The great interest rate rip off part 1

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Raising the Roof » Properties Blog » International Herald Tribune » Blog Archive » Turns out U.K. sites predicting a property crash were clairvoyant

 

At the height of the housing boom in the U.K., several contrarian Web sites emerged, warning that the bubble was sure to burst. But as prices continued to soar, many openly scoffed at the pessimism of forums like House price news, information and discussion - HousePriceCrash.co.uk, Introducing PricedOutand globalhousepricecrash.com, including a 2006 article in The Independent which labeled the sites “doomsters” and “Jeremiahs.”

Two years later the “doomsters” are looking like soothsayers and the sites have turned into lively forums on the woes of the property market.

“It is not a happy feeling that we have been proved right, given the issue,” said Jonathan Davis, who serves as spokesman for housepricecrash.co.uk. “There are going to be huge numbers repossessed, unemployed, bankrupt, etc by the end of it. I do wish more had listened to us.”

Housepricecrash.co.uk is a clearinghouse for information on the U.K. property market, including detailed charts featuring the wide array of statistical reports regularly released from analysts and property companies. The site has generated more than 1.1 million posts in five years and boasts more than 11,000 registered users, Davis says.

The goal is to present information and opinions in a format that is “away from hype and vested interest,” according to Davis, who is managing director of a financial planning firm, Armstrong Davis Ltd.

As an official “doomster,” Davis remained undaunted when the market continued to rise and some smirked at any negativity.

“I thought—to paraphrase Scotty in Star Trek —‘Captain, ye cannae change the laws of…economics!’” said Davis in an e-mail exchange (and he’s Scottish, so maybe he can get away with Scotty quotes). “Also, in 400 years of recorded economic history an asset bubble has never deflated gently. They all burst, as will this–the biggest asset bubble in history.”

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BBC NEWS | Business | Plans to lift UK mortgage lending

 

Mortgage lenders have drawn up a plan to help kick-start the mortgage market amid falling house prices and a squeeze on the availability of home loans.

The Council of Mortgage Lenders (CML) want to free up UK banks and building societies to offer new home loans.

It wants the Bank of England to guarantee a market in mortgage-backed securities and covered bonds.

This would encourage investment in the market for these products, pushing funds back into mortgage lending.

Because this will really solve the problems!!!!

 

Remember, profits are privatised, losses are socialised.

That's the 21-century Free Market.

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How the US banking crisis will strangle the mortgage market - Money Week

 

US mortgage giants Fannie Mae and Freddie Mac have been deemed too big to fail.

But investors are only too aware that not every bank or lender is in the same lucky position. The Federal Reserve didn't step in to save IndyMac, a Californian lender which was taken over by the Federal Deposit Insurance Corporation (roughly the equivalent of our Financial Services Compensation Scheme) at the end of last week.

That's focused attention on which regional bank could be next to fail, which in turn sent US banking stocks tumbling yesterday. But don't let the name 'regional banks' fool you. We're talking about some of the biggest banks in the US.

The reality is that regardless of how much money the US government pumps into Freddie and Fannie, the US financial system is in big trouble - and the sooner they face up to it, the better…

 

The US is bankrupt.

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Red alert as overdrafts hit record rate - Telegraph

 

Even people who are savvy about credit card rates often don't have a clue how much they are paying for their overdraft. A big mistake, writes Kara Gammell, when the downturn is putting pressure on our wallets

Cash-strapped Britons are turning to their overdrafts to help them through the economic crisis - yet rates are at their highest for 11 years.

New data from the Bank of England shows that the average authorised overdraft rate on a current account leapt from 17.4 per cent to 17.9 per cent during June - despite the Bank keeping base rates on hold.

Yet more and more people are having to delve into their overdraft to get by. The nation's overdraft and personal loan debt mountain has grown to £177bn over the past year, up from £161bn. But fewer personal loans are being agreed, suggesting that overdraft usage has spiralled.

"The number of personal loans has fallen dramatically due to the tougher lending criteria from the banks, so to still see such a rise in personal debt implies that people are using their overdrafts as a way to cope with everyday living costs," says Tim Moss of moneysupermarket.com, the comparison service.

Banks make a mint from overdrafts. The Office of Fair Trading is expected to reveal later this month that high street banks rake in £2.5bn a year from unauthorised overdraft charges. But it is not just unauthorised overdrafts where banks cash in. Authorised overdrafts can be just as lucrative - and rates have been increased.

 

The debt time bomb is ticking and it's going to explode, the politicians should seize all the banks and just say they are bust.

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European recession looms as Spain crumbles - Telegraph

 

The eurozone is tipping into a deeper downturn than America itself despite the tremors in the US mortgage industry, and may already be in full recession for the first time since the launch of the single currency.

Industrial production for the EMU bloc fell 1.9pc in May, according to fresh Eurostat data. It is the sharpest one-month decline for the region since the exchange rate crisis in 1992. Officials in Berlin have warned that Germany's economy could contract by as much as 1.5pc in the second quarter as export orders crumble.

 

Industrial output in both Italy and Greece has slumped 6.6pc over the past year. Portugal is off 6.2pc. "It is a very ugly picture: we're on maximum alert," said Emma Marcegaglia, head of Italy's business federation Confindustria.

 

Rome is now lobbying for a "New Deal" to revive Italy's economy through massive infrastructure projects.

 

The idea is to use bonds issued by the European Investment Bank, allowing EU states to circumvent the 3pc limit on budget deficits imposed by the Maastricht Treaty.

 

The EU is about to face it's first serious stress test.

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Inflation hits 3.8pc in June as squeeze tightens - Telegraph

 

The financial squeeze on British households is tightening after figures this morning showed that inflation rose to its highest level in 16 years in June.

The Consumer Price Index (CPI), the Government's preferred measure of inflation, climbed 3.8pc last month compared with the same period last year and up from May's 3.3pc annual increase. The figure was more than the 3.6pc predicted by economists. On a monthly basis, inflation spiked 0.7pc.

 

Economists at Citigroup now expect inflation to peak at 5.1pc year-on-year in January.

 

Falls in clothing and footwear price inflation in June were outweighed by a new record high in food price inflation, which jumped 10.6pc in the year to June, and the soaring cost of fuel.

 

The news helped drive the pound to a three-month high against the dollar as traders bet that the inflation spike will make it tougher for the Bank of England to cut interest rates in the short term.

Sterling rose above $2 for the first time since March this morning against an already weak dollar, which has been hit by worries over the US economy and fears for the future of troubled federal mortgage lenders Fannie Mae and Freddie Mac.

 

Although increasing interest rates won't make a blind bit of difference.

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Get ready for BT's great road digging bonanza - Telegraph

 

Get ready for the great road digging bonanza. BT wants to spend £1.5bn laying fibre optic cables under the streets, from its local exchanges to road-side cabinets, to boost the broadband speeds it can offer.

 

Keynes would approve of this.

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http://business.timesonline.co.uk/tol/business/markets/article4336008.ece

 

US Federal Reserve chief Ben Bernanke has cast further gloom over financial markets, warning of "considerable stress" and an "uncertain outlook" as the US dollar wilted and share markets in London and New York tumbled further.

UK shares today slumped to their lowest mark since 2005 as US stocks slid, with Mr Bernanke's grim assessment adding further unease about the future of mortgage groups Fannie Mae and Freddie Mac.

New York's Dow Jones index slipped below 11,000 after three straight days of losses and the dollar fell to a record low against the euro at $1.5975.

The pound rose above $2 for the first time this month, hitting a three and a half-month high. By mid afternoon, the pound was trading at $2.0072.

 

The dollar is a micky mouse currency, the nation is bankrupt.

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BA warns the oil price will wipe out profits - Times Online

 

Martin Broughton, the chairman of British Airways, admitted today that profits are likely to be wiped out this year as soaring fuel costs and the economic downturn pile the pressure on the UK's flagship airline.

Mr Broughton told shareholders at BA's annual meeting that it would be a "considerable achievement" if BA broke even for the current financial year.

The airline's chairman said that, with the oil price surging above $140 a barrel amid fears of a global recession, BA and its peers are "up to our necks in the biggest crisis the aviation industry has ever known".

He spelled out to investors that, with oil at $85 a barrel - a price last reached in February - BA would be on course for handsome profits.

 

If BA can keep flying that will be an achievement.

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Families suffer as price of groceries soars - Times Online

 

Spiralling food prices have pushed the cost of a family's weekly shop up by nearly £1,100 a year, new figures reveal.

The price of staple groceries has risen by more than a fifth since July last year as food producers deal with with soaring wheat, rice and energy costs, figures from mysupermarket, the shopping comparison site show.

The cost of a loaf of white bread from Tesco has risen by 50 per cent to 72p in the past year while the price of a 1kg bag of basmati rice at Sainsbury's has risen by 110 per cent to £1.89.

The figures highlight the increasing strain on consumers. Despite a surge in high street sales in May as people replenished their summer wardrobes, like-for-like retail sales fell by 0.03 per cent in the three months to June, pushing the annual decrease to 0.4 per cent, according to figures from the British Retail Consortium (BRC).

 

Will we see ration books return?

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Fannie Mae and Freddie Mac on trial - Times Online

 

It was rather timely that the US Securities and Exchange Commission (SEC) chose Sunday to announce that it is to begin aggressively pursuing the rumour-mongering on Wall Street that has apparently been so damaging to the health of otherwise completely sound financial institutions. There's nothing worse than people trying to manipulate prices in financial markets by talking.

The first place that the securities police might want to look is the offices of their colleagues at the US Treasury Department - because even as the SEC was announcing its bold new enforcement crackdown, the folks at Treasury were colluding with their friends at the Federal Reserve to pull off a remarkably clever bit of talk-based manipulation to rescue America's beleaguered mortgage lenders.

Despite the headlines about a massive bailout, the Government carefully committed no actual money on Sunday to the rescue of Fannie Mae and Freddie Mac, the ugly sisters in the complex and dysfunctional family of US finance. They simply promised to make available a lengthy line of credit should the institutions need it and pledged to inject capital into the troubled companies - again, crucially, “if necessary”.

This was a fine example of what is known in financial markets as “open-mouth operations”. The idea is that, by promising or threatening to do something dramatic, you will get the markets to do what you want them to do, without having actually to do anything yourself. Yet as anyone who has reared children will know, open-mouth operations don't always succeed. Sometimes they have to be backed up with action.

 

I think the US will have to put it's money where it's mouth is or let them go bust, and the US doesn't have the money to bail them out.

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Fresh warning over Japanese economy - Times Online

 

The Japanese economy is continuing to slow due to rising energy and raw material costs and cutbacks in capital spending and consumption, the Bank of Japan (BoJ) warned today.

The warning came as Asian stocks fell to a two-year low as investor confidence waned in the region’s financial sector in the face of high inflation, a stricter lending environment and massive volatility from overseas markets.

Hong Kong's Hang Seng index fell by 3.2 per cent, down 711.02 points at 21,303.44, while Japan’s Nikkei average slid 2 per cent, losing 255.60 points to close at 12,754.56.

The Japanese central bank said that international financial markets remained unstable and Japanese domestic demand may face downside risks on rising commodity prices.

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Martinsa-Fadesa falls victim to Spain's housing crisis - Times Online

 

Spanish property developer Martinsa-Fadesa has declared itself insolvent, having failed to raise a loan as part of a €4 billion refinancing package.

 

After a board meeting late Monday, the Madrid-listed company made a request to be declared in breach of payments, after it was unable to secure the €150 million loan.

 

The company said the move would prevent its financial crisis from becoming “irreversible and having grave repercussions on creditors and the interests of all shareholders".

 

It is the first large property group in Spain to seek protection from its creditors since the bubble burst on Spain’s once-booming real estate market last year.

Despite the woes in its home mortgage market, Spanish bank Santander yesterday launched a £1.3 billion takeover bid for Alliance & Leicester that will make it the UK's biggest mortgage lender when A&L is combined with Abbey.

 

The low interest rates that followed Spain’s accession to the eurozone in 1999 fuelled its housing boom as Spaniards took out mortgages to buy homes for the first time or to trade up to larger houses.

 

The market began to suffer early last year as rising interest rates and the international lending crunch hit Spain’s credit-fuelled expansion, making it hard to sell property in a market that many argue is oversupplied.

 

Martinsa-Fadesa has assets that were estimated to be worth €10.8 billion, and it employs 880 staff. Spanish press reports said the group was considering cutting its workforce.

 

Spain it appears is on the brink of imploding although quite how cutting it's 880 staff would help unless they are all on 1m salaries each.

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To the rescue of Fannie & Freddie - Business Analysis & Features, Business - The Independent

 

The promise of a United States government bail-out for the mortgage finance giants Fannie Mae and Freddie Mac failed to bring an immediate halt to the gathering panic over the American banking system.

Shares in many of the country's biggest regional banks were again plunging yesterday, and confusion reigned over just how many billions of dollars the Bush administration may be willing to hand to Fannie and Freddie to prop up the mortgage market.

The government's intervention prompted a brief rally by the stock market, but that was stamped out by nervous investors within the first hour of trading.

Late on Sunday, the US Treasury Secretary, the former Goldman Sachs chief executive Henry "Hank" Paulson, promised that the government and the Federal Reserve would each extend credit to prevent a liquidity crisis at Fannie and Freddie. That made explicit what had previously only been an implicit government guarantee behind the $5.2 trillion (£2.6 trillion) of mortgage debt insured by the two companies.

An immediate liquidity crisis appeared to have been averted, and a $3bn debt auction by Freddie Mac – part of its regular financing operations – was well-supported by investors. The government's backing ensures that Freddie and Fannie have access to cheap debt, which they use to buy and sell mortgages, providing an important prop to the mortgage market and ensuring that American homeowners have easy access to mortgages.

 

I think that's because the market knows the system is bankrupt.

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Jeremy Warner's Outlook: Spanish price for A&L is a miserable one but don't bank on rival offers - Jeremy Warner, Business Comment - The Independent

 

So farewell then Alan Gillespie, forced to resign as incoming chairman of Alliance & Leicester before he had even started in the job. With Banco Santander agreeing takeover terms, he will not now be taking up a posting which was announced only last week. One shouldn't speak ill of the dead, but it was perhaps just as well that his predecessor, Sir Derek Higgs, wasn't around to witness the humiliation of little A&L's surrender to Emilio Botin's Spanish armada.

Little more than two years ago, Sir Derek turned down a tentative takeover approach from Credit Agricole pitched at what, by today's standards, was the fabulous price of £13 a share. Even as recently as last December, there was meant to be £6.50 on the table from the present bidder, Banco Santander. You never know from the outside how real these reported approaches – or prices – are, but compared with the derisory 299p a share the board now feels compelled to recommend, almost anything looks good.

Santander's bid is a relief to banking regulators, who now have one less bank to worry about, and a boon to the sector – at least there are some players out there bottom fishing for banking assets – but it is a kick in the proverbial for shareholders. This is a rubbish price, paid almost wholly in paper of dubious quality.

For the time being, Mr Botin is the pin-up boy of the banking world, if there can be such a thing. Unlike the other partners in the break-up bid for ABN Amro, he's judged to have come out of it quids in. He's also avoided the sub-prime losses of his American and European counterparts. Yet is it really credible that a bank at the centre of an economy which seems to be in even worse shape than our own can for ever resist the rising impairment charges suffered by just about everyone else? I don't think so.

The price being offered seems like a big premium, but in fact it takes the shares back to where they were only a month ago. What's more, shareholders are being asked to accept paper in a company whose accounts are, by the standards of disclosure adhered to by British banks, a masterpiece of obfuscation. None the less, I wouldn't bet on David Cumming, head of equities at Standard Life, being right in assuming that a British bank is bound to counter.

The A&L board has only agreed because, with the economy weakening by the day, it sees no end to the banking crisis. Virtually all the credible counter-bidders would also face more challenging competition hurdles than Santander.

 

Spain economy is rapidly deteriorating so it's may not save the bank, plus Santander is also the owner of Abbey another bank with a big mortgage book.

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Jeremy Warner's Outlook: Freddie and Fannie not yet out of the woods - Jeremy Warner, Business Comment - The Independent

 

American legislators had been hoping that Freddie Mac and Fannie Mae would be part of the solution to the beleaguered US mortgage market. Only a little while back, the strict rules governing what type of mortgages Freddie and Fannie were allowed to securitise were relaxed a little in an effort to re-start the US housing market. Yet now they have become very much a part of the problem. Is there no end to the extraordinary loss of confidence that has engulfed financial markets over the past year?

The promised infusion of new equity and credit from the Federal authorities is obviously a positive development for markets, even if the US Treasury had little choice – it is unthinkable that these two organisations, together accounting for around half of the domestic mortgage market in the US, could be allowed to go to the wall. But the hope expressed by the US Treasury that in practice there may be no need for a bail-out, that merely saying the facilities are there as a backstop will be sufficient to restore confidence, may be over-optimistic. Nor is it entirely correct to think of the problems that have beset Freddie Mac and Fannie Mae over the past week as just a crisis in confidence that can be made to go away by saying the US government stands ready to do whatever it takes. Regrettably, the problem goes much deeper.

Last week's meltdown in the share price was sparked by remarks from Bill Poole, a former president of the Federal Reserve Bank of St Louis. His was the simple observation that if you apply "fair value accounting" to Freddie Mac's books, then because of the way mortgage securities have fallen in value, there is a big capital shortfall. As he himself pointed out, this is not such an uncommon feature of banking crises. As markets fall, they tend to overshoot, making banks seem critically under-capitalised.

The difference is that, whereas in the past banks have been able with the connivance of regulators to sweep these problems under the carpet, thereby muddling through until prices recover, modern accounting rules require much greater transparency. Losses have to be recognised immediately. Some bankers believe this has seriously enhanced the seriousness of the crisis, forcing unnecessarily large impairment charges and recapitalisations on banks. The enforced disclosure of losses has also plainly contributed to the collapse in confidence in the banking system as a whole.

 

No the banks are bankrupt.

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Inflation rate soars and economists fear 6% on the way | Business | guardian.co.uk

 

Inflation hit a new record of 3.8% last month as food and petrol prices rocketed, raising fears that inflation is surging towards 5% or even higher.

The Office for National Statistics said June's annual inflation rate was the highest since the consumer prices index was set up in January 1997, up from 3.3% in May. The rate is nearly double the Bank of England's inflation target of 2%.

The jump in inflation surprised economists, who had expected it to reach 3.6%, and warned that the cost of living will head sharply higher in the next few months - increasing the pressure on the Bank of England to raise interest rates. Bank governor Mervyn King has already cautioned that record oil prices are likely to push inflation above 4% .

"CPI inflation is heading for 5% plus late this year," said Michael Saunders at Citi. "The monetary policy committee is unlikely to cut near term with such high inflation even though the UK may be slipping into recession. If the economy was not so weak, [the MPC] would be hiking." George Buckley of Deutsche Bank warned that "a breach of 4% seems almost inevitable" and "questions will now be asked if 5% could be reached".

And Alan Clarke of BNP Paribas said that as inflation keeps scaling new peaks, "before too long we are going to be talking about inflation with a 6% handle".

Both food and transport inflation surged to the highest levels since 1997. The cost of food and soft drinks rose 9.5% from a year ago while transport prices were up by 7.3%. Meat prices, in particular beef, rose by more than last year. Fruit, bread and cereals, as well as milk, cheese and eggs, are also dearer. Soaring fuel prices pushed transport costs higher with the average price of petrol increasing by 5.3p a litre between May and June to reach 117.6p. Diesel prices rose by 7.1p a litre.

Even the core inflation measure, which excludes food, energy and tobacco, picked up to 1.6% from 1.5%.

 

“There’s little central banks around the world can do to prevent food prices from rising,” Mexico’s central-bank governor, Guillermo Ortiz

 

And that would achieve what exactly more unemployed people? Mystic Merv has failed in his job and should resign.

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Editorial: Too big to fail | Comment is free | The Guardian

 

Two salvage jobs began yesterday, one of a British Championship (rather than Premier League) mortgage lender, the other of two American giants. The stories are very different but what both show is how much trouble still has to hit financial markets, and the urgent need for closer, better supervision of banks.

Let us start with the big fish across the Atlantic. You might not have heard of them before last week, but Fannie and Freddie are among the oldest couples in American finance. Fannie Mae is the institution set up by Roosevelt to revive the Depression-era housing market (that name is a riff on the old title: Federal National Mortgage Association). Freddie Mac (again, the original name is more prosaic: Federal Home Loan Mortgage Corporation) was set up after Fannie was privatised in 1968, to provide some competition. The two institutions with the folksy names have been a joint backstop for the American housing market, buying home loans from banks and so freeing them up to lend even more. Between them, they hold or back around $5.3 trillion of debt - getting on for half the entire mortgage book of America. Since the US housing market has been tanking for two years, it should have come as no surprise that Fannie and Freddie would run into trouble - which they did last week, with questions raised over their solvency and their shares in freefall. Given their size, it was also unsurprising that the White House would throw the two Fs a lifeline worth billions, and talk about investing in them; all paid for, of course, by the US taxpayer.

Unsurprising, but still worrying. The US government did the right thing. Had it allowed the mortgage firms to keep on haemorrhaging market confidence, the result might well have been curtains for the global banking system. As it is, Freddie Mac was able yesterday afternoon to pull off what would once have been a routine task: getting another $3bn of credit from banks. This story will probably not end here but so far, the two Fs fight on. No, the real issue is summed up in the phrase commonly used by financiers, that Fannie and Freddie are "too big to fail" - and so would be bailed out by the taxpayer. Yet these were private-sector firms (despite being government-sponsored enterprises, successive administrations swore there would be no public support) and had been on the stockmarket for 40 years.

"Too big to fail" has been the financiers' chant throughout this crisis. Northern Rock, Bear Stearns, even a humble German regional bank: all were too big to go under; all came in for either government bail-out, or regulator-organised takeover. The result is inevitably bad news for shareholders in the individual firms, but relief for markets. Too big to fail should surely have a corollary: too big not to be broken up. But a similar syndrome applies even in finance's lower divisions. Alliance & Leicester announced yesterday that it would be taken over to protect it against "the deterioration in economic conditions and the continuing turbulence in the financial markets"; had it not, the regulators would have waded in. When it comes to banks, the good times and the profits are private; the bad times and the risks are to be shared with everyone else.

What a rotten deal. Its terms were meant to improve; the price for bail-outs, ministers promised, would be tighter regulation. Yet yesterday, the Treasury's only announcement was that it had set up a group to ensure London remains "a world-leading financial services centre": members include fund managers, private equity firms and accountants. The agenda for group meetings is not public, but it is a fair bet that it will include calls for tax cuts and less regulation.

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Bloomberg.com: Worldwide

 

July 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said risks to both U.S. growth and inflation have increased, abandoning officials' June assessment that threats to the expansion had ``diminished somewhat.''

There are ``significant downside risks to the outlook for growth,'' and ``upside risks to the inflation outlook have intensified,'' Bernanke said in semiannual testimony on the economy to the Senate Banking Committee in Washington.

Bernanke's shift reflects renewed turmoil in markets that forced the Treasury and Fed to mount a rescue of Fannie Mae and Freddie Mac this week. He said that stabilizing financial markets remains ``a top priority,''

The Fed chief spoke less than two hours after government figures showed that the economic boost from U.S. tax rebates began to fade in June and inflation pressures increased. The dollar and stocks extended declines in the minutes after Bernanke's remarks, before recouping some losses.

``Clearly, policy is on hold,'' said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut, and a former Fed economist. ``They are relatively concerned about the second half of the year.''

 

The art of talking complete and utter gibberish. Is this the sign he's having a breakdown?

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Bloomberg.com: Worldwide

 

July 15 (Bloomberg) -- Crude oil fell more than $8 a barrel, its first decline in a week, on concern that a slower U.S. economy will curtail demand for oil and gasoline.

Oil futures fell below $141 a barrel as Federal Reserve Chairman Ben S. Bernanke said risks to U.S. growth and inflation have increased, in testimony to the Senate Banking Committee. U.S. stocks tumbled, and the Standard & Poor's 500 Index reached its lowest since 2005. Earlier, oil touched $146.73 a barrel.

``We're getting to the point where the market's looking at an increasing likelihood of a deep recession,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``Traders are looking at this decline in the stock market and saying oil demand is going to be a lot weaker than we thought.''

Crude oil for August delivery fell $8.33, or 5.7 percent, to $136.85 a barrel at 11:24 a.m. on the New York Mercantile Exchange. Oil fell as much as $9.26 to $135.92. Futures reached a record $147.27 a barrel on July 11 and have risen 85 percent in the past year.

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washingtonpost.com

 

It's been a difficult time for many American families who are coping with declining housing values and high gasoline prices. This week my administration took steps to help address both these challenges. To help address challenges in the housing and financial markets we announced temporary steps to help stabilize them and increase confidence in Fannie Mae and Freddie Mac.

 

These two enterprises play a central role in our housing finance system, so Treasury Paulson has worked with the Federal Reserve Chairman Bernanke so the companies and the government regulators -- put the companies and the government regulators on a plan to strengthen these enterprises. We must ensure they can continue providing access to mortgage credit during this time of financial stress.

 

I appreciate the positive reaction this plan has received from many members of Congress. I urge members to move quickly to enact the plan in its entirety, along with the good oversight legislation that we have recommended for both Fannie Mae and Freddie Mac.

 

We will work to ensure that they remain shareholder-owned companies.

 

To help address the pressure on gasoline prices, my administration took action this week to clear the way for offshore exploration on the outer continental shelf. It's what's called OCS. Congress has restricted access to key parts of the OCS since the early 1980s. I've called on Congress to remove the ban.

 

It was also an executive prohibition on exploration, offshore exploration. So yesterday, I issued a memorandum to lift this executive prohibition.

 

 

With this action the executive branch's restrictions have been removed, and this means that the only thing standing between the American people and these vast oil resources is action from the U.S. Congress.

 

Bringing OCS (ph) resources on the line is going to take time, which means that the need for congressional action is urgent. The sooner Congress lifts the ban the sooner we can get these resources from the ocean floor to the refineries, to the gas pump.

 

Democratic leaders have been delaying action on offshore exploration and now they have an opportunity to show that they finally heard the frustrations of the American people.

 

They should match the action I have taken, repeal the congressional ban and pass legislation to facilitate responsible offshore exploration.

 

Congress needs also to pass bills to fund our government in a fiscally responsible way. I was disappointed to learn the Democratic leaders in the House postponed committee consideration of the defense appropriations bill, and they did so yesterday.

 

They failed to get a single one of the 12 annual appropriation bills to my desk. In fact, this is the latest that both the House and the Senate have passed any of their annual spending bills in more than two decades.

 

They're just 26 legislative days left before the end of the fiscal year.

 

BUSH: This means that to get their fundamental job done, Congress would have to pass a spending bill nearly every other day. This is not a record to be proud of, and I think American people deserve better.

 

Our citizens are rightly concerned about the difficulties in the housing markets and high gasoline prices and the failure of the Democratic Congress to address these and other pressing issues.

 

Yet, despite the challenges we face, our economy has demonstrated remarkable resilience. While the unemployment rate has risen, it remains at 5.5 percent, which is still low by historical standards. And the economy continued to grow in the first quarter of this year. The growth is slower than we would have liked, but it was growth nonetheless.

 

BUSH: We saw the signs of a slowdown early and enacted a bipartisan economic stimulus package. We have now delivered more than $91 billion in tax relief to more than 112 million American households this year.

 

It's going to take some time before we feel the full benefit of the stimulus package, but the early signs are encouraging. Retail sales were up in May and June and should contribute -- and will contribute -- to economic growth.

 

Bush saying don't panic = panic!!!!

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Bloomberg News Video

He's predicting ANOTHER 20% fall on the stock markets.

 

Worse than the S&L crisis and the LTCM crisis...

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"All lenders and all borrowers should think very carefully before they either lend or borrow."

 

"House prices are only a matter of opinion, whereas debt is real"

 

"There is a lot of hubris around in thinking that the expansion of financial services was a good in itself. It is not. It is a means to an end."

 

"The conclusions inevitably tend in the direction of saying that financial institutions will have to hold more capital in the longer run and that these activities will have to be monitored much more carefully."

 

“I think you can probably rely on the fact that the pain that will be suffered by financial institutions this year will be enough to keep people’s minds focused on it for a number of years. There will come a time I’m afraid when people actively involved will have forgotten what it was like or would not have been working when the problems were experienced, and will go through the same again"

 

"This is not a bailout for banks. The objective is not to protect the banks. It is to protect the public from the banks."

 

All quotes from our friend Mystic Merv and yet he did nothing to stop it.

[interestrateripoff]

We're due for a banking crisis - 16 Jul 2008 - NZ Herald: New Zealand Business, Markets, Currency and Personal Finance News

 

A colleague with a longer recollection of financial crises than mine says that, when he first came into financial journalism, there used to be something known as "the 40-year rule".

This had it that really serious banking crises only happened once every 40 years, because that was roughly the career lifespan of most bankers - in at 20, out at 60.

It therefore required a full 40 years to wipe out all institutional or salutary knowledge of the previous calamity, thereby creating the next one.

When you think about it, in rough terms the rule actually works.

The last big banking crisis was in the early to mid-1970s.

Prior to that, you have to go back to the Great Depression.

Further back in history, there was another really bad one in the late 19th century, and so on.

Certainly the current crisis is outside most people's experience.

Few of those who work in the City and on Wall Street even properly remember the downturn of the early 1990s, let alone the banking crisis of the 1970s.

George Soros, the billionaire speculator and philanthropist, has described it as the worst financial firestorm since the Great Depression, and we've every reason to believe him.

Yet that doesn't mean it is necessarily going to end in an equal economic implosion.

After another shocking day in stock markets yesterday, partially reversed on Wall Street later on as a result of a sudden fall in the oil price, Kevin Gardiner, equity strategist at HSBC, observed that there is no point in arguing with the market in this mood.

Despite corporate and economic fundamentals that are actually not that bad, if confidence in the financial system continues to erode at the present stomach-churning rate it will eventually bring the economy with it.

Markets are in danger of creating a self-fulfilling prophecy.

So far, the policy action taken in the US and elsewhere has failed to underpin confidence in our financial institutions in the manner intended.

Rumour, fear and hearsay continue to rule the roost.

For central bankers, it has been like spitting against the wind.

There are two ways it can go.

Either things will settle after a short and relatively mild downturn, and we'll eventually look back at what's occurred as just another of those temporary, and in some respects necessary, workouts that must always follow a period of excess.

Or it will turn into one of the really bad 40-year events with potentially catastrophic economic and political consequences lasting many years.

 

More at the link.

 

So where due for one then?

[interestrateripoff]

BBC NEWS | Business | Nationwide to cut mortgage rates

 

The Nationwide is to cut the cost of mortgages for new borrowers for the second time in as many weeks.

The building society says rates will come down by up to 0.46% on some of its fixed-rate and tracker home loans from 18 July.

But those unable to provide more than a 10% deposit when buying will see a smaller fall in rates.

Mortgage rates have fluctuated during the credit crunch, owing to the cost of wholesale borrowing for lenders.

 

Won't make any difference.