Dean Baker: Obama helping banks, not homeowners

Economist Dean Baker says the latest Obama plan to "help" homeowners will only help banks. I agree.Alan Greenspan, Ben Bernanke, and the rest of the crew running economic policy somehow could not see the housing bubble as it grew to more than $8tn. It really should have been hard to miss. ...As a result of this astounding incompetence, we are now living through the worst downturn since the Great Depression. Because Greenspan and Bernanke and the rest messed up, tens of millions of workers are unemployed. ...Remarkably, the folks in charge seem...

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Was the global savings glut an effect of the bubbles, not a cause?

Ben Bernanke's explanation for why we had a housing bubble is that it was caused by a global savings glut, coming from China and the Middle East. Apparently, some economists are arguing that cause and effect go the other direction. That is, the stock and housing bubbles caused excessive American consumption, which in turn caused more saving in China and the Middle Ea...

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Elizabeth Warren: Half of commercial RE mortgages to be underwater

Bad news for commercial real estate and the economy:By the end of 2010, about half of all commercial real estate mortgages will be underwater, said Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, in a wide-ranging interview on Monday.“They are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending."As...

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Paul Krugman on financial reform

In a sentence, Paul Krugman echoes my fears on financial reform:I’m all for passing reform. But I’m not that optimistic that it will work, even if it pass...

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More government encouragement of irresponsible behavior

President Obama continues the traditional government policy of rewarding irresponsible behavior:The Obama administration on Friday will announce broad new initiatives to help troubled homeowners, potentially refinancing several million of them into fresh government-backed mortgages with lower payments. ...The administration’s earlier efforts to stem foreclosures have largely been directed at borrowers who were experiencing financial hardship. But...

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There's no "Mc" in this mansion

An 8,000 sqft. colonial-era colonial in Harwood, Maryland goes on the auction block.Built in 1756, it sits on 52 acres of land. George Washington was a friend of a former owner and slept in the home. Apparently it failed to sell at $2.75 million and is now bank-owned.From the auction press release:Considered one of the finest Pre-Revolutionary War historic estates in the United States, Tulip Hill is a grand Georgian plantation house built around...

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More Cash for Clunkers bashing

Ph.D. economist Rebecca Wilder echoes Calculated Risk and me in her contempt for last year's cash for clunkers program, calling it "the most economically atrocious piece of legislation in 2009."Also, even in a fiscal mess, California is wasting taxpayer mon...

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Costs of renting vs. owning

The National Multi Housing Council (think of them as the anti-NAR) presents its argument for renting (from 1997):Computing the total expense of homeownership is not easy. The costs vary from person to person, from city to city, and from time to time, because of both market conditions and tax treatment. A recent NMHC research paper (available upon request) offers one method of summarizing this diverse national experience. The study estimates how the housing costs — properly measured — of the typical home buyer in the mid-1980s would have compared...

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Greenspan still in denial

Alan Greenspan's slightly updated denial of the ability to prevent the housing bubble:The former Fed chairman also acknowledged that the central bank failed to grasp the magnitude of the housing bubble but argued, as he has before, that its policy of low interest rates was not to blame. He stood by his conviction that little could be done to identify a bubble before it burst, much less to pop it.Can't identify a bubble before it burst? Really? This...

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Australia's housing bubble

Compare Australia's housing bubble to America's:One may wonder why their bubble keeps growing. Apparently, the Australian government has been actively promoting the bubble at taxpayer expen...

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Meredith Whitney: Housing market will double-dip

Financial analyst Meredith Whitney forecasts a second fall in the housing market:The US housing market will face another retreat while mortgage-backed securities and Treasurys are likely to go through a "material" correction, Meredith Whitney, CEO of Meredith Whitney Advisory Group, told CNBC Tuesday."The housing market surely will double dip," Whitney told "Worldwide Exchange."Government programs to support housing have been "murky" and when the...

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Senator Dodd's financial reform bill, in summary

Here's a brief summary of the financial reform bill proposed by Senator Dodd:Consumers: A consumer-protection division would be created within the Federal Reserve, with the ability to write new rules governing the way companies offer financial products such as mortgages and credit cards. It would have authority over any bank with more than $10 billion of assets, and certain nonbank lenders. Banks: The Fed would oversee bank holding companies with...

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New book: Ending government bailouts

Brief description:In Ending Government Bailouts as We Know Them, a team of expert contributors examine the dangers of continuing government bailouts and offer constructive alternatives designed to both resolve the current bailout problem and prevent future crises.The authors include former Fed Chairman Paul Volcker, current Kansas City Fed President Thomas Hoenig, former U.S. Treasury Secretaries George Shultz and Nicholas Brady, and Stanford University...

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Author Michael Lewis on the financial crisis

For those who missed 60 Minutes last night:Part 1Part...

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Flashback: Economic Forecasting FAIL!

From the back cover:Dent identifies opportunities, explores trends, and makes concrete predictions. Among them are: A Dow that will reach at least 21,500 and possibly 35,000 by the year 2008.Far from being a "roaring" decade, the 2000s had the slowest rate of job growth since the Great Depressi...

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Should, or can, central banks target asset prices?

Click here for a variety of expert opinio...

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Dean Baker: Recession not caused by a financial crisis

Dean Baker, the earliest economist to publicly warn about a housing bubble, argues that the recession was directly caused by the decline of the housing bubble, not by the financial crisis:Politicians and the media continue to refer to the economic downturn as being the result of a financial crisis. This is wrong. We have 15 million people out of work because the housing bubble that drove the economy since the last recession finally burst. The financial...

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Did the Washington DC metro area have a recession?

A question from the blog comments:Question, does anyone know if we officially went into a recession in this area "2 negative quarters of GRP"?? My suspicion is no, in which case, its inaccurate to say we are "emerging" from the recession when we never entered one in the first place.First of all, NBER, the official arbiter of recessions, only makes its judgments for the country as a whole. Therefore, if "we" are in the United States of America then...

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Mort Zuckerman on housing

Real estate billionaire Mort Zuckerman describes the state of the housing market:America’s housing crisis has not gone away. If anything, it is getting more severe. Today, median single family house prices nationwide are down by slightly more than 30 per cent from their early 2006 peak. Fusion IQ, the research group, estimates that excess inventories will push prices down by a further 10 per cent. This is a critical issue because home equity was...

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A housing bubble in China?

Apparently, China may have its own housing bubble:Premier Wen Jiabao pledged further measures to curb speculation in China's housing market Friday, signaling that lending to the sector would be tightened as well as the imposition of targeted taxes and stricter enforcement of real estate laws."We will rein in speculative housing purchases by intensifying the implementation of differentiated credit and tax policies," Wen said in his report to the annual National People's Congress in Beijing.The government would work to improve management of land...

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Rebound beginning in apartment complex construction

Real estate investment trusts are betting on an eventual economic recovery by starting construction on more apartment complexes:This year, real-estate investment trusts, or REITs, are expected to start close to $1 billion in new multifamily projects, according to real-estate research firm Green Street Advisors. While that still is less than average, it is a significant increase over the $100 million of development starts in 2009.Analysts caution that the increase in construction doesn't mean there has been an improvement in the business. Apartment...

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Warren Buffett on the housing market

Warren Buffett discusses the prospects for the residential real estate industry in his newly-released letter to Berkshire Hathaway shareholders:In 2009, [housing] starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news.People thought it was good news a few years back when housing starts – the supply side of the picture – were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the...

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Why Fannie and Freddie should be euthanized

Keeping Fannie Mae and Freddie Mac operational is consuming hundreds of billions of taxpayer dollars:Friday night, note the timing, Fannie Mae said they will need another $15 billion in cash from the government (that's you and me, the taxpayers). That brings the Fannie and Freddie total to $126.9 billion thus far, but with more to come, according to both companies.The Congressional Budget Office estimates Fannie & Freddie cost us a total of $389 billion by 2019. That includes all the subsidies they are providing in an effort to keep mortgage...

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Home prices predicted to fall this summer

Fiserv and Moody's expect home prices to fall this summer:Despite signs that the real estate market might be lurching forward, prices are expected to fall further this year and next.The average home price in the United States will fall by about 6% by September 2011, according to a joint report between Fiserv and Moody's Economy.com. And that's after plunging more than 27% in the past three years.Most of the projected home price decline will occur during the usually slow summer months of 2010. After that, prices should begin to stabilize, according...

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