U.S. Economic/Financial News
Housing Collapse Figures Now Recall Great Depression
Jan. 29 (EIRNS)New figures have come out on the depth and severity of the collapse of the nation's housing industry. Until now, all figures of this type had been referenced to 1991, the most recent slump in the housing market. Although that is significant, what is most notable about today's figures, is that they now eclipse those of 1991, and are being compared directly to those of the Great Depression.
* Last week, the National Association of Realtors reported that sales of previously owned homes posted the biggest drop in 25 years, with the median price of those homes falling for the first time "in at least four decades, and possibly since the Great Depression."
* Census Bureau figures show that overall national home ownership is now 67.8%, down 1.1% from 4thQ '06, and 0.4% from 3rdQ '07. This is the biggest one-year drop "since record keeping began in 1965," again leaving only the Great Depression for comparison. Home ownership has been falling for three years, when it was at an all-time high of 69.2% in October of 2004.
* Combined home foreclosures grew 75% last year (the December rate almost double from a year before), according to RealtyTrak, with 405,000 homes being repossessed.
* The price of homes also continues to fall, according to the S&P/Case-Shiller home-price index. Prices in November 2007 had dropped 7.7% from a year earlier (also the biggest drop on record), and, after dropping 6.1% in October, were down for 11 months in a row.
* Lennar Homes posted a record $1.2 billion loss in the fourth quarter of 2007. Others are due to announce soon.
Missouri Bank Is Third Failure Since September 2007
Jan. 30 (EIRNS)The Office of the Comptroller of the Currency on Jan. 25 closed Douglass National Bank of Kansas City, Mo., and named the Federal Deposit Insurance Corporation (FDIC) as receiver. In December, Missouri legislators reported, a state banking official told a legislative hearing that 22 Missouri banks were "in trouble." Douglass National is the first FDIC-insured bank to fail this year, and the third failure since Sept. 28, 2007. As noted by the FDIC, no advance notice is given to the public.
The deposits of Douglass National, valued at $53.8 million, were assumed by Liberty Bank and Trust Company, of New Orleans, La.
Wrench Thrown in Stimulus Steamroller: OFHEO Head Objects
Jan. 29 (EIRNS)James Lockhart, head of the Office of Federal Housing Enterprise Oversight (OFHEO), which oversees mortgage giants Freddie Mac and Fannie Mae, expressed opposition Jan. 24 to the Bush-Pelosi "stimulus package." Lockhart objected to the proposed change in OFHEO rules, which would allow the mortgage companies (also known as Government Sponsored Enterprises, or GSE) to invest in (buy up) "jumbo" loans, up to $729,000. Currently the limit is set at $417,000.
Lockhart stated that the raising of the limit, although temporary, "is a mistake ... in the absence of comprehensive GSE regulatory reform." He said that, to "restore confidence in the markets," he needs more, not less authority to regulate the purchase of loans. GSE review legislation has been languishing in the Senate Banking Committee, headed by financier Felix Rohatyn's lapdog Sen. Chris Dodd (D-Conn.) for an entire year.
So "stimulated," Dodd has pledged to "move" the legislation along "early" this year.
U.S. Wheat Stocks Sink to Lowest Level Since 1948
Jan. 30 (EIRNS)U.S. wheat stocks have now fallen to their lowest level in 60 years, in absolute tonnage, according to the U.S. Department of Agriculture ("World Agriculture Supply and Demand Estimate," Jan. 11). This reflects the massive dislocation imposed on U.S. agriculture by the biofuels bubble, under which former wheat acreage has been planted to corn for ethanol. U.S. wheat stocks, end of year carry-over, are estimated at 7.94 million metric tons, about half the 15.55 mmt in 2005, when the biofuels craze took off. Even less area has been seeded to Winter wheat (planted in the Fall, harvested in June) than the year before. Given the lingering impact of drought, future wheat supplies are jeopardized.
Add to the low stocks, the frenzy of commodities speculation on the Chicago Board of Trade, and the other markets in Kansas and Minnesota, and wheat prices are setting records almost daily. Yesterday, the price for hard red Spring wheat rose 30 cents in one session, hitting its trading limit cap, to reach a price of $13.27 a bushel, double that of a year ago. In Kansas City, the price rose yesterday by 10 cents, hitting $10.10 a bushel (hard red Winter wheat, March delivery). Overall, in the past two months, U.S. wheat prices rose 40%.
Bad Car Loans Increased 30% in 2007
Jan. 31 (EIRNS)At a national level, every year, U.S. consumers borrow $575 billion to buy automobiles. In 2007, the number of bankrupt borrowers increased by 30%. This aspect of the crashing economy was covered today by France's Le Figaro, under the headline, "After the home foreclosures, foreclosures on automobiles."
In order to make up for losses, automobile companies are now going with seven-year loans, covering up to 125% of the car prices. Right now, says Le Figaro, the average debt of U.S. car owners is $4,221 above the value of their cars.