Today's Stories

May 22, 2008

Brendan McQuade
From Obama to the PRTs in Iraq

May 21, 2008

Jeffrey St. Clair
The Gothic Politics of Hillary Clinton

Nikolas Kozloff
U.S. Military Bases in South America

Alan Farago
Miami, Cuba and the Presidential Campaign

Dave Lindorff
Big John and the Scary, Scary Iran Threat

David Model
Genocide in Iraq?

Eric Walberg
Afghanistan: Who is the Enemy?

Franklin Lamb
Lebanon Gets a President

Kenneth Couesbouc
Tax Against Tyranny

Website of the Day
Child Labor and War-Affected Children: a Photo Essay

May 20, 2008

Ralph Nader
A Trip Inside Google

Uri Avnery
With Friends Like These

Patrick Irelan
The Empire and the Fleet

Ray McGovern
Come Out, Admiral Fallon, Wherever You Are

David Macaray
The UAW Strike Against American Axle

Chris Genovali
Big Oil on the Water: Skating Around the Tanker Issue

Ibrahim Fawal
Birmingham, Israel and the Nakba

Christopher Ketcham
Let Us Now Praise Famous Suicides

Andy Worthington
Guantánamo Trial Delayed

Martha Rosenberg
Merck is a Repeat Offender

Website of the Day
Defend the Students Who Pied Tom Friedman

May 19, 2008

Saul Landau
Cuba Will Live

Paul Craig Roberts
The Metamorphosis of the Conservative Movement

Brian McKenna
Brotherly Love in Philly's Badlands

Patrick Cockburn
City of the Dead: Mosul on Lockdown

B. R. Gowani
The Central Problem Pakistan Needs to Tackle

Dr. Trudy Bond
Psychologists and Torture: If Not Now, When?

Cindy Sheehan
Whose War is It?

John Mohawk
The Warriors Who Turned to Peace

Remi Kanazi
When Free Speech Doesn't Come for Free

Robert Day
I Get a Horse

Website of the Day
Evolve or Die

May 17 / 18, 2008

Alexander Cockburn
The View from the Crusaders' Castle

Tim Wise
Testosterone is Not to Blame: Why Sexism isn't the Reason for Hillary's Loss

Andy Worthington
Gitmo Trials: Betrayal, Backsliding and Boycotts

Robert Fantina
The Double-Talk Express Derails

Karim Makdisi
In the Wake of the Doha Truce

Harry Browne
Only Ireland Can Vote on EU's Future

John Ross
Suicide by Taco? The Demise of Mexico's PRD

Dave Lindorff
Fear at the Pump

Robert Weissman
Pharmaceutical Payola

Laray Polk
Bush Family Appeasement

David Yearsley
Puritans in Seattle

Ron Jacobs
Riot Squads, Privatization and the National Front

Paul Quinnett
My Last Flight

Sam Bahour
Refugees are the Key

Keeanga-Yamahtta Taylor
Poverty Wages

Dr. Susan Block
The Groom May Kiss the Groom

Kim Nicolini
Paranoid Park: Inside the Fractured Landscape of Male Adolescence

Jeremy Scahill
John Cusack's War

Jeffrey St. Clair
Booked Up

Poets' Basement
Dominguez, Gerard and Davies

May 16, 2008

Stephen Soldz
Involuntary Drugging of Detainees

Jonathan Cook
Police Attack Al-Nakba March

Paul Craig Roberts
Lies of Aggression

Christopher Brauchli
A Funny Thing Happened on the Way to the Pharmacy

James L. Secor
Olympic Torch China: the View from Shaoxing

Franklin Lamb
Did Hezbollah Thwart a Bush/Olmert Attack on Beirut?

Linn Washington, Jr.
The Price of Protecting Racist Cops

Dave Lindorff
What West Virginia Means

May 15, 2008

Stan Cox
Big Brother Close Up

Jeff Halper
Rethinking Israel After 60 Years

Greg Moses
Living for the Children of Palestine

John Ross
Why Mexican Justice is a Euphemism

Ron Jacobs
Go to Work, Go to Jail

Binoy Kampmark
Indian Jailbirds: the Case of Binayak Sen

Eve Spangler
We Should Not Celebrate Dispossession

Martha Rosenberg
Meat Wars with South Korea

Website of the Day
Idaho Wolf Killers

May 14, 2008

Ismael Hossein-Zadeh
Oil Wars

Reza Fiyouzat
Torture, a Bully's Creed

Felice Pace
California Water Politics: Of Dams and Water Buffaloes

Hamdan A. Yousuf / Dania S. Ahmed
A Generation Defined by War

Robert Weitzel
Hillary's "Final Solution" to the Persian Problem

Ralph Nader
You're Either with the American People or the Big Auto Bosses

Dave Lindorff
Hillary, McCain and the Stupid Vote

Missy Comley Beattie
White Heaven: Hillary's W. Virginia Idyll

Neve Gordon
Israel as a Site of Struggle

Dr. Susan Block
A Washington Witch Hanging

Website of the Day
Hillary's Downfall

May 13, 2008

David Rosen
Sexual Terrorism: the Sadistic Side of Bush's War on Terror

Alan Farago
Nuclear Florida: Beachfront Reactors in an Age of Rising Sea Levels?

Saul Landau
The Crisis at Home

Saree Makdisi
Forget the Two-State Solution

Paul Craig Roberts
How Empires Fall

Andy Worthington
Gitmo's Suicide Bomber

Brother Bede Vincent
The Problem with Rev. Wright--There are Too Few Like Him

Linda Mamoun
Marketing Ethnic Cleansing

David Macaray
The Myth That Won't Die

Website of the Day
Burning the Future: Coal in America

May 12, 2008

St. Clair / Frank
The Pentagon's Toxic Legacy

Ziga Vodovnik
Rebels Against Tyranny: an Interview with Howard Zinn on Anarchism

Gary Leupp
Why All of Our Efforts Won't Stop an Attack on Iran

Frankln Lamb
Choufeit's Bloody Pentacost

Suzanne Baroud
The Ambition of Hillary Clinton

Martha Rosenberg
Farmer Ernie's Chamber of Horrors

Dave Zirin
The Boss's Boycott

Carl Finamore
I Ain't Gonna Work No More

Peter Morici
Recession Watch

Richard Rhames
The Third Way to Nowhere

Website of the Day
The Untold Story of Black New Orleans

May 10 / 11, 2008

Alexander Cockburn
Real Clear Numbers: 101,000 Casualties a Year

Franklin Lamb
Hezbollah Eases Up and Beirut Opens Its Shutters

Ciara Gilmartin
A Surge in Iraqi Detainees

Diane Farsetta
Inside a Nuclear Industry Soirée

Kent Paterson
Mother's Day in Ciudad Juarez

Alan Farago
The Social Engineers

Rannie Amiri
Beirut on the Brink

Patrick Irelan
Bolivia, Morales and the Red Ponchos

Robert Fantina
The Lexicon Legacy of George W. Bush

Nikolas Kozloff
El Salvador 2009: Another Feather in the Cap of Chavez?

George Ciccariello-Maher
The Yumare Massacre, 22 Years On

David Yearsley
Bacharach at 80

Ron Jacobs
Rosa Luxemburg's Shock Doctrine

John Holt
Can Yellowstone Survive?

David Michael Green
It's So Over

Ben Terrall
Dealing Sleep

Kim Nicolini
The Best Film of the Bush Era?

Jeffrey St. Clair
Booked Up

Poets' Basement
Gibbons, Orloski, Frisella, Gladstone-Gelman

May 9, 2008

Franklin Lamb
A Wild Day in Beirut

Andy Worthington
The Afghans of Gitmo

Benjamin Dangl
Polarizing Bolivia

Mark A. Huddle
Remembering Mildred Loving, an Unsung Hero of the Civil Rights Movement

David Macaray
Hollywood Gives SAG the Brush Off

Dave Lindorff
Team Clinton: Going Down Ugly

C.G. Estabrook
The Way We Live Now

Matt Kosko
McCain, Clinton, Obama and the Wages of Lesser-Evilism

Robert Weissman
Big Business is not the Solution to Global Poverty

Michael Dickinson
Jailing the Joint

Website of the Day
The Role of Third Parties in the U.S.A.

May 8, 2008

Sharon Smith
Rockefeller Family Fables

Saul Landau
The NATO Axiom

Laura Carlsen
A Primer on Plan Mexico

Binoy Kampmark
Food Riots are Coming to the U.S.

Kenneth Couesbouc
China's Paper Feet

Liaquat Ali Khan
Pakistan's Constitutional Shenanigans

Franklin Lamb
Blindsided, Hezbollah Mulls Its Response

Sen. Russ Feingold
Government in Secret

George Wuerthner
The Problems with Conservation Easements

Richard W. Behan
A Brief Exposé of a Fraudulent War

Adam Federman
Marching for Sean Bell

Website of the Day
State of the Air

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Fallout from the Crash of the Housing Market

The Sorry State of the Banking Industry

By PETER MORICI

Friday, the National Association of Realtors will report April existing home sales and prices. These are expected to continue the down trend of recent months and reflect the sorry and dysfunctional state of the banking industry.

Existing home sales and prices are fundamental indicators of the vitality of the housing market and significantly affect consumer confidence and the health of the economy. Until the Federal Reserve instigates reform among the major New York banks, housing prices will remain depressed, and broader U.S. economic growth will be lethargic.
 
In March, the annual pace of sales was 4.93 million, down 2 percent from the previous month and 19.3 percent from a year earlier. The median price in March was $200,700, a bit higher than in February, but 7.7 percent lower than a year earlier.

The NAR’s index of pending home sales measures new contracts and provides a forward looking indicator of final sales one or two months in advance. Over the last year, this indicator has slid fitfully, and for February and March combined it was down about 21 percent from a year earlier.

Based on this information and other soundings from the credit markets and broader economy, my proprietary forecasting model indicates existing April existing home sales will come in at about 4.84 million. The median prices should fall to about $198,000.

Housing sales will remain well below the 7.1 million posted in 2005 and prices will continue to slide. During the recent bubble, home and land prices got out well in front of fundamentals, such as household personal income and housing density. But for creative mortgages, which created huge profits for New York banks and have since proven poisonous, many sales would have never been completed at the lofty prices recorded in 2006 and early 2007.

The U.S. consumer faces a constant drumbeat of bad news. Housing prices are falling, gas prices are rising, good new jobs are getting scarcer than hen's teeth, and credit card terms are getting tougher, even as the Federal Reserve makes credit to banks cheaper.

Federal Reserve efforts to increase liquidity and bank lending have not made mortgages adequately more available, especially in the Alt-A and subprime categories. Alt-A loans are for homeowners offering good repayment prospects but either less-than-perfect credit or recent income records.

Fannie Mae, generally, only takes a limited number of nonprime lenders, and cannot finance many upper-end, more expensive homes.  It certainly does not finance the kind of liars loans, based on fictitious assertions about home values and buyer incomes, that Citigroup, Merrill Lynch and others bundled in bonds for sale to unknowing fixed income investors to create transactions fees, profits and huge bonuses for executives.

Federal Reserve Chairman Ben Bernanke's strategy has two components. The Fed has lowered short-term interest rates by slashing the Federal Funds rate 3.25 percentage points since September 2007, and the Fed has permitted banks to use subprime-backed mortgage securities to borrow from the Federal Reserve. The latter is the so-called term auction facility.

These policies do not solve the basic problem, because these policies do not provide banks with opportunities to write many new non-Fannie Mae conforming mortgages.

Banks cannot provide the housing market with adequate amounts of mortgage financing by taking deposits, writing mortgages and keeping those mortgages on their portfolios. Bank deposits are not nearly enough to carry the U.S. housing market. Much the same applies for loans to businesses.

In normal times, regional banks bundle mortgages into bonds, so-called collateralized debt obligations, and sell these in the bond market through the large Wall Street banks.

The recent subprime crisis revealed the large banks were not creating legitimate bonds. Instead, they sliced and diced loans into incomprehensibly complex derivatives, and then sold, bought, resold, and insured those contraptions to generate fat fees and million dollar bonuses for bank executives.

This alchemy discovered, insurance companies, mutual funds and other private investors will no longer buy mortgage-backed bonds. Banks can no longer repackage mortgages and other loans into bonds and are pulling back lending. Home prices tank, consumers spend less, businesses fail and jobs disappear.

Private investors have taken massive losses, and the large banks have taken more than $150 billion in losses on their books. This has left the banks short of capital and in liquidity crises. The banks turned to foreign governments, through sovereign investment funds, to sell new shares and raise fresh capital, and to the Fed to boost liquidity.

Neither the sovereign investment funds nor Bernanke have required the banks to change their business models, which essentially pays bankers for creating arcane investment vehicles that generate transactions fees, rather than writing sound mortgages and selling simple, understandable mortgage-backed securities to investors.

Rather than reform their business practices to reenter the fixed income market, Citigroup and other large financial houses are scaling back or abandoning mortgage finance, and trolling financial markets for other lucrative opportunities to write derivatives that pay outsized profits and huge bonuses.

Most recently we have learned Citigroup’s hedge fund engineers have been practicing slight of hand to sell derivatives based on bank-owned life insurance policies, bilking investors and other banks for fees.

Until Citigroup and other major New York banks abandon such tainted business practices, the bond market virtually remains closed to mortgage finance, other than CDOs offered by Fannie Mae, and cannot supply the volume and array of mortgage products necessary to support a full housing recovery.

The legislation to update regulation for Fannie Mae and other federally sponsored banks and provide additional federal funds to assist these institutions in working out troubled mortgages will help but the private banks must be reformed and revitalized to fully finance a vibrant housing market.

The economic stimulus package tax rebates, interest rate cuts and administration help for distressed homeowners are useful. The stimulus package is less than the losses taken by private investors and the banks on CDOs.

Getting the housing market going and the economy growing will require Bernanke to aggressively pursue banking reform. Without genuine changes in the way Wall Street handles mortgages and other loans, the economy can't get back on track.

Peter Morici is a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.

 

 

 

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