September 29, 2008

Wall Street Bailout Bill – A bureaucratic monster

Holy Mackerel! I was suspicious that Congress would use the crisis to promote agendas other than getting past this Wall Street meltdown. Boy was I right! Here are some passages that caught my eye in the Draft Wall Street Bailout Bill. (via Phoenix Real Estate Guy.) SEC. 103. CONSIDERATIONS. In exercising the authorities granted in this Act, the Secretary shall take into consideration”” … (3) the need to help families keep their homes and to stabilize communities; … (7) the need to ensure stability for United States public instrumentalities, such as counties and cities, that may have suffered significant increased costs or losses in the current market turmoil; (8) protecting…

September 28, 2008

Sacramento down to 3.9 months supply of homes!

It wasn’t long ago that Sacramento was called the worst real estate market in the county because it’s median home price had fallen more than any other. Now, with a 3.9 months supply of homes, you could say it’s a seller’s market in Sacramento. Even though about 25% of home sales are bank owned properties, the inventory of homes listed for sale in Sacramento continued to decline. After such a long spell of lousy news on the housing front ““ for sellers and owners, that is ““ here’s a surprise: In today’s housing market, there are just 3.9 months of for-sale inventory in Sacramento County and West Sacramento. The number,…

September 28, 2008

Lawmakers Reach Tentative Bailout Deal

I got a bad feeling about this tentative bailout deal. And it could be a game changer for some races as emotions are running high for and against it. It will likely become a major talking point in some races, anyway, especially if it doesn’t pass next week. My guess is that it will get bogged down in Congress until the politicians figure out how it shakes out with their voters.

September 27, 2008

What’s the line on Wachovia going under next week?

First Congress needs to replenish the FDIC with funds or give it a blank check, and then come back to address the Paulson bailout plan.

September 27, 2008

More problems with the Paulson “Wall Street” bailout plan

Here are points made by the CEO of a healthy bank in the Southeast arguing against the Paulson plan. 1. Freddie Mac and Fannie Mae are the primary cause of the mortgage crisis. These government supported enterprises distorted normal market risk mechanisms. While individual private financial institutions have made serious mistakes, the problems in the financial system have been caused by government policies including, affordable housing (now sub-prime), combined with the market disruptions caused by the Federal Reserve holding interest rates too low and then raising interest rates too high. Again “affordable housing.” I’m now starting to think the federal affordable housing policies which mandated banks make sub-prime loans were…

September 27, 2008

U.S. home ownership rates

Brian made a comment in a post below which agreed with the idea that the government’s promotion of “affordable housing” (especially, subprime loans) was an important factor in the housing boom, housing bust and the current financial meltdown. So, how much success did promoting affordable housing and subprime loans have on increasing the rate of home ownership in the United States? Source: Wikipedia Let’s say the “natural” rate of home ownership in the United States is about 64%. By lowering the minimum standards for getting a mortgage the United States was able to raise the home ownership rate 5 percentage points to 69% in 2004. (That will likely be a…

September 26, 2008

New solution to the credit crisis will prevent “disaster”

You may have heard me call him the “Mortgage Curmudgeon.” Jack Guttentag is a retired professor of finance at the Wharton School of the University of Pennsylvania and an expert on the mortgages. I respect his opinion tremendously. He believes the credit rescue plans proposed by the Federal Reserve and currently being discussed in Congress are “a disaster in the making.” But he also offers a solution to the credit crisis. Current Proposals This mammoth transaction, which could have ramifications lasting decades, is a disaster in the making… It will provide taxpayer gifts to every selling firm, with no quid pro quo… And since there are no existing institutions to…