There is nothing like a good public lynching to take one’s mind off any real problems. The executives at AIG with their bonuses and Bernie Madoff’s request to be released from prison provided enough ammunition to rally the public into a mob. One of the victims may be senator Dodd, who coincidentally along with congressman Frank were responsible for launching the catastrophe in the mortgage market by spearheading legislation to force banks and financial institutions to provide mortgages to people who could not afford such loans. On a more positive note, the housing market continues to show glimmers, albeit small, of hope that we are indeed approaching a bottom at least in some sectors of the market. The stock market is up 12% in two weeks and the credit market is also showing some signs of thaw. Inflation appears to be the next headline with commodities led by gold raising the alarm. It is true that central banks are printing money on a pace unequalled in history, but before we all sell everything (or what is left of everything) and buy gold bullion it is important to recognize that a large portion of the newly printed cash will merely replenish losses required for a stable banking and financial system and therefore not become readily available to chase goods and services at ever increasing prices. In addition China with its own fiscal stimulus package will increase its existing manufacturing capacity, a significant part of which is already idle, thus providing the world with a surplus of goods once spending returns. Both the replenishment of lost capital and excess production capacity should limit any immediate inflationary concerns.

The Treasury Department is expected to unveil early next week its long-delayed plan to buy as much as $1 trillion in troubled mortgages and related assets from financial institutions, according to people close to the talks. The plan is likely to offer generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks. To help protect taxpayers, who would pay for the bulk of the purchases, the plan calls for auctioning assets to the highest bidders. The three-pronged approach is perhaps the most central component of President Obama’s plan to rescue the nation’s banking system from the money-losing assets weighing down bank balance sheets, crippling their ability to make new loans and deepening the recession. Industry analysts estimate that the nation’s banks are holding at least $2 trillion in troubled assets, mostly residential and commercial mortgages. The plan to be announced next week involves three separate approaches. In one, the Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money that those partnerships will need to buy up troubled assets that banks want to sell. In the second, the Treasury will hire four or five investment management firms, matching the private money that each of the firms puts up on a dollar-for-dollar basis with government money. In the third piece, the Treasury plans to expand lending through the Term Asset-Backed Securities Loan Facility, a joint venture with the Federal Reserve. The goal of the plan is to leverage the dwindling resources of the Treasury Department’s bailout program with money from private investors to buy up as many of those toxic assets as possible and free the banks to resume more normal lending. But the details have been treacherously difficult, politically and financially, and some of the big decisions are the same as those that bedeviled the Treasury Department under President George W. Bush last year. The hope is that such a generous taxpayer subsidy will attract private investors into the market and accelerate the recovery of the country’s banks. The key protection for taxpayers, according to people briefed on the plan, is that the private investors will bid in auctions against each other for the assets. As a result, administration officials contend, the government will be buying the troubled loans of the banks at a deep discount to their original face value. Because the government can hold those mortgages as long as it wants, officials are betting the government will be repaid and that taxpayers may even earn a profit if the market value of the loans climbs in the years to come.

For the entire article from the NEW YORK TIMES click here:

Rates on 30-year mortgages plunged to a record low Thursday after the Federal Reserve launched a new effort to prop up the flailing housing market. The national average rate on 30-year, fixed mortgages was 4.94 percent on Thursday, according to financial publisher HSH Associates, down nearly a quarter point from a day earlier. That’s the lowest on HSH’s records, which date back to 1979. For borrowers with stable jobs and good credit, it represents an opportunity to refinance at the lowest rates in decades. But people with less-than-perfect credit are likely to pay higher rates. Interest rates have drifted lower since November when the Federal Reserve pledged to buy up mortgage-backed securities in an effort to bolster the long-suffering housing market.

For the entire article from MSNBC click here:

MOUNTAIN HOUSE, Calif. -- California's mortgage crisis hit this master-planned community particularly hard last year, and eventually 90% of mortgage holders here owed more than their homes were worth. But residents are allowing themselves the first twinges of optimism amid the gloom. The 2,600 existing homes in this development 60 miles east of San Francisco are selling at nearly three times last year's pace. One builder has sold about 30% more homes in 2009 than a year ago. And homeowners here are seeing the welcome return of another phenomenon: the bidding war. No one wants to call a bottom in Mountain House after what happened. Home prices have fallen more than 50% from their peak amid masses of foreclosures. But 48 homes have sold so far this year and another 59 are in escrow, compared with just 19 sales in the year-earlier period, said MetroList Services Inc., an industry-tracking firm. Mountain House's nascent revival is representative of a phenomenon playing out here and there around California, offering glimmers of wary optimism as fallen home prices and interest rates entice buyers. California homes were on the market an average 6.7 months in January, compared with 16.6 months in January 2008, the Realtors association said. Nationwide, it was 9.6 months. Few economists say California's housing debacle is over, and things could even get much worse. The state's unemployment rate of 10.5% in February is likely to rise, they say. So are foreclosures, which rose 5% in February from the month before, according to industry researcher RealtyTrac Inc. The median home price in California fell 57% to $254,350 in January from $594,530 in May 2007, and prices continue to drop in many places. There is another potential time bomb: What happens when banks put on sale the thousands of homes they have repossessed, but kept off the market?

For the entire article from the WALL STREET JOURNAL click here:

The next week -- the last full week in the quarter -- promises to be a critical one for investors looking for reasons to either resurrect the stalled rally or retreat even further. "As we approach the end of the quarter the big question is if we can push the S&P 500 above the 800 level," said Michael Sheldon, chief market strategist at RDM Financial Group. He said that if the market can make that move, it would add weight to bets that the much longed for bear market bottom was put in place earlier in March. Twice late last week, the S&P 500 topped the 800 level, only to turn tail and run. "We need another leg up on decent [trading] volume before more buyers will come in off the sidelines," Sheldon said. "Unless something changes, you have to consider the current advance a rally in the bear market, but you never know." Key economic reports are due this week on home sales and income and spending, while in Washington, Congress talks AIG and regulatory reform. But more notable will be if Wall Street is able to recharge the advance after it lost steam at the end of last week. After plunging 28% to 12-year lows, the S&P 500 shot back up rapidly, gaining 17% in seven sessions. But stocks slipped at the end of last week, as investors bailed out of banks and techs, the leaders of the advance. Still, Wall Street was able to post a second week of gains, its best streak in 10 months.

For the entire article from CNNMoney click here:

Commodities prices surged on Thursday as investors sought protection against the risk of higher inflation by buying everything from oil and gold to copper and sugar. Plans by the Federal Reserve to buy $300bn of US government debt triggered the stampede into commodities markets, which had suffered sharp price falls on worries that the world was heading for a depression. For the first time in almost a year, traders looked to oil and other raw materials as a hedge against an unexpected jump in prices. The switch into commodities was triggered by concern that the US central bank might find it difficult to manage down the country’s money supply when its economy turned. That could lead to sharply rising prices for many goods and services. The International Monetary Fund forecast the world economy would contract 0.5-1 per cent this year, the first global fall in output in 60 years. “Commodity prices are unlikely to recover while global activity is slowing,” it said in a report ahead of the G20 summit of developed and developing nations next month in London.

For the entire article from the FINANCIAL TIMES click here:

BARACK OBAMA, no less, has decried as a “phoney debate” the idea that Europe and America disagree on the need for a fiscal stimulus to fix the economic crisis. The American president was reacting to headlines predicting a transatlantic row at the G20 summit in London on April 2nd. But senior European politicians and officials support him. When it comes to the case for stimulus spending, they say, transatlantic differences are small. For all that, revealing differences remain over the organisation of stimulus packages. And these are not just divergences between Europe and America. Within the European Union, and indeed inside European governments, arguments rage about the right way to beat the crisis through fiscal policy. There are several reasons for this. European governments, led by Germany, want to see how a first wave of stimulus plans works before committing even more money. One senior politician voices wider concerns when he frets that American plans could trigger “hyperinflation”. But a purely political headache also explains some of Europe’s resistance to fresh stimulus plans. Many EU governments face the same sources of pain: rising unemployment and a corresponding rise in welfare bills, falling tax receipts, soaring deficits and public debt. If they are lucky and come up with the right stimulus packages, this pain could lead to gain, through a return to sustainable growth. But here is the catch: all the sources of pain are national, yet the potential gains are all international. The Dutch prime minister, Jan Peter Balkenende, recently admitted that EU governments were under “intense pressure to use scarce tax revenues mainly for our own countries”. Indeed, the Netherlands offers a case study of European procrastination when it comes to fiscal stimulus, not to mention some non-phoney differences between Europe and America. Mr Balkenende’s coalition government has spent weeks locked in painful talks over a fresh stimulus to supplement a modest first effort in November that was aimed mainly at the country’s huge financial industry. Within the coalition, the centre-left Labour Party has opposed public-spending cuts. Centre-right Christian Democrats are more worried about the long-term solvency of the state, especially after the government extended guarantees to such giant Dutch financial groups as ING. Earlier this month, the impasse led five leading Dutch economists to write a joint appeal to the country’s “quarrelling politicians”, urging them to split their differences and agree on a stimulus plan now, offset by “irreversible” commitments to austerity later.

For the entire article from the ECONOMIST click here:

MISJUDGING THE OUTRAGE OF RECEIVING BONUSES WHEN THE SHIP IS SINKING.

 

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