U.S. Economic/Financial News
'Washington Post': Let the Nation's Banks Go Under
Nov. 20 (EIRNS)The Washington Post today promotes Congressional legislation to let some households threatened with foreclosure, choose bankruptcy instead, getting their mortgages restructured by bankruptcy judges. This legislation is sponsored by Sens. Charles Schumer (D-N.Y.) and Dick Durbin (D-Ill.), and Reps. Brad Miller (D-N.C.) and Linda Sanchez (D-Calif.).
This action would ignore the crisis hitting America's chartered banks, and Congress's responsibility for protection of those depository banks from the massive losses of the mortgage meltdown. "If your state or local bank goes, you're gone, mortgage or not," commented Lyndon LaRouche, whose Homeowners and Bank Protection Act would save both homeowners from foreclosures and chartered banks from closing their doors.
Under changes contained in the Miller-Sanchez bill, bankruptcy judges could lower the interest rate on a primary home, extend the life of the loan, or forgive part of the homeowner's debt. Further, the judge could reduce the principal on the loan to the home's "fair market value," which in the current depressed real estate market is generally less than the amount for which the mortgage-loan was contracted. The Post, citing a report on Moody's Economy.com, projects that this could reduce by a quarter, the anticipated 2 million foreclosures in the next 18 months.
The Post notes that, "Lenders say investors pumped money into the mortgage market knowing each loan they funded was secured by an assetthe home." The paper doesn't mention the bubble of securities backed by these assets, held by the major investment banks. Nowhere is there any indication that the bill would do anything to keep banks afloat that are necessary for the physical economy.
Nation's Largest Homebuilders Now Rated as 'Junk'
Nov. 20 (EIRNS)CNNMoney notes that, of the nation's largest home builders, only luxury builder Toll Brothers, No. 6 in revenue, has yet to report a quarterly loss, even though its stock price has fallen by almost 50% in recent months. The five larger builders had much larger-than-forecast losses in their most recent financial reports. Home builders nationwide are reporting that the sales pace deteriorated significantly during October compared with recent months, and that they are experiencing a sharp rise in cancellations. CNN added that, last month, credit-rating agency Moody's downgraded the debt of three of the top four home builders: No. 1 Lennar, No. 2 Centex, and No. 4 Pulte Homes, to junk bond status.
Democrats' Fannie-Freddie 'Solution': 'No Rescue Here'
Nov. 23 (EIRNS)The Washington Post devoted its lead editorial today to denouncing the foolish Democrats in the Congress who are proposing that Fannie Mae and Freddie Mac, the government-sponsored privatized agencies which back up $4.8 trillion in mortgages in the U.S., bail out the subprime mortgage bubble. The Post, of course, has no better plan, and refuses to mention the FDR-solution proposed by Lyndon LaRouche (the Homeowners and Bank Protection Act), but they correctly note that Fannie and Freddie are themselves facing a disastrous collapse, and that "this is no time to pile new risks on top of thoseknown and unknownthat Fannie and Freddie already bear."
Under the headline "No Rescue Here," the Post says that with both Fannie and Freddie reporting huge losses, "their own safety and soundness come first." Freddie has 15% of its holdings in subprime-backed junk, while Fannie has 6%, or about $42.4 billion, according to the Wall Street Journal, and Freddie will have to write off at least $5 billion of its holdings next year (in addition to the $2 billion loss reported this week). Freddie is now only $600 million above its legal capital minimum, and will be issuing $5 billion in preferred stock next week. Will anyone want it?
Foreclosures in Loudoun County, Va. Increase 758%
Nov. 23 (EIRNS)RealtyTrac, the national company monitoring foreclosures, announced that Loudoun County, Va., about 40 miles west of Washington, D.C., which Lyndon LaRouche long ago labeled "Ground Zero" of the real estate bubble, reported a 758% increase in foreclosures for the third quarter over 2006from 125 filings in 2006 to 1,073 this year.
The national rate of increase in foreclosures over this period is about 100%.
Rising Heating Oil Costs Force Use of 19th-Century Methods
Nov. 24 (EIRNS)As the oil price flirts with $100 per barrel, and cold weather moves into the Northeast, people who are able to, are moving from the use of oil for home heating, to wood-burning stoves and boilers.
Although nationally, heating oil is used by only 7% of homes, in the Northeast, closer to 50% of households heat with oil. But this year, heating oil prices have shot up 83% over last year's, making firewood a bargain. Wood is plentiful, and many are able to gather and cut their own wood to save money.
A story in the New York Times on Nov. 24, gives a picture: In Maine, many of the aged poor, who have eked a hard living from seasonal occupations such as fishing and lobstering, are now barely surviving on Social Security benefits and declining heat subsidies. The Federal heating assistance check for those applying, will probably drop this Winter to $579 from $688. Meanwhile, the average cost to heat a home has jumped from $1,800 last year to a projected $3,000 this year. For many, the only solution available this Winter will be to bundle up and turn off the heat at night.