Friday, October 19, 2012

Today's links

1--Housing’s Bounce Off the Bottom May Not Signal Boom Times, Firedog Lake

One potential pitfall could be all the private loan modifications granted by the major servicers. These are modifications performed outside of HAMP, which have notoriously higher levels of default. Well over 40% of private mods granted since the third quarter of 2009 are now back in default. I’ve heard about some of these modifications leading to higher mortgage payments. These won’t all default in one fell swoop like everyone feared with rate recasts, but we could slowly see more and more decay as they tick off. Short sales have basically replaced foreclosures, and the private investors scooping up homes in serious default could set a floor under that side of the market and help prices. But that’s a bubble waiting to happen.

2--Some Smart Money is Already Exiting the Single Family Rental Landgrab, naked capitalism

Reuters describes how one of the funds that was first to get on the “buy single family homes out of foreclosure and rent them” bandwagon has decided to exit

3--Wall Street CEOs Up Pressure for Grand Bargain in the Lame Duck Session, Firedog Lake

4--Housing starts boosted by FHA loans, Sober Look

5--Today’s investors have pulled $440 billion from U.S. equity mutual funds since 2008, Bloomberg

... and sent trading to the lowest levels in at least four years, retrenching after the worst financial crisis since the Great Depression and the May 2010 stock crash, data compiled by Bloomberg and the Investment Company Institute show.

6--Say "Good bye" to SEC's Mary Schapiro, Bloomberg

the SEC should have focused on fixes that could prevent another crisis, such as the Dodd-Frank mandate that the agency remove references to credit-rating companies from its rule book.

‘Bold Action’

The companies had been lambasted for giving top ratings to securities that turned out to be toxic, helping to fuel the crisis. Excluding them would protect investors “more than any other action the commission has taken since Congress took bold action to give the SEC formal oversight of credit-rating agencies,” Gallagher said.....
 In April, Obama signed the bipartisan Jumpstart Our Business Startups Act, which aims to spur investment in new firms. Among other things, it allows closely held companies to sell shares over the Internet via “crowdfunding” and lets hedge funds advertise for investors. After the House passed its version and the Senate was about to take it up, Schapiro wrote a March 12 letter to lawmakers asking that the bill be “modified to improve investor protections.”

‘Lowest Point’

Arthur Levitt, a former SEC chairman who said he applauds Schapiro for pulling the agency back from the brink in 2009, was disappointed by her response to the bill. He said the agency’s failure to aggressively oppose the JOBS Act “was the lowest point” of her tenure.
“I’m glad that Mary wrote a letter, but it was far less firepower than was required to fight legislation more harmful to investor interests than any in my memory,” said Levitt, who is a board member of Bloomberg LP, parent of Bloomberg News.
The Washington Post had a nice piece on the potential impact of the recovery of the housing market on the economy. The piece reasonably assumes that construction returns to its long-term trend share of GDP, rather than getting back to its bubble levels of the last decade. In this case it will make a substantial contribution to the recovery, although it still will not possible to return to full employment without large budget deficits, unless there is a substantial reduction in the size of the trade deficit.

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