foreclosure home sales federal reserve rent seeking

Foreclosure rates up, Home sales down, as …
financial industry home buyers

Wall Street and US central bank formally found at fault

A New York judge has ordered the US Fed to air its laundry. And the economics writer for The New Yorker points out the big bankers wear no clothes, noting statistical models are like bikinis: what they reveal is suggestive, but what they conceal is vital. Meanwhile, housing keeps the US economy shackled. We trim, blend, and append four articles from: (1) the AP, Mar11, on foreclosures by Alan Zibel; (2) MarketWatch, Mar 24, on home sales by Jeffry Bartash; (3) MarketWatch, Mar 19, on Fed ruling by Ronald D. Orol; (4) Financial Times, Mar 14 on Bear Stearns by John Cassidy, a staff writer at The New Yorker.

by Alan Zibel, by Jeffry Bartash, by Ronald D. Orol, and by John Cassidy

The number of US households facing foreclosure in February grew 6% from a year ago, the smallest annual increase in four years.

More than 308,000 households, or one in every 418 homes, received a foreclosure-related notice. That was down more than 2% from January.

Banks repossessed nearly 79,000 homes last month, down 10% from January but still up 6% from 2009 February.

The number of borrowers who have either missed a payment or are in foreclosure was at 15%.

Homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

Hundreds of thousands of homeowners are being evaluated under loan modification programs. Most of those borrowers will eventually lose their homes, sparking a new round of foreclosures later this year.

Foreclosed homes are typically sold at steep discounts. [Buyers, be there!]

Sales of new homes in the US fell in February to the lowest rate since the government began tracking the data in 1963.

Compared to February 2009, the rate of sales is down 13%.

It was the fourth straight monthly drop despite an extension of a federal tax credit.

From October 2009 to February 2010, the sale of new homes fell to a seasonally adjusted average from 363,000 to 346,000 -- clear evidence of a still-weak housing market.

Although sales of new homes rose modestly in the first half of 2009, they leveled off last fall despite low interest rates and cheaper prices.

If a home isn't sold before it's finished, an average sale takes 14.4 months to complete. That's also a new record.

Yet the median price of a new home actually shot up 6.1% to $220,500 in February from January's revised level of $207,900 -- the biggest one-month gain in more than two years.

Sales of existing home also fell.

The Federal Reserve must identify the names of banks that could have collapsed if not for the central bank's emergency lending, ruled the US Court of Appeals for the Second Circuit in New York.

Bloomberg L.P. and other news organizations had requested the documents under the Freedom of Information Act.

Bloomberg also sought information about the amount of funds lent to banks during the financial crisis.

Rent-seeking is not wealth creation. Some of the money that financial companies make consists of economic rents diverted from other groups, such as investors in actively managed funds, workers in companies taken over by private equity groups, and taxpayers who eventually bear the costs of excessive risk-taking. The losses that UK banks suffered in 2008-2009 wiped out roughly half of the economic valued added -- wages, salaries, and gross profits -- that the banking sector generated between 2001 and 2007.

A century ago, progressive English thinkers such as J.A. Hobson and L.T. Hobhouse argued that much wealth is, in part, socially created, providing a justification for the state distributing some of it to old age pensions and health programs. As far as modern finance goes, the New Liberals had it doubly right. Not only are some of the “profits” that bankers generate contingent on implicit state guarantees: much of the capital they put at risk belongs to others.

Given its lobbying power, the financial industry may yet head off some of the restrictions on its activities. But never again will bankers be able to argue that what is good for Citigroup is good for America, or what is good for Royal Bank of Scotland is good for the UK. Not with a straight face anyway.

JJS: Banks are part of the sector called “FIRE” for Finance, Insurance, & Real Estate. What connects the four? Mortgages. What is the essence of mortgages? “Rent”, or the money we spend for the land we use.

When we borrow to buy land (instead of pay rent to our community), we create all the problems we’ve come to know so well. How? It’s not really that complicated.

By failing to recover the socially-generated value of land, we turn land into an object of speculation. Speculators bid up its price, making it suck more wealth from people buying land. Then speculators borrow against land and bid up its price higher. Eventually (every 18 years), over-priced land and overly indebted investors deflect spending on goods and services so much that companies layoff workers, workers default, and even crashing land prices can’t stop the collapse into recession -- which ends when land becomes affordable again, triggering the next revolution of the business cycle.

To make recessions a thing of the past, society must recover and share the value of land -- divert all our spending for land (and resources, EM spectrum, ecosystem services, etc) into the public treasury then back out again as truly desired social services and dividends to the citizenry.

While sharing the worth of Mother Earth, it’d also be an excellent idea to quit subsidizing special interests and taxing useful efforts. Doing all that is the policy of geonomics. The places that have adopted even a little geonomics have gone on to benefit measurably.


Jeffery J. Smith runs the Forum on Geonomics.

Also see:

Earn Like Goldman Sachs, a ProPublica How-To

Following Wall St. advice proves costly

How the Fed Prints Money Out of Thin Air

Email this articleSign up for free Progress Report updates via email

What are your views? Share your opinions with The Progress Report:

Your name

Your email address

Your nation (or your state, if you're in the USA)

Check this box if you'd like to receive occasional Economic Justice announcements via email. No more than one every three weeks on average.

Page One Page Two Archive
Discussion Room Letters What's Geoism?

Henry Search Engine