LyrArc Article Gist
AIG's bad bets on housing were made right under the supervision of a "college' of global bureaucrats and regulators in the Office of Thrift Supervision, according to its acting director Polakoff, says the WSJ editorial.

LyrArc Article Gist
R.E.O. is lingo for "Real Estate Owned," the term for homes taken in by banks that are from foreclosures. Reomac is the industry group that specializes in the sales of such homes. And "REO tsunami" refers to the flood of some 700,000 bank properties now on the market nationwide. Therre were just 100,000 in 2006. In February, nearly 45% of the home sales natinwide were called short sales in which homeowners under duress sell a property for less than their mortgage, according to the National Associaiton of Realtors. These sales have worsened a natiowide decline in home values, as REO homes typically sell at a 20% discount. Reomac just held its 2009 conference at Palm Desert. The extravagance and the excess at the conference is amazing considering that the whole country is facing this crisis and California is one of the hardest hit states. From the way people are trying to get these properties one could not imagine that the rest of the country is going through a crisis, and millions in developing countries might at this very moment be plunged below the poverty line!...

LyrArc Article Gist
Shows what the different states are doing and why the response at the state level is slow even though its better than the respose at the federal level. Most of this action willhelp future borrowers and rlieve some of the effects on current borrowers but only to a small degree otherwise the foreclosure process will probably continue to play out.

LyrArc Article Gist
How the mortgage restructuring process might take shape to mitigate the effects on homeowner, on lenders and on the overall economy of rising foreclosures in 2008 as the Alt-A mortgages rest to higher rates. Active intervention by California's governor to obtain mass restructuring through agreements with lenders, four servicers agreed to extend the teaser rate for several years and fast tract the procedures for whole masses of struggling but not hopeless borrowers to get the lower rate.

LyrArc Article Gist
The House of Representatives just passed a bill to stem foreclosures and stabilize house prices by having the government through the Federal Housing Administration reinsure upto $300 billion of problem loans. The bills backers estimate 1.5 million foreclosures could be prevented by this bill but the Congressional Budget Office estimates only about 500,000 foreclosures can be averted this way. Under this bill lenders would have to writedown their loans to 85% of current value of the house. Borrowers pay a fee for the insurance and give up any share in future price appreciation to the government. According to the Congressional Budget Office the cost to the government is modest about $1.7 billion over years. The reason for the limited effectiveness of this bill is that it is voluntary, not much government money is extended. Many of the comments in the blog on this article as is the case with other articles on help to homeowners facing foreclosure show the widespread idea that its a bailout of irresponsible decisions by homeowners and mortgage companies who made the loans. This may be the reason why so little has been done in this regard and the limited government money extended even in plans put forth by Congressional Democrats like Barney Frank. Feldstein who is a former Chairman of the Council of Economic Advisors under Reagan has taken a different approach focussing on homeowners who may see the rational decision is to walk away from homes where they have no equity in their homes as prices drop by 20% and for government to prevent a wave of foreclosures in this manner. The danger is if not much is done there could be a downward spiral in home prices as foreclosure reach a new high in 2009. Last year according to Economist's charts foreclosures were averaging more than 100,000 a month now they are averaging more than 200,000 a month, this would take it from 1.5 million foreclosures in 2007 to 2.5 million in 2008. According to the Economist 9 million people owe more than their house is worth, the homeowners who have negative equity, and if they were to foreclose at the rate of 2-3 million a year and accelerating as the economy deteriorates, this could be enough to start a downward spiral. At that point a new President and Congress would have to take drastic action with a substantial amount of the government's money. In that kind of crisis not much thought would be given to the cost because like the financial meltdown that was feared during the Bear Stearns crisis the fears of a global severe economic crisis would make action necessary on many fronts of which housing would be one....

LyrArc Article Gist
Applebaum talks to two researchers at the University of Chicago and Princeton, Prof. Sufi and Prof. Mian, on the record of U.S. president Obama and Fed chairman Bernanke in helping homeowners facing foreclosure and underwater borrowers, comparing that record with their record in helping the banks. The issue is relevant as the policy and handling of homeowners had to be part of an overall effective plan for recovery in the U.S. economy, because ultimately without the U.S. consumer any recovery would be weak in the long run- a situation the U.S. faces in early 2014. The response to the issue of irresponsible homeowners borrowing beyond the limit without an equally robust response to irresponsible bank management that allowed wildly excessive leveraging of assets, and successful aggressive lobbying by banks in a shortsighted policy of going through with a wave of foreclosures; besides creating questions of fairness and equitable handling of the problem, also had major ramifications for the future of the U.S. and global economic growth. Here Christina Romer and other administration advisors say Bernanke was right in tackling the problem from the perspective of the banks needing to be recapitalized. Thoughtful advisors looking at the entire problem, Martin Feldstein and Sheila Bair strongly pushed for providing the same help to homeowners without getting caught up in the issue of who was responsible home buyers or the banks, and looking at the interests of the U.S. economy and the U.S. people. Proposals by Feldstein and Bair were equally robust in helping banks as they were in helping homeowners, only the banks understood their interests narrowly and had more access to policymakers in the Bush, as well as the Obama administration, Paulson as well as Geithner. This leaves us with the ultimate irony of the Obama administration pushing for the minimum wage, even to the point of electoral posture, when lasting damage had been inflicted on homeowners from the weaker portions of America's middle class by a policy that went against what two respected financial and economic experts from the Reagan period, Sheila and Bair had strongly advocated. See links and groups on Feldstein and Bair. Applebaum has followed most aspects of this problem closely and continues to provide exceptional reporting including the piece on the thinking of new Fed chairman, Janet Yellen. Private enterprise rules that require management at banks just as for other companies to take responsibility for failures, and be replaced with new management, was largely avoided leading to a fundamental failure in how a free market economy such as the U.S. and western European economies are supposed to function. Rules aggressively pushed by Geithner's mentor Treasury Secretary Rubin for a vigorous cleanup at banks in South Korea during a similiar situation in 1997, were not followed in any way here, also setting wrong precedents for the long run. ...

LyrArc Article Gist
Stuart Stevens, the chief strategist of the Romney campaign points to the Romney campaign's success in getting a majority of votes of people making over $50,000, a majority of white voters under 30 by a 7 point margin, winning the votes of a majority of America's middle class, and falling short of a win of the Electoral College by 320,000 votes. He says Obama turned Democratic party weaknesses of being too liberal and too dependent on minorities into advantages. The Pew Research Center and other expert opinion cited as the principal reaon for the defeat, Romneys failure to empathize with voters. He appeared callous in his image with Hispanic voters with his self-deportation stand, and similiarly his position on the auto bailout was shown as callous in a barrage of political ads by the Obama campaign in the midwestern states, the remark about the 47% dependent on government help simply reinforced this notion of being insensitive to concerns of the less affluent. The candidate never succeeded in shaking off impressions in the minds of voters of being a private equity executive who could not empathize with weaker sections of the community, which were reinforced by heavy negative advertising in the 2012 election. Stevens says nothing about the short sightedness of a callous immigration policy of self-deportation adopted by a former governor of Massachusetts, in the face of Census statistics showing more children of minorities, especially Hispanics, born each year than children of any other demographic group in the U.S. The changing demographics may have made a crucial difference in many states....

LyrArc Article Gist
How will countries like India generate jobs when technology enables manufacturing and other activity to do work with fewer and fewer people. Even Hon Hai in China is shifting work to robots. Technological progress is leaving more people unemployed and widening income gaps with the benefits going to a few people, says the Economist in this research based essay. It will require carefully managed governance to invest in infrastructure, raise skills of less skilled workers through education, and wage subsidies for those left behind to ensure our current system works in the future.