Wednesday, February 13, 2013

Today's links

1--Time to Drop Money From Helicopters, counterpunch

2---The Blame Someone Else Crowd', economists view

Paul Krugmanexplains why the false charge that government housing policy caused the financial crisis and recession is harmful:
...No, the CRA wasn’t responsible for the epidemic of bad lending; no, Fannie and Freddie didn’t cause the housing bubble; no, the “high-risk” loans of the GSEs weren’t remotely as risky as subprime.
This really isn’t about the GSEs, it’s about the BSEs — the Blame Someone Else crowd. Faced with overwhelming, catastrophic evidence that their faith in unregulated financial markets was wrong, they have responded by rewriting history to defend their prejudices.
This strikes me as a bigger deal than whether Rubio slurped his water; he and his party are now committed to the belief that their pre-crisis doctrine was perfect, that there are no lessons from the worst financial crisis in three generations except that we should have even less regulation. And given another shot at power, they’ll test that thesis by giving the bankers a chance to do it all over again
3---Yanis Varoufakis: Are Ireland and Portugal out of the Woods?, naked capitalism

In conclusion, Mr Draghi’s OMT has undoubtedly succeeded in addressing a sequence of political headaches:
How to avoid telling the German electorate that Spain, Ireland, Portugal and, eventually, Italy will need gargantuan fiscal assistance that the EFSF-ESM was incapable of providing.
How to break the news to them, months before the German federal election, that Ireland, Spain and Portugal, in addition to Greece, will require fiscal financing ad infinitum.
How to tell the Irish people that their suffering had no tangible effect.
All these questions are now answered in one, brief, liberating sentence: Ireland has escaped Bailoutistan and Spain has been prevented from entering it. Even Portugal has issued some five-year bonds! Bring on the champagne!
But as the champagne corks are liberated, and the merriment’s din fills our ears, it is worth maintaining a connection with reality. And the reality is particularly stark: There has been no progress whatsoever! Indeed, the Eurozone crisis is getting worse the calmer the bond markets seem and the more confident the commentariat is becoming that Ireland and Portugal are out of the woods. If the resolution of the Euro Crisis was all about replacing EFSF-ESM funding with the ECB, without decoupling the banking from the debt crisis and while a vicious asymmetrical recession is eating into the heart of Europe, then of course the Crisis is over. Alas, it was never about that. And so the good ship Eurozone sails on, taking water in at an increasing rate that drowns more and more of those below the decks, while its first class passengers, pacified by a cunning captain, are downing the champagne

4---Mortgage refinancing push said to move forward in Congress, Delaware online

The U.S. Treasury Department and members of Congress are preparing to move forward with plans to expand government-backed refinancing programs to underwater homeowners whose loans are packaged in private-label securities.
Senator Jeff Merkley, an Oregon Democrat, is drafting a bill modeled on a proposal he outlined last year to set up a federal trust to purchase or guarantee refinanced mortgages, according to two people familiar with the discussions who asked not to be identified because the bill hasn’t been introduced.
The trust, as described in Merkley’s earlier proposal, would provide relief to borrowers with privately owned loans and would probably be set up under the oversight of an existing housing agency. If Congress doesn’t pass such a measure, the Treasury is planning to step in to pay for rate modifications for those homeowners.
“We must continue helping as many responsible borrowers as possible refinance into affordable mortgages by taking advantage of today’s historically low interest rates,” Michael Stegman, counselor to the Treasury secretary on housing policy, said during a speech in Las Vegas on Jan. 29. “We must expand streamline refinancing to families whose loans are not guaranteed by the government.”
Treasury also is poised to approve a pilot program in Oregon that would use federal housing aid to purchase mortgages from private securities and modify the interest rates, a model that could be used in other states, according to two people familiar with the plan, who asked not to be identified because it hasn’t been announced.
The efforts come a year after President Barack Obama called for a universal refinancing program in his State of the Union address. They could prolong a refinancing boom that may be stalling by creating new opportunities for some of the nearly 11 million so-called underwater homeowners who owe more than their properties are worth but are current on their payments....

Nearly 1.8 million borrowers have taken advantage of the Home Affordable Refinancing Program for mortgages backed by government-owned Fannie Mae and Freddie Mac since it began in 2009. The Merkley plan would create a similar avenue for an estimated 930,000 borrowers whose loans are in private-label securities and who are current on their payments, according to the proposal outlined last year...

Under that option, the government would pay the difference between the new and original interest rates to the owners of the loans for five years. Investors in private-label securities have sometimes objected to mortgage modifications because of concerns their income could be reduced....

New efforts to expand refinancing won’t be limited to aid for homeowners with privately owned loans. Senators Robert Menendez of New Jersey and Barbara Boxer of California, both Democrats, plan to introduce as soon as this week a new version of a bill that didn’t advance last year. It would expand HARP by promising lenders they won’t be forced to absorb the loss on refinanced loans that default

5---Consumer Cutbacks May Get Worse, WSJ

There’s now clear evidence higher tax bills are prompting Americans to cut back — but it’ll be months before we know the full impact on the economy.

The Commerce Department said today U.S. retail sales rose 0.1% in January to a seasonally-adjusted $416.6 billion. The rise came even though tax bills for most Americans went up following the expiration of a payroll-tax holiday that pulled $9 billion out of the economy in the first month of 2013. Sales at department stores climbed, echoing positive reports last week from Macy’s and Gap.

But a closer look at the report suggests spending is taking a hit. A measure of retail sales called “retail control,” which economists prefer because it gives an inkling as to how government economists will view consumption when they calculate the nation’s growth rate — weakened dramatically in January, rising only 0.1% compared to 0.7% in both December and November. There’s also evidence Americans are buying only what they need — groceries and gasoline and warm clothes — and curbing spending on discretionary purchases like cars, restaurants, and furniture.

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