economics who's now at the Massachusetts Institute of Technology. “When you have a big increase like that, the wages of the person in the middle are likely to be held down.''

Economic Impact

Now, as prices pick up, the deterioration in income growth means households are likely to cut spending, restraining the economy. Economists don't anticipate annualized growth to breach 2 percent until the third quarter of 2009, according to a monthly Bloomberg News survey.

The Labor Department reported July 16 that consumer prices jumped 5 percent in the year to June, the most in 17 years. That pushed the so-called Misery Index, which adds inflation to the unemployment rate, to 10.5, a level unseen since 1993, the year Democrat Bill Clinton was inaugurated as president after campaigning on promises to revive the economy.

The lack of wage growth during George W. Bush's presidency means Democrats are likely to make gains in this year's election, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

“People vote their pocketbooks,'' he said. “They're likely to take out their problems on the incumbent party. It's going to be pretty hard'' for Republican presidential candidate John McCain “to escape Bush's mantle on the economic front.''

1998 Gain

The last time households significantly gained on inflation was 1998, when median income grew by 3.4 percent.

As Stechmiller got 2 percent raises the last six years, his monthly natural-gas bill more than doubled to $199, gasoline increased to $4.20 a gallon and Chicago's sales tax rose to the highest of any major U.S instant payday loan. city: 10.25 percent.

Now with a three-year pay freeze, he's pondering how to keep up with expenses.

“I can't imagine how I can keep a roof over my head,'' said Stechmiller, who lives in an 88-year-old brick bungalow with his wife, a part-time teacher's assistant, and family.

The outlook for workers like him isn't likely to improve, with economists saying the economy is close to a recession. Each of the five contractions since 1969 brought declines in inflation-adjusted median income.

Recession Risk

U.S. growth will slow in the second half of the year as unemployment rises and stock-market declines hurt household wealth, according to an index of leading economic indicators. The Conference Board's gauge declined 0.1 percent in June, after a revised 0.2 percent drop the prior month, a report from the New York-based research group showed today.

What's more, a recession in 2008 would be accompanied by accelerating prices, a toxic combination mostly absent since 1980, when inflation topped 14 percent.

Labor's influence has crumbled since then, helping prevent wages from chasing prices higher.

“Labor now is so weak that it doesn't have the bargaining power to even keep up with inflation,'' said Mark Weisbrot, co- director of the Center for Economic and Policy Research.

1970s Price Spiral

Modest pay gains give Fed Chairman Ben S. Bernanke confidence the U.S. will avoid a repeat of the 1970s, when compensation for inflation became embedded in contracts and price expectations soared.

“We see little indication today of the beginnings of a 1970s-style wage-price spiral,'' Bernanke said in a speech last month.

Businesses in most of the U.S. reported moderate or limited wage growth in the June 11 Fed Beige Book survey of economic conditions.

“From the point of view of business, Wall Street and the central bank, this is great because part of the threat of inflation has been eliminated,'' Weisbrot said. “From the point of view of the vast majority of people, it's a big step backward.''

That's the direction Mark Ivankovits had been going since 2003. The journeyman electrician from Allentown, Pennsylvania, said his annual earnings fell in five years to about $45,000 from $65,000 and his hourly wage fell between $6 and $7 as he drove up to 200 miles a day looking for work.

“I've been treading water for the last few years,'' said the 46-year-old father of two.

In June, Ivankovits said, he landed a steady job only 15 minutes from home: one that pays exactly what he earned in 2003.

Source

07/21/2008 (6:42 am)

California broadens Countrywide lawsuit

Filed under: economics |

State officials expanded a previously filed lawsuit against Countrywide Financial Corp., adding on Thursday allegations that the mortgage lender rewarded staff for selling risky loans.

The new claims amended a lawsuit filed on June 20 by the California attorney general’s office accusing Countrywide (CFC, Fortune 500) of deceiving borrowers with misleading advertisements and other unfair practices.

The latest filing said Countrywide paid higher commissions to agents who put borrowers into loans with higher rates and fees than they qualified for based on credit scores and other factors.

It also alleged that Countrywide employees regularly overrode warnings from the company’s computerized underwriting system that analyzed the ability of applicants to repay loans.

The amended lawsuit gave several examples of questionable loans. In one case, it said, the company provided a mortgage for an 85-year-old disabled veteran with such a low credit score and high debt that he defaulted on an adjustable rate mortgage in less than six months.

Borrowers ‘doomed to default’

"They had a scheme by which they could make exceptions and the people who made the exceptions made more money, so therefore there was a very sophisticated incentive system that pushed the risky loans on borrowers that were doomed to default," state Attorney General Jerry Brown said in a prepared statement payday loans online.

Charlotte, N.C.-based Bank of America (BAC, Fortune 500) bought Countrywide in an all-stock deal valued at about $2.8 billion that was approved by the troubled lender’s shareholders late last month.

Bank of America spokesman Dan Frahm said company officials were still reviewing the latest lawsuit filing and had no immediate comment.

The new details emerged from evidence gathered under subpoena when the state launched a probe last year into Countrywide.

The allegations were not included in the original lawsuit because of confidentiality concerns raised by Countrywide that were eventually dropped, said Gareth Lacy, a spokesman for the state attorney general’s office.

Along with the company, the lawsuit names as defendants former Countrywide Chairman and Chief Executive Officer Angelo Mozilo and President and Chief Operating Officer David Sambol.

The initial suit coincided with a separate lawsuit filed by officials in Illinois who made similar claims against the company.

California and Illinois both seek unspecified damages and want Countrywide to pay restitution to borrowers who lost their homes or loans. 

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07/18/2008 (5:39 am)

Paulson Lobbies to Get Fannie-Freddie Rescue Approved

Filed under: technology |

Treasury Secretary Henry Paulson tried to rally support yesterday for his plan to rescue Fannie Mae and Freddie Mac and said he is confident Congress will pass it by next week.

A growing number of lawmakers from both parties agree with his assessment, even if they don't back the legislation. House Minority Leader John Boehner, an Ohio Republican, said there's no question “that this will become law and become law very soon.'' Senator Christopher Dodd, a Connecticut Democrat who is chairman of the Senate Banking Committee, expects a vote on the measure next week.

“I am optimistic that this is going to be done quickly,'' Paulson said yesterday.

Paulson asked Congress on July 13 to approve a three-part plan that would allow the Treasury to increase the credit lines of the two mortgage companies, buy shares in the firms if necessary and give the Federal Reserve what he called a “consultative role'' in overseeing their capital requirements. The proposals are meant to restore confidence in the government- chartered companies which together own or guarantee more than half of the $12 trillion of U.S. home loans outstanding.

Boehner was among Republicans who on July 15 urged Democrats to hold hearings on the measure so they could get a better idea of how it would work. He said after meeting with Paulson yesterday that he hasn't decided whether to support the bill.

Market Stability

Anthony Ryan, Treasury's acting under secretary for domestic finance, said the proposals are “wholly consistent'' with a focus on capital-market stability.

“We don't see the need for them to have to access additional liquidity or capital, but if they did, it certainly would send a strong signal to the marketplace that they have the resources to do so,'' Ryan said in an interview today on CNBC.

Paulson also met yesterday with Dodd and Alabama Senator Richard Shelby, the top Republican on the banking panel, to try to address concerns that Treasury would have too much power under the plan. Paulson declined to comment upon leaving that meeting.

“We had a very positive meeting, and think it's going in the right direction,'' Shelby said after the session. “We're trying to do it right.''

Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac have lost more than 80 percent of their stock market values this year on concern they don't have enough capital to survive the biggest housing slump since the Great Depression.

Lawmakers from both parties raised questions about how much authority Treasury should have.

Protecting the Taxpayer

“I want to make darn sure that, if we do this, that the American taxpayer is going to be protected,'' Dodd said earlier yesterday.

Paulson said he emphasized with lawmakers that Treasury's authority would be temporary.

This issue is “tough,'' Paulson said. “There's never unanimity, but I'm feeling very good as a result'' of meetings today, he said fast cash advance.

Representative Jeff Flake, an Arizona Republican, said Paulson received a “mixed'' reception from lawmakers.

“Everybody knows something has to be done. It's just a question of what are we willing to accept,'' Flake said.

Congress created Fannie Mae and Freddie Mac to expand homeownership by increasing mortgage financing and to provide market stability. The shareholder-owned companies make money by holding mortgage assets and on guarantees of mortgage-backed securities they create out of loans bought from lenders.

Globally Held Debt

Debt from the government-sponsored enterprises “is globally held in extensive amounts so we want to reassure that market that we understand the importance of this,'' Dodd said. “And simultaneously, we need to reassure the American taxpayer that they're not going to be exposed to a massive bill at the end of the day. So striking that balance is what I'm trying to achieve.''

House Financial Services Committee Chairman Barney Frank has suggested prohibiting the companies from paying dividends if they tap a proposed increased line of credit with the Treasury. He also said regulators should be required to approve the compensation for top executives of Fannie Mae and Freddie Mac.

House Democrats postponed a vote on the rescue plan until early next week. Paulson had initially pushed for a vote this week.

“I think we're going to have it all done by the end of next week,'' Frank told reporters yesterday. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said he doesn't expect the bill to get “bogged down'' in the Senate.

Housing Bill

Lawmakers plan to graft the rescue plan onto a pending housing bill that would allow thousands of Americans struggling with subprime loans to refinance into fixed-rate mortgages backed by the government. The measure would also install tougher regulators for Fannie Mae and Freddie Mac.

Frank said July 15 that Democrats may retain provisions opposed by the Bush administration to send $4 billion to communities to buy up foreclosed properties. The White House has threatened to veto the bill over those plans because administration officials say they would benefit lenders who own the vacated properties, not homeowners.

Representative Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee, who also met with Paulson yesterday, said he preferred a stand-alone Fannie-Freddie bill.

“We don't need to deal with 40 different issues,'' he said. “We need a clean bill.''

Fannie Mae dropped 27 percent July 15, its biggest slump since at least July 1980, while Freddie Mac declined 26 percent.

Fannie Mae rebounded yesterday, rising 31 percent to $9.25 in New York, while Freddie Mac climbed 30 percent to $6.83.

Source

07/16/2008 (9:42 pm)

Schumer: Don

Filed under: technology |

Sen. Charles Schumer said Sunday the Bush administration is trying to "blame the fire on the person who calls 9-1-1" by suggesting he had a role in one of the costliest U.S. bank failures.

Federal regulators with the Office of Thrift Supervision were "asleep at the switch" when it came to IndyMac’s "reckless" behavior, the New York Democrat complained.

"OTS ought to stop pointing false fingers of blame and start doing its job to protect the future of the banking system, so that there won’t be other IndyMacs," said Schumer, a member of the Senate Banking Committee, chairman of Congress’ Joint Economic Committee and the third-ranking Democrat in the Senate.

OTS announced Friday that it was taking over the $32 billion IndyMac and transferring control to the Federal Deposit Insurance Corporation - and the agency pointed the finger directly at Schumer for the failure, accusing him of sparking a bank run by releasing a letter that "expressed concerns about IndyMac’s viability."

"In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts," the OTS said in a statement announcing the California-based lender’s takeover. The statement included a quote from OTS Director John Reich saying, "Although this institution was already in distress, I am troubled by any interference in the regulatory process."

Schumer’s letter on June 26 said he was "concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers." But after Friday’s statement, Schumer swiftly rejected any suggestions of responsibility for IndyMac’s collapse — and in a Sunday news conference, he said "everything" in his letter was already known to the public payday loans.

"IndyMac was one of the most poorly run and reckless of all the banks," he said. "It was a spinoff from the old Countrywide, and like Countrywide, it did all kinds of profligate activities that it never should have. Both IndyMac and Countrywide helped cause the housing crisis we’re now in."

The embattled Countrywide Financial Corp. was recently purchased by Bank of America.

Schumer argued that the "breadth and depth" of the problems at IndyMac were "apparent for years, and they accelerated in the last six months." But OTS, he said, "was asleep at the switch and allowed things to happen without restraint.

"And now they are doing what the Bush administration always does: blame the fire on the person who calls 9-1-1."

The White House had no immediate response.

Schumer said OTS is "known as a weak regulator," and added, "my job was to try and toughen them up and that’s what I tried to do."  

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