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Jack Ewing of the NYT provides this exceptional account of how a solution can emerge in the Greece crisis based on debt sustainability relief. On this issue of debt sustainabilty relief without immediate haircuts but stretching the payments over an extended period with still lower rates, there is a consenus emerging with the IMF and France, putting forward the idea, and Germany showing awillingness to consider this. It would also restore some unity in the European Union with France and Germany moving in the same direction with a common goal.

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The 2016 election will be decided by changing demographics and shifting coalitions between Democrats and Republicans. The changing demographics mean that a higher Latino vote in states such as Nevada, Colorado and Florida could bring these states to Democrats. And the working class vote in the industrial midwest in Ohio and the vote in some farm rural states such as Iowa could bring these states to Republicans. Michigan is another industrial midwest state which is uncertain as the older industrial centres such as Youngstown, Ohio, Scranton, Pennsylvania, and parts of Michigan- a big change from when unionized workers voted Democratic. The millenials, college educated women, and suburban voters in cities such as Denver, Miami, Las Vegas and Washington are now part of a new Democratic coalition. Most striking is the way the electorate is divided between better educated and less educated, between men and women, and between young and older voters. In fact with the conservative cultural emphasis in the Republican platform older voters are looking back to bringing back the 50's, while Democrats and the younger generation are looking forward to the future in this election. This is not an accurate characterization though because in 1948 with Harry Truman and in 1952 and 1956 with Dwight Eisenhower America was changing rapidly and looking to the future, so that by 1960 the civil rights movement was already established, and women were making the transition to being college educated and working in business and government.   ...

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Voter fatigue with the Conservatives under prime minister Harper is showing up in the province of Ontario. The area around London, Ontario, and Toronto is critical in the 2015 general election. A large loss of manufacturing jobs has left this key manufacturing region of Canada so weakened that the recent 20% decline in the Canadian currency is not leading to a rebound in the manufacturing sector. The Liberals under Justin Trudeau have promised to run a slight deficit to invest in infrastructure that would help the manufacturing sector, while Harper's Conservatives plan to keep the status quo. The vigorous campaign run by Trudeau, the son of a former prime minister, is also helping the Liberals, who are moving ahead in the polls.

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BHP Billiton Ltd announced it would reach a record production of 159 million tons of iron ore for the full year.

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Advice on walking away from a home loan when you are way under water, and it makes no sense to keep writing checks, and when government help is not there as you are way under water. Martin Feldstein had warned abut this as a major cause of rising foreclosures from early last year. Now without government help this looks like a rising tide for many homeowners under water. This financial planner says its feasible, and may make sense. He talks to the Mortgage Bankers Association, and a spokesman there tells him that its cost prohibitive for a bank to chase down a borrower in financial difficulty. And some states have laws that prohibit banks from going after borrowers for the remainder after foreclosure, including California and Arizona, two of the worst affected. And a lawyer arranging the foreclosure, can put in writing a waiver for this. For the tax impact, he says recent laws eliminate a federal tax through 2012 on most primary resident debt that a lender has reduced through loan restructuring, or forgiven through foreclosure. And states like California and Arizona have passed laws echoing these federal rules. Then there is the question of credit. Yes, its impaired for about 7 years. But with so many in foreclosure there may be an effort by credit unions and financial institutions to destigmatize borrowers who have foreclosed. A law Professor at George Mason University says credit scores will have to be adjusted to lessen the impact of a foreclosure, as this does not carry the information value in 2009 that it would say in 2005. And with so many people in foreclosure there is an emerging market here, according to credit union lender BECU in Washington state. If other than foreclosure you have good credit, its not going to be a big issue, says the director of the Rental Property Owners of Michigan, especially as good tenants are not that easy to find in this difficult economic environment anyway. What this suggests is that many will take this option and foreclosures will rise for the rest of 2009, especially if the job losses go on for longer in the range of 400,000 to 600,000 that we have seen for the last 4 months. Changes in the bankruptcy laws and restructuring the loans on that basis, or government help to those under water in some future plan that lowers payments to something in the range of 30-40%, are ways in which this can be averted. But with job losses of this magnitude a lot of people would end up in serious difficulty, and consider the foreclosure option....

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Habitat for Humanty is shifting to fixing homes in Saginaw, Michigan, which has so many vacant homes. With $500,000 from state and local governments and an agreeement with the city, volunteers and pid workers plan to demolish two vacant dilapidated houses here aweek, every week for the next 2 years. About 800 homes in this city sit empty and abandoned. Saginaw is down to 56,000 residents, half of what it had in the years the auto industry was at its strongest. Now what jobs exist are mostlyy in health care.

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As moratoriums on foreclosures that were put in place earlier expire at Chase, Wells Fargo, Fannie and Freddie, and other mortgage companies, foreclosure activity has increased. Foreclosure related filings increased by nearly 6%in February from month earlier, and were up nearly 30% from February 2008, according to RealtyTrac. In California notices of trustee sales, which are a precursor to foreclosure sales, climbed more than 80% to 33,178 in March from February, according to ForeclosureRada.com and the Field Check Group. The increase reflects both the expiration of foreclosure moratoriums and a California law made late last year that temporarily delayed default and foreclosure notices. As aresult Ronald Temple, co-director of research at Lazard Asset Management, expects that home prices will decline by 22% to 27% from their January levels. Over 2.1 million homes will be lost in 2009 in foreclosure according to Moody's Economy.com, up from 1.7 million in 2008.

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According to a study by Goldman Sachs, an supported by other experts, the USA is only half way through the housing crisis. Goldman estimates that there will be a 18-20% correction overall with about 11-13% further price declines expected. In some states a decline of 25% is expected. These are states that saw huge runup in prices- Virginia and Maryland, Florida, California and Arizona, and New Jersey.

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NYT editorial says Bush Administration thinks it has time on its side in the housing foreclosure crisis but they are wrong. The White House has not come up with a clear strategy or what needs to be done as the way forward from here. And this it says wil prove costly. Because there is no clear direction coming out of the White House the Congress also has not been able to articulate a clear strategy with near unanimous support. Alt-A loans called Alt A for alternative to grade A prime loans are scheduled to reset to higher payments starting 2009 with losses mounting in 2010 and 2011. Alt A losses are projected to reach $150 billion but his is based on price declines following a stable pattern, but if housing prices take a steep decline then losses could go much higher causing a great deal of instability to the financial system, which will be harder to fix at that time. NYT is urging the Bush administration to wake up to the impending crisis.

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The plan to prevent foreclosures in Minnesota is supported by the state's Democrat- Farmer-Labor party which has a majority in the legislatre. The Republican Governor of Minnesota Tim Pawlenty is mentioned as running mate to McCain and he will be criticized in the election if he vetoes the bill. A 39% increase in foreclosures is expected for 2008 by Housing Link, a Minnesota nonprofit research group. with about 28,000 households affected. CEO of Toll Brothers, a luxury builder rates Minnesota a F- in assessment of regional housing markets. So what will this bill do? Under the foreclosure deferment plan loans closed from January 1, 2001 through August 1, 2007, when antipredatory lending law took effect would be eligible. Borrowers must be legal U.S. residents and have adjusted household gross incomes of less than $250,000. Second home are not covered. During the deferment period borrowers keep paying a portion of their mortgages. This is set at either the monthly payment of principal and interest when the loan was originated, or 65% of the monthly payment at the time of default, whichever is less. Rep Matsui of California introduced a similar bill in the House of Representatives May 13, 2008. Because the bill limits the benefit to those who are needy and worst affected it would appear to be a sensible approach. At this time there are so many proposals but with little Republican support and a public opinion that sees this as moral hazard or rewarding people for their mistakes with public money, there is little to help the most needy and deserving borrowers for whom a good case can be made for help on a bipartisan basis and with support of the public....

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Amazing! Just fresh from the foreclosure crisis and as the worst of the foreclosures are taking place between now and 2009 for subprime and other loans homebuilders and home sellers are financing the 3% downpayment required by FHA for loans from the is government agency. What do they hope to accomplish sell homes and have the government foot the bill when these homes also go into foreclosure in a downturn? Already above average default rates for seller assisted down payment programs will make this government agency the Federal Housing Administration ask for a government subsidy for the firtst time in its 74 year history. The FHA will need $1.4 billion next year. FHA estimates that down payments provided by nonprofit groups account for 34% of all 200,000 loans backed by the FHA so far this year, up from 18% in all of 2003, and less than 2% in 2000. And FHA says that borrowers are 2 to 3 times as likely to default on their payments when they receive a down payment from a nonprofit. The reckless manner in which homebuilders are selling these homes is unbelievable, more so in today's difficult economy. See the ads for these homes in this WSJ article and its is shocking. D.R. Horton is advertising 100% financing for 2 and 3 bedroom homes near the beach in Maui, costint $498,000, and a Seattle area builder Quadrant corporation is advertising townhomes for $500 downpayment. Use your coffee budget says a online promotion in the St Louis area! And though the risks are known to housing officials in the government they face a battle from well funded and coaltition of homebuilders, lowincome housing and minority groups. though its hard to understand how a home that ends in foreclosure for a low income group or minortiy group can benefit a minority group. Yet the Black and Hispanic caucus, people in Congress like Maxine Waters and Barney Frank still think it does as they continue to support the lobbying that keeps these kinds of loans going. Two examples given here of a Dick Whitmore and a Gloria Harris one saying it was impossible for him to come up with the $5000 downpayment and the other saying she was living from week to week suggest that they are likely to end up having difficulty making payments. ...

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Lawmakers in Congress finally get overwhelming bipartisan support behind a plan to help homeowners facing foreclosure. The rate of homeowners going into foreclosure is 8000 a day or 2,920,000 between now and the same time next year, with the burden falling more heavily in some regions or states like Nevada, Arizona, California and Florida, and in states where the economy is weak as in the auto industry states of Michigan, Ohio and Indiana. This took some time apparently as there was some hope a couple of months before that the economy would recover and taxpayer money need not be spent to rescue homeowners and lenders from their folly. Now the economy looks sure to go into a serious downturn and homeowner prices measured by the Case-Shiller index show a 16.5% drop in prices from this time last year. Lenders earlier had balked from reducing the size of the loans and balance owed by lenders as part of their contribution. Now with losses of 40-60% in foreclosure the new federally guaranteed mortgages which require reducing the loan money owed to 85% of current value are looking attractive. The new mortgages are 30 year fixed loans with a federal guarantee. Only borrowers wanting to stay in their primary home are eligible. Borrowers also have to pay hefty fees to save taxpayer money. Buyers who purchase unoccupied properties will get a $8000 refund tax credit. There is some concern that because the bill is fairly complicated homeowners and lenders would not make larger use of it....

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McCain's Plan announced in the debate with Obama moderated by Tom Brokaw was clarified further and looks more like the plan proposed by Hubbard in the WSJ. The government would step in and clear up the old mortgages and issue new 30 year mortgages at 5%. Taxpayer money would be involved, about $300 billion but the effect would be immediate relief to all homeowners, and the opportunity to stabilize home prices before a recession makes the situation worse with higher unemployment, more foreclosures. As much as 40% of all mortgages acccording to Deutsche Bank expected to go under water with home values dropping below the outstanding mortgages, and encouraging default in that situation. Lenders who made mistakes would get off without punitive price but even in the purchase of toxic assets by the government there is no certainty that private equity and other buyers of the assets from the government would not benefit. And the banks themselves could unload these assets at below their value to the Treasury because of asymmetric information, the lenders having a better idea than Treasury what these assets are really worth. And bad lending practices especially abusive ones can be prosecuted through investigation, the courts, and tough negotiations by the states and the government just as Jerry Brown obtained a settlement against Countrywide/Bank of America for $8 billion. And some of the people involved in the abusive practices and who benefited from them could have charges filed against them and end up serving time. The advantage of such a plan is that it would be decisive action and comprehensive action to see immediate effects of preventing whole neighborhoods being blighted across the nation, as most people underestimate the speed of this downturn from 6% to 16% home foreclosures from 2007 to 2008 and expected to hit as much as 40% of all mortgages in 2009 or 2010 absent any such action. Making what seems sensible letting lenders take the pain for their mistakes could then end up causing systemwide pain. When other ways of punitive action or shared pain or burden could be found especially prosecuting such behaviour and getting settlements through investigations and tough negotiations with the offending lenders. ...

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The WSJ editorializes on McCain's plan to take over American mortgages and issue new ones at 5% and 30 year term to help stem foreclosures and stabilize home prices. WSJ editorial points to taxpayers having to shoulder all the costs under this plan and lenders and those who made bad decisions among homeowners not having to pay a price for their decisions.

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Warnings by state and city officials that were ignored by federal agencies and their officials. Efforts to protect homeowners from oppressive lending were thwarted by federal officials when state attorney generals took up the issue in Washington DC. Not a pretty picture and says a lot about what went on in that period when federal officials were too close to lenders way of seeing things or ideologically blind because lenders played the deregulation music to perfection.

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JP Morgan Chase will modify the terms of $70 billion in mortgages for borrowers who are behind in their payments or expected to be. This covers 400,000 borrowers. The focus is especially on a type of loan structured so that the monthly payment increases, and Chase inherited $54 billion of such loans with the takeover of Washington Mutual in September 2008. Some of these loans are called options adjustable rate mortgages where borrowers can make payments that don't even cover the interest costs, resulting in increasing the loan balance. Chase will replace the options ARM's with fixed rate loans.In taking over WaMU, Chase had a large exposure to the California housing market. WIth WaMu CHase ended up with $16 billion of subprime mortgages. The mortgages that Chase will modify for this plan with affordable payments make up 4.7% of the home loans it owns or are serviced by Chase's EMC Mortgage Corporation. So this is a good start but a lot remains to be done. Chase's Scharf who heads the retail division said that Chase had heard loud and clear what the thought leaders in the country are saying, and wanted to provide leadership on this issue to the whole industry as it does'nt make sense to wait. About 7.3 million American homeowners are expected to default on their mortgages from 2008 to 2010, and about 4.3 million homeowners lose their homes, according to Moody's Economy.com. While opinion leaders like FDIC's Sheila Bair and Reagan adviser Martin Feldstein have called for government help to prevent foreclosures from the early months of 2008,and FDIC has considered about 40% of current monthly payments the affordable amount for loan modification in IndyMac FDIC modifications, neither the Bush administration, banks or companies in the mortgage industry have taken any leadership on this issue. And now Scharf says it makes no sense to wait, in effect a signal to other banks to do the same. Scharf also said the stronger you are the more easier it makes to take these decisions suggesting that the $25 billion in government funds it received helped it reach this decision on this plan, which makes a lot of sense for the banks because foreclosures are the worst way to recover money with bad consequences for all parties and disastrous for the US and global economy....

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FDIC program for loan modification at IndyMac Bank. About 3500 loans were modified, and 15,000 borrowers contacted in recent weeks with offers for lower affordable monthly payments. FDIC's innovation is to create a comprehensive program with clear guidelines so that a lot of loans can be modified without doing it on a case by case basis which would take too long. Loans are modified by reducing interest rates and the principal amount so that the payments are affordable each month, and the FDIC has come up with 38 to 40% of the previous monthly payment as about the right amount. It also looks at tax information to verify earnings. There have been complaints about the responsiveness of FDIC Indymac call centers which may have inadvertently turned down some homeowners looking for help. A big problem is that the FDIC can do little for loans sold to other investors so that out of 653,000 loans serviced by Indymac Bank only about 47,000 are eligible for FDIC modification program. ...

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Sheila Bair tops the list of women in prominent positions who have exercized good judgement and vision in their positions.

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Why the loan modification programs get media attention but are not going to stem the rising tide of foreclosures. Even with all the programs announced by the banks it would affect only 2 million of the 8 million homeowners facing foreclosure. As the loan modifications are working with reducing payments to 40% of the prior monthly payment,this may not be enough as 28% is a better figure for homeowners struggling to makepayments. As a result homeowners with loan modifications may still end up in foreclosure as unemployment rises to 8% in 2009 and 2010.

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Australia exceeded China in total revenue for GE by $100 million, with $5.8 billion in revenues. GE now sees resource rich countries providing revenue growth of 25% in the next 2 years compared to 10-15% for China and India. The Ichthys $34 billion LNG project by Total SA and Inpex of Japan alone generated $1.1 billion in contracts for gas turbines, compressors and underwater production systems. The Gorgon project of Chevron on the northwest coast of Australia generated $1.3 billion in revenue.

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A description of Ben Bernanke's style at the Fed and how its different from Greenspan's. Bernake has brought a more open and cooperative style with lots of questions asked of other experts of all ages and experience and in different parts of the world, with lots of discussion, testing assumptions, and looking for creative ways to and creative solutions to address the problems. Its more collaborative mode. As one Fed staffer puts its more like a seminar room at Princeton. Description from insiders on how the Fed met with advisors on August 9, a day after the ECB had acted on the mortgage crisis, and how the response by the Fed was developed on that day in a collaborative cooperative mode with a lot of participation and discussion on the Fed's next move, calming the markets and reassuring them while making sure that the Fed's actions were well thought out in all aspects for a series of moves over the next couple of months. Involvement of NY Fed's Geithner, of former Treasury Secretary Rubin and Wall Street bankers, sought out for advice by Bernanke....

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Simon Johnson reminds readers that in October 2008, Johnson, Peter Boone, and James Kwak, suggested that some European countries had given taxpayer-backed pledges to banks that had liabilities larger than their own gross domestic products. Their proposal included creation of a European Stability Fund with at least 2 trillion euros of credit lines guaranteed by all member nations, as well as Switzerland, Sweden, and the U.K., to buy time dealing with underlying insolvency in Ireland and other countries. Simon Johnson, is former chief economist of the IMF. He says the euro-zone only belatedly acted on this advice and the politicians never took responsibility for what they allowed to happen. The runaway financial globalization he says, was allowed to happen by US Treasury officials, but European banks were seriously involved in similar behaviour. These banks became too large relative to their economies, captured their regulators and acted recklessly. Europe's leaders haven't fully faced up to this and keep telling their voters that the problem is entirely because of US banks irresponsible behaviour. Ireland was the extreme example of this. And Johnson provides readers with the names of two books on the subject. David Lynch has "When the Luck of the Irish Ran Out," Fintan O'Toole has "Ship of Fools: How Stupidity and Corruption Killed the Celtic Tiger." Both laying out the intermingling of politicians, bankers and real-estate developers that resulted in the reckless growth and collapse of Ireland. In his own account in Atlantic magazine, May 2009, Johnson compared the US economc boom-bust-bailout cycle to what happened to Argentina, Russia and Indonesia. These were emerging middle class countries with crony capitalism, unsustainable debt and other problems. Johnson says, don't think these problems are limited to emerging markets. Its a global or general occurrence in which powerful people get together to build an economic model that brings growth based on debt. Under public pressure the German government keeps saying there must be burden sharing, that creditors must take losses also. Johnson says Angela Merkel and her colleagues have not thought through what signal this sends to the markets- which is to tell people to get out of Irish banks now. And the big German banks are telling the government they face big losses if Ireland or other European countries default. If the ECB can't pay, and the German taxpayer won't pay, Johnson asks, does the IMF have the resources to tackle Spain? If China offers to recapitalize the IMF with some of its $2.6 trillon in reserves, and becomes the largest shareholder, would the IMF headquarters be moved to Beijing as the Articles of Agreement require for the largest shareholder. ...