Freddie and Fannie Bailouts

So while people are debating whether the PPT exists or not, here is our government with a plan to buy equity directly into Fannie and Freddie. If you are shorting either one of this stock, get out!

First, the governemnt bought about $30 billion worth of securities from Bear Stearns. Now, a plan to directly buy equities in Fannie and Freddie. Your tax dollars at work.

How about lending a few billions to Lehman Brothers? Or even better, buying Lehman stock? How about buying futures?

Just remember that if you are too big to fail, and you have ennough risk, the government will bail you out. Even if you are not too big to fail they will still bail you out. Just look at how they are trying to help the homebuilders.

Each day we wonder how many bullets the fed has left. And everytime, while they are running out of bullets, come up with a creative way of using taxpayer dollars.

The printing presses are running at full speed.

In a statement timed to precede the opening of Asian markets Monday, as well as a closely watched auction of debt by Freddie, the Treasury said it plans to seek approval from Congress for a temporary increase in a longstanding Treasury line of credit for the two companies.

The Treasury also said it would seek temporary authority so that it could buy equity in either company "if needed" to ensure they have "sufficient capital to continue to serve their mission" of providing a steady flow of money into home mortgages. The plan, which requires congressional approval, also calls for a provision to give the Federal Reserve a "consultative role" in the process of setting capital requirements and other "prudential standards" for Fannie and Freddie.

Once again, the fed showed it is trying to prevent markets from plunging.

Sunday's moves, by promising government funds to keep Fannie and Freddie operational, reinforce the notion that investors can count on the government to bail them out in a crisis. Until recently, that was an idea the Bush administration had tried hard to quash.

Bye bye capitalism...hello Socialism.

http://online.wsj.com/article/SB121603898437750725.html?mod=hps_us_whats_news

FDIC Taking over Indymac Operations

Indymac taken over by FDIC

Indymac is the biggest bank to fail. The FDIC will take over the operation.

Who is next? Wamu? Wachovia? This thing just keeps getting uglier!

Would it have been a good idea to open a CD that earns over 4% interest?

Pending Homesales down 14% from Last Year

Pending Homesales down 14% from Last Year

Pending home sales were down 14% from last year and down 4.7% from last month.

Modest near-term movement is expected in existing-home sales, with a recovery in sales seen during the second half of the year, according to the latest forecast by the National Association of Realtors^®.....

Lawrence Yun, NAR chief economist, said some pullback after a sharp increase in the previous month was expected. “The overall decline in contract signings suggests we are not out of the woods by any means. The housing stimulus bill that is still being considered in the Senate is critical to assure a healthy recovery in the housing market, jobs and the economy,” he said.

So in one paragraph, the NAR expects a recovery during second half of the year. But in the next, it's begging congress for help. I guess this is the new socialist world the fed and the government has created. Privatize gains and socialize risk. I did not see the NAR arguing that home prices were too high when they were going up. Now they are asking congress to keep them artificially high.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the current market offers immediate benefits and long-term value for many buyers. “Home buyers are getting a great deal right now,” he said. “Although inflationary expectations appear to be under control for the time being, sharper consumer price gains could lead to notably higher mortgage interest rates in 2009.”

Higher mortgage rates will effect the sellers. They will have to bring down the prices more! Morons!

“The speed at which home prices has declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market,” Yun said. “Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets.”

If you had a penny everytime NAR saw a bottom in housing, you would be a millionaire.

The aggregate median existing-home price is projected to fall 6.2 percent this year to $205,300, and then rise by 4.3 percent in 2009 to $214,100.

Once again, in one paragraph they talk about interest rates going higher. And in another they talk about home prices rising. As I have said before, with the labor markets in the dumps, and so many issues with mortgages, I am not sure how they forecast rising home prices.

http://www.realtor.org/press_room/news_releases/2008/home_sales_vary_then_rise

Indymac - Major Layoffs and ending Wholesale and Retail Lending

Indymac - Major Layoffs and ending Wholesale and Retail Lending

In addition to needing to shrink our assets to improve our capital ratios, we also need to do so to ensure that we maintain prudent operating liquidity. A consequence of falling below well-capitalized is that we are no longer permitted to accept new brokered deposits or renew or roll over existing ones, unless we get a waiver from the FDIC. While we have submitted a waiver application, it is uncertain as to whether such a waiver will be granted.

As a result of the above, we have made the difficult decision, effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel.....

Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months, which should reduce our operating expenses by roughly 60%.

We have been talking about no housing bottom. Now with more layoffs it's going to get worse. This should also effect the mortgages directly another lender goes down.

US Loses 62,000 Jobs in June

US Lost 62,000 jobs in June. This is the sixth straight decline in job numbers. Numbers for May were revised downward from 49,000 jobs lost to 62,000 jobs lost.

The birth and death model once again came to the rescue by adding 241,000 jobs. July is when BLS model give back some of it's gain. So look for July number to be a fugly number (July 2008 number will still not give back all of the BLS number - Look for that in Jan 2009!)

``As long as the consumer is facing these headwinds, it's going to be very tough for a major turnaround in employment growth,'' Kathleen Stephansen, head of global economics at Credit Suisse Holdings USA Inc. in New York, said before the report. ``There is very little room for the Fed to do anything.''

Actually, the fed has already done alot. Thanks for the higher gas prices and lower dollar.

This is yet another nail in the housing coffin. The only remaining hope for the housing market is lower interest rate. With inflation going up, I am not sure how long that is going to last.

Of course, the trolls are going to be out there once again touting the stocks. We might be ready for antoher bear-market rally.

Lehman bonuses equal to 20% of compensation: report

Huh? Is this the last hurrah? Should they not be conserving capital? Just too weird!

Morning Briefs - More Job Losses

U.S. private employers slashed 79,000 jobs in June, the largest drop since November 2002, according to a private report by ADP Employer Services released Wednesday.

Meanwhile, a separate private survey showed planned layoffs at U.S. companies fell 21 percent in June from May's 29-month high, but were 47 percent above June 2007, while second-quarter cuts were the highest since late 2005.

Planned job cuts at U.S. companies totaled 81,755, compared with 103,522 in May and 55,726 in June 2007, employment consulting firm Challenger, Gray & Christmas reported.

In other news, Starbucks is planning to cut up to 12,000 full- and part-time positions.

We have been saying housing is going to get worse due to the job market. If interest rates go higher, that would depress the already depressed housing market - if that is possible.

Delinquent Home-Equity Credit Lines Rise Most Since 1987.

Home-equity lines of credit at least 30 days past due rose 14 basis points to 1.1 percent of accounts for the quarter, the Washington-based group said today in a statement. Delinquent credit-card accounts increased 13 basis points to 4.51 percent, the highest level since 2006.

The housing ATM is finished. Now it is time to pay back.