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Mortgage rates drop slightly in week
10/09 01:53 PM
Interest rates for 30-year, fixed-rate U.S. mortgages declined in the week ending Oct. 9, the Federal Home Loan Mortgage Corp. said Thursday.
The 30-year, fixed-rate mortgage averaged 5.94 percent with an average 0.6 points in the week, which followed two weeks of rate increases, Freddie Mac said.
A week ago, 30-year, fixed-rate mortgages averaged 6.1 percent. A year ago, they averaged 6.4 percent, the mortgage broker said.
At 5.63 percent with an average 0.6 points, the 15-year, fixed-rate average also declined, dropping from the previous week's average of 5.78 percent. A year ago, 15-year fixed-rate mortgages averaged 6.06 percent, the report said.
"Longer-term mortgage rates fell for the first time in three weeks, roughly following bond market yields," said Frank Nothaft, Freddie Mac vice president and chief economist.
"Meanwhile, the latest housing market data showed some pickup in home purchase activity in August. Pending existing home sales in August rose 7.4 percent, reflecting the largest monthly increase since October 2001, and July's figures had an upward revision, according to the National Association of Realtors," he said.
Mortgage rates drop slightly in week
10/09 01:53 PM
Interest rates for 30-year, fixed-rate U.S. mortgages declined in the week ending Oct. 9, the Federal Home Loan Mortgage Corp. said Thursday.
The 30-year, fixed-rate mortgage averaged 5.94 percent with an average 0.6 points in the week, which followed two weeks of rate increases, Freddie Mac said.
A week ago, 30-year, fixed-rate mortgages averaged 6.1 percent. A year ago, they averaged 6.4 percent, the mortgage broker said.
At 5.63 percent with an average 0.6 points, the 15-year, fixed-rate average also declined, dropping from the previous week's average of 5.78 percent. A year ago, 15-year fixed-rate mortgages averaged 6.06 percent, the report said.
"Longer-term mortgage rates fell for the first time in three weeks, roughly following bond market yields," said Frank Nothaft, Freddie Mac vice president and chief economist.
"Meanwhile, the latest housing market data showed some pickup in home purchase activity in August. Pending existing home sales in August rose 7.4 percent, reflecting the largest monthly increase since October 2001, and July's figures had an upward revision, according to the National Association of Realtors," he said.
They manipulate the crap out of FRE/FNM's closing price...
2nd UPDATE:Paulson: Govts Must Still Work To Provide Liquidity
10/08 03:47 PM
(Updates to add information on Fannie/Freddie mortgage-backed securities purchases and comments from Treasury Under Secretary David McCormick on G7 meetings)
By Meena Thiruvengadam, Tom Barkley and Jeff Bater
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--U.S. Treasury Secretary Henry Paulson on Wednesday urged governments around the world to continue working together to boost liquidity and strengthen financial institutions.
"Governments have and must continue to take individual and collective actions to provide much-needed liquidity, strengthen financial institutions through the provision of capital and the disposition of troubled assets, prevent markets abuse, and protect the savings of our citizens," he said in a prepared statement on the condition of financial markets.
Still, he cautioned that "we must also take care to ensure that our actions are closely coordinated and communication so that the action of one country does not come at the expense of others or the stability of the system as a whole."
Paulson expressed confidence that recent moves by the U.S. Federal Reserve in conjunction with other major central banks could help stabilize the financial sector. "Today's announcement of a coordinated rate cut, including Europe, China and other large economies, is a welcome sign that central banks around the world are prepared to take the necessary steps to support the global economy during this difficult time," he said.
Paulson said he expects a program the Fed announced earlier in the week through which it would buy commercial paper will "significantly improve the availability of funding for financial institutions and corporations that depend on the commercial paper market.
"Although we are facing particularly difficult circumstances, I remain confident that we will work through this challenge," Paulson said.
Paulson said Treasury is working to quickly implement a $700 billion plan to buy troubled assets that are weighing down bank balance sheets. He said the plan's oversight board already has held its first meeting.
He said healthy institutions also will be encouraged to participate in that program and that an interim chief financial officer has been identified to work in a new Treasury department office that will guide the effort. Treasury already has tapped Assistant Secretary Neel Kashkari to oversee the program on an interim basis.
"We will continue to coordinate with other federal regulators to use these tools to implement our strategy to address the four key challenges in our financial markets today - confidence, capital, systemic risk and liquidity," he said.
Paulson said to provide additional funding to mortgage markets, Fannie Mae and Freddie Mac's regulator asked the companies to boost purchases of agency mortgage-backed securities. "There is headroom of over $150 billion between the current GSE portfolios and their regulatory limit," he said. "We also expect Fannie and Freddie to increase direct support to the mortgage market through their ongoing securitization activities."
Paulson urged patience, reminding the world that "turmoil will not end quickly" and that significant challenges are still ahead.
"Neither passage of this new law nor the implementation of these initiatives will bring an immediate end to current difficulties," Paulson said. "It will take time and bipartisan leadership, cooperation and collaboration, as well as well-conceived and executed policies to overcome the challenges our nation is facing. And we will overcome them."
Paulson warned that some financial institutions likely will fail despite the government's wide ranging efforts to stabilize the financial sector.
"One thing we must recognize - even with the new Treasury authorities, some financial institutions will fail," he said.
Paulson also called for a special meeting of G20 officials this weekend to discuss "how we might coordinate to lessen the effects of global market turmoil and the economic slowdown in all of our countries."
The G20 was already scheduled to meet next month in Brazil.
Paulson plans to meet with Group of Seven leading industrial nations' leaders this weekend in Washington to discuss steps each is taking to address the global financial crisis.
G7 members meeting this Friday will focus on forming a "collective and individual" response to the financial crisis, Treasury Under Secretary for International Affairs David McCormick said Wednesday.
McCormick said one of the key messages of the meeting will be that the current financial turmoil is a global phenomenon.
"We are all affected by it, and strengthened international collaboration is needed now more than ever to find collective actions to achieve stable and efficient financial markets and restore the health of the world economy," McCormick said in opening remarks of a press conference ahead of Friday's meeting.
-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; meena.thiruvengadam@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=77znUA3kjavnLZNSIfQT9w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-08-081547ET
Copyright (c) 2008 Dow Jones & Company, Inc.
2nd UPDATE:Paulson: Govts Must Still Work To Provide Liquidity
10/08 03:47 PM
(Updates to add information on Fannie/Freddie mortgage-backed securities purchases and comments from Treasury Under Secretary David McCormick on G7 meetings)
By Meena Thiruvengadam, Tom Barkley and Jeff Bater
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--U.S. Treasury Secretary Henry Paulson on Wednesday urged governments around the world to continue working together to boost liquidity and strengthen financial institutions.
"Governments have and must continue to take individual and collective actions to provide much-needed liquidity, strengthen financial institutions through the provision of capital and the disposition of troubled assets, prevent markets abuse, and protect the savings of our citizens," he said in a prepared statement on the condition of financial markets.
Still, he cautioned that "we must also take care to ensure that our actions are closely coordinated and communication so that the action of one country does not come at the expense of others or the stability of the system as a whole."
Paulson expressed confidence that recent moves by the U.S. Federal Reserve in conjunction with other major central banks could help stabilize the financial sector. "Today's announcement of a coordinated rate cut, including Europe, China and other large economies, is a welcome sign that central banks around the world are prepared to take the necessary steps to support the global economy during this difficult time," he said.
Paulson said he expects a program the Fed announced earlier in the week through which it would buy commercial paper will "significantly improve the availability of funding for financial institutions and corporations that depend on the commercial paper market.
"Although we are facing particularly difficult circumstances, I remain confident that we will work through this challenge," Paulson said.
Paulson said Treasury is working to quickly implement a $700 billion plan to buy troubled assets that are weighing down bank balance sheets. He said the plan's oversight board already has held its first meeting.
He said healthy institutions also will be encouraged to participate in that program and that an interim chief financial officer has been identified to work in a new Treasury department office that will guide the effort. Treasury already has tapped Assistant Secretary Neel Kashkari to oversee the program on an interim basis.
"We will continue to coordinate with other federal regulators to use these tools to implement our strategy to address the four key challenges in our financial markets today - confidence, capital, systemic risk and liquidity," he said.
Paulson said to provide additional funding to mortgage markets, Fannie Mae and Freddie Mac's regulator asked the companies to boost purchases of agency mortgage-backed securities. "There is headroom of over $150 billion between the current GSE portfolios and their regulatory limit," he said. "We also expect Fannie and Freddie to increase direct support to the mortgage market through their ongoing securitization activities."
Paulson urged patience, reminding the world that "turmoil will not end quickly" and that significant challenges are still ahead.
"Neither passage of this new law nor the implementation of these initiatives will bring an immediate end to current difficulties," Paulson said. "It will take time and bipartisan leadership, cooperation and collaboration, as well as well-conceived and executed policies to overcome the challenges our nation is facing. And we will overcome them."
Paulson warned that some financial institutions likely will fail despite the government's wide ranging efforts to stabilize the financial sector.
"One thing we must recognize - even with the new Treasury authorities, some financial institutions will fail," he said.
Paulson also called for a special meeting of G20 officials this weekend to discuss "how we might coordinate to lessen the effects of global market turmoil and the economic slowdown in all of our countries."
The G20 was already scheduled to meet next month in Brazil.
Paulson plans to meet with Group of Seven leading industrial nations' leaders this weekend in Washington to discuss steps each is taking to address the global financial crisis.
G7 members meeting this Friday will focus on forming a "collective and individual" response to the financial crisis, Treasury Under Secretary for International Affairs David McCormick said Wednesday.
McCormick said one of the key messages of the meeting will be that the current financial turmoil is a global phenomenon.
"We are all affected by it, and strengthened international collaboration is needed now more than ever to find collective actions to achieve stable and efficient financial markets and restore the health of the world economy," McCormick said in opening remarks of a press conference ahead of Friday's meeting.
-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; meena.thiruvengadam@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=77znUA3kjavnLZNSIfQT9w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-08-081547ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Hopefully history will look back at this moment and call it, "The Great Cover"...
That is how much they have raised this year using those two instruments.
In an environment where squirrels are hoarding nuts, FRE/FNM are able to get their nuts...in a nutshell...
Freddie Mac Prices $1 Billion Reopening of 4.125% Five-Year Reference Notes(R) Security
10/08 01:43 PM
MCLEAN, Va., Oct. 8 /PRNewswire-FirstCall/ -- Freddie Mac announced today that it auctioned a $1 billion reopening of its 4.125% five-year USD Reference Notes(R) security that matures on September 27, 2013. The stop yield for the issue, CUSIP number 3137EABS7, was 3.740%, priced at 101.721943 or approximately 98.7 basis points more than five-year U.S. Treasury Notes. The bid-to-cover ratio was 2.75 to 1.
After the reopening, which was conducted via an Internet-based auction, the total outstanding size of the 4.125% five-year Reference Note will be $5 billion. The issue will settle on Thursday, October 9, 2008. An application was made to list the issue on the Euro MTF market of the Luxembourg Stock Exchange.
Including today's offerings, Freddie Mac has issued $47 billion of Reference Notes securities during 2008 and has approximately $258 billion in Reference Notes and Reference Bonds(R) securities outstanding.
This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac's proxy statement, its Registration Statement on Form 10 dated July 18, 2008 and all documents that Freddie Mac files with the Securities and Exchange Commission ("SEC") pursuant to Section 13(a), 13(c) or 14 of the Securities Exchange Act of 1934.
Freddie Mac's press releases sometimes contain forward-looking statements. A description of factors that could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements can be found in the company's Registration Statement on Form 10 dated July 18, 2008 and its reports on Form 10-Q and Form 8-K, filed with the SEC and available on the Investor Relations page of the company's Web site at http://www.FreddieMac.com/investors and the SEC's Web site at http://www.sec.gov.
Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters. http://www.FreddieMac.com
SOURCE Freddie Mac
I hope they keep it under $100B...
If the market has been capitulating, it doesn't make sense to stop that capitulation before you know you can draw more from those afraid of the lifting of the ban. You can get those same bottom sellers buying back in much higher when the market recovers, IMO.
I can't imagine much shorting at these levels, and that is across the market. Maybe we haven't bottomed, but that is quite a gamble to bet against it. Now that the rest of the world has revealed their uglies, it turns out we aren't doing as bad as everyone else. This week is the bottom for American markets, IMO.
They will also be able to say they weren't the problem all along. See, it wasn't me...
I actually think it might help, having the shorts back. Just a hunch, but I think they will bring some volume to the market, which is sorely needed for the market's confidence, at this point. A rally when they come back would even further back "their side of the story", in regards to public opinion therefore keeping with their 'status quo'. JMHO
Very nice...
Fannie Mae, Fedl Home Loan Bank Of Chicago To Provide Addl Liquidity And Stability To Mortgage Market
10/07 11:17 AM
DOW JONES NEWSWIRES
Mortgage lender Fannie Mae (FNM:$1.29,00$0.0000,0.00%) plans to buy 30- and 15-year fixed-rate mortgage loans from the struggling Federal Home Loan Bank of Chicago to provide liquidity and stability to the mortgage market.
Fannie will purchase loans channeled through the bank's Mortgage Partnership Finance program, which has provided funding to financial institutions for 11 years to make sure affordable mortgages are available.
FHLB of Chicago President and Chief Executive Matt Feldman said the mortgages provided through the program continue to perform well. He added the partnership with Fannie will make it easier for its 823 member banks and other financial institutions to continue offering competitively priced fixed-rate mortgages.
Last month, the U.S. government seized both Fannie and Freddie Mac (FRE:$1.4500,$0.0300,2.11%) , which are government-chartered, publicly traded backers of residential mortgages. Both have suffered mightily as the housing bubble burst, leaving them holding the bag when mortgages they backed soured.
The takeover has raised questions about the 12 regional Federal Home Loan Banks that were set up by Congress to help finance housing. Like Fannie and Freddie, they have long been able to borrow money inexpensively on the bond market because investors assume that the government would rescue them in a crisis.
The home-loan banks are among the world's biggest borrowers, with about $1.3 trillion of debt outstanding, compared with a combined $1.7 trillion for Fannie and Freddie. The home-loan banks' debt has ballooned 34% since the end of 2006 as they have taken on a bigger role in funding banks and thrifts amid a credit crisis that has choked off other sources of money.
Unlike Fannie and Freddie, the home-loan banks generally have been profitable despite the mortgage-default crisis. They reported combined net income of $718 million for the second quarter, up 14% from a year earlier. But one of them, the FHLB of Chicago, reported a loss of $152 million for the first half. The Chicago bank has been hurt by losses on mortgage investments caused partly by hedging costs related to interest-rate risks.
-By Shara Tibken, Dow Jones Newswires; 201-938-2168; shara.tibken@dowjones.com
(James R. Hagerty of The Wall Street Journal contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=SeIg8G7yNMkWwEGTEPV1HQ%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires (201-938-5400)
10-07-081117ET
Copyright (c) 2008 Dow Jones & Company, Inc.
I think the fact that they 'could' do it, as opposed to they 'must' do it, may be important too...
Fannie, Freddie Could Sell Assets
10/07 10:38 AM
As per media reports, Fannie Mae and Freddie Mac (FRE:$1.51,00$0.0900,6.34%) may sell some of their bad assets to the treasury department, but a final decision is pending. "They are financial institutions that could sell assets. Whether they will or not certainly the decision has not been made," said James Lockhart, director of the Federal Housing Finance Agency, as per the report. Fannie and Freddie were nationalized by the U.S. government in early September.
Fannie, Freddie Could Sell Assets
10/07 10:38 AM
As per media reports, Fannie Mae and Freddie Mac (FRE:$1.51,00$0.0900,6.34%) may sell some of their bad assets to the treasury department, but a final decision is pending. "They are financial institutions that could sell assets. Whether they will or not certainly the decision has not been made," said James Lockhart, director of the Federal Housing Finance Agency, as per the report. Fannie and Freddie were nationalized by the U.S. government in early September.
Fed, Treasury move again to help financial markets
Paulson taps point man to oversee high-stakes mortgage rescue effort
10/06 08:57 AM
WASHINGTON (MarketWatch) -- The Bush Administration and the Federal Reserve said Monday they are moving "with substantial force on a number of fronts" to shore up confidence in, and protect, the financial system.
Announcements and statements from regulators came early and often throughout the day.
Most recently, Treasury Secretary Henry Paulson announced Neel Kashkari, a close advisor, has been tapped to lead the $700 billion mortgage rescue effort.
A former banker at Goldman Sachs Group Inc., Kashkari has been assistant secretary for international economics. He came to Treasury along with Paulson in July 2006.
Kashkari's new title is interim assistant secretary for financial stability.
Kashkari, 35, holds two master's degrees. The first is in engineering and the second was an M.B.A. in finance.
The frenzy of activity comes as global stock markets suffered fresh losses amid fear that the turmoil in financial markets and the squeeze on credit will spread to the broader economy.
President Bush joined the effort, saying that it would take time for the Paulson plan to buy toxic assets from banks and help recapitalize the industry.
Bush spoke after the President's Working Group on Financial Markets, which includes the top officials of all regulatory agencies and the Fed, put out a statement saying that it was working with the industry and regulators around the world to address the current challenges.
A prime spot for global coordination could be this week's meeting of finance ministers of the Group of Seven, representing the richest industrial countries, behind closed doors at the Treasury Department.
The U.S. announced that the meeting would take place on Friday afternoon, with a press conference by Treasury Secretary Henry Paulson on Friday evening.
In an early morning statement, the Fed said it would double the size of its emergency loan program to banks to a potential $900 billion by the end of the year.
The announcement came as the central bank announced that it will begin to pay interest on bank reserves. This will give the Fed "greater scope" to address conditions in credit market, the central bank said.
Paying interest on reserves would give the Fed more power to implement monetary policy.
Paying interest would attract excess bank reserves to the Fed, giving the central bank more firepower. Currently, banks deposit only the minimum reserve required.
Maneuvering without cutting rates
Paying interest on bank reserves would allow the Fed to enlarge the asset size of its balance sheet without pushing the funds rate to zero, explained Robert Brusca, chief economist at FAO Economics. The interest rate paid on bank reserves would effectively serve as the floor on the funds rate.
So if the Fed paid 1.75% interest on reserves, the effective federal funds rate couldn't go below 1.75%. Fed researchers believe monetary policy would be much more effective with this approach, because the Fed could more directly control the most liquid asset in the economy and would no longer have to worry that policy could become impotent as the target rate approaches zero.
The Treasury announced steps to clarify to the market how it plans to coordinate the massive borrowing needs that will be required to fund the new emergency mortgage financing plan approved by Congress last week.
Treasury said it will make adjustments to its auction calendar by increasing the size of bill and note auctions and continuing to issue cash management bills, some of longer-duration.
In addition, the department said it was considering bringing back the three-year note in November and taking other steps.
The Fed and Treasury said that they are consulting with market participants on ways to support term unsecured funding markets.
"Together these actions should encourage term lending across a range of financial markets in a manner that eases pressures and promotes the ability of firms and households to obtain credit," the Fed said.
"The Federal Reserve stands ready to take additional measures as necessary to foster liquid money market conditions," the statement said.
The Fed will increase the size of its term auction facility auctions to $150 billion beginning later Monday.
Anthony Ryan, the acting under secretary for domestic finance, went on television to stress that top-level officials are working rapidly to implement the mortgage rescue plan hatched by Treasury Secretary Henry Paulson.
"We're moving as quickly as we can," Ryan said in an interview on CNBC.
But Marc Chandler, currency analyst with Brown Brothers Harriman, said he was worried that the markets were moving much more rapidly than regulators and that Washington's efforts ultimately may be too small to stem the crisis.
Racing to get its plan in place, Treasury put out guidelines to hire the asset managers it will need to purchase and hold mortgages and mortgaged-backed securities.
Fed, Treasury move again to help financial markets
Paulson taps point man to oversee high-stakes mortgage rescue effort
10/06 08:57 AM
WASHINGTON (MarketWatch) -- The Bush Administration and the Federal Reserve said Monday they are moving "with substantial force on a number of fronts" to shore up confidence in, and protect, the financial system.
Announcements and statements from regulators came early and often throughout the day.
Most recently, Treasury Secretary Henry Paulson announced Neel Kashkari, a close advisor, has been tapped to lead the $700 billion mortgage rescue effort.
A former banker at Goldman Sachs Group Inc., Kashkari has been assistant secretary for international economics. He came to Treasury along with Paulson in July 2006.
Kashkari's new title is interim assistant secretary for financial stability.
Kashkari, 35, holds two master's degrees. The first is in engineering and the second was an M.B.A. in finance.
The frenzy of activity comes as global stock markets suffered fresh losses amid fear that the turmoil in financial markets and the squeeze on credit will spread to the broader economy.
President Bush joined the effort, saying that it would take time for the Paulson plan to buy toxic assets from banks and help recapitalize the industry.
Bush spoke after the President's Working Group on Financial Markets, which includes the top officials of all regulatory agencies and the Fed, put out a statement saying that it was working with the industry and regulators around the world to address the current challenges.
A prime spot for global coordination could be this week's meeting of finance ministers of the Group of Seven, representing the richest industrial countries, behind closed doors at the Treasury Department.
The U.S. announced that the meeting would take place on Friday afternoon, with a press conference by Treasury Secretary Henry Paulson on Friday evening.
In an early morning statement, the Fed said it would double the size of its emergency loan program to banks to a potential $900 billion by the end of the year.
The announcement came as the central bank announced that it will begin to pay interest on bank reserves. This will give the Fed "greater scope" to address conditions in credit market, the central bank said.
Paying interest on reserves would give the Fed more power to implement monetary policy.
Paying interest would attract excess bank reserves to the Fed, giving the central bank more firepower. Currently, banks deposit only the minimum reserve required.
Maneuvering without cutting rates
Paying interest on bank reserves would allow the Fed to enlarge the asset size of its balance sheet without pushing the funds rate to zero, explained Robert Brusca, chief economist at FAO Economics. The interest rate paid on bank reserves would effectively serve as the floor on the funds rate.
So if the Fed paid 1.75% interest on reserves, the effective federal funds rate couldn't go below 1.75%. Fed researchers believe monetary policy would be much more effective with this approach, because the Fed could more directly control the most liquid asset in the economy and would no longer have to worry that policy could become impotent as the target rate approaches zero.
The Treasury announced steps to clarify to the market how it plans to coordinate the massive borrowing needs that will be required to fund the new emergency mortgage financing plan approved by Congress last week.
Treasury said it will make adjustments to its auction calendar by increasing the size of bill and note auctions and continuing to issue cash management bills, some of longer-duration.
In addition, the department said it was considering bringing back the three-year note in November and taking other steps.
The Fed and Treasury said that they are consulting with market participants on ways to support term unsecured funding markets.
"Together these actions should encourage term lending across a range of financial markets in a manner that eases pressures and promotes the ability of firms and households to obtain credit," the Fed said.
"The Federal Reserve stands ready to take additional measures as necessary to foster liquid money market conditions," the statement said.
The Fed will increase the size of its term auction facility auctions to $150 billion beginning later Monday.
Anthony Ryan, the acting under secretary for domestic finance, went on television to stress that top-level officials are working rapidly to implement the mortgage rescue plan hatched by Treasury Secretary Henry Paulson.
"We're moving as quickly as we can," Ryan said in an interview on CNBC.
But Marc Chandler, currency analyst with Brown Brothers Harriman, said he was worried that the markets were moving much more rapidly than regulators and that Washington's efforts ultimately may be too small to stem the crisis.
Racing to get its plan in place, Treasury put out guidelines to hire the asset managers it will need to purchase and hold mortgages and mortgaged-backed securities.
Gee, Cramer was wrong? What a surprise...
Initial Results Out On Agency Credit Default Swaps Auctions
10/06 11:06 AM
NEW YORK (Dow Jones)--Initial results of auctions Monday morning to settle credit default swaps on Fannie Mae (FNM:$1.0700,$-0.2700,-20.15%) and Freddie Mac (FRE:$1.2300,$-0.2600,-17.45%) are pegging prices between 92 and 94 cents on the dollar.
Initial settlement prices on CDS written on Freddie Mac (FRE:$1.2300,$-0.2600,-17.45%) senior and subordinated debt are higher than those written on Fannie Mae (FNM:$1.0700,$-0.2700,-20.15%) . For Freddie Mac (FRE:$1.2300,$-0.2600,-17.45%) , the price on the senior debt is 93.75 cents on the dollar and on the subordinated, 93.8 cents. On Fannie's senior debt the initial settlement price is 92.4 cents on the dollar, and for the subordinated debt, 92.65 cents.
Final results will be published by 4 p.m. EDT on www.creditfixings.com by auction administrators Creditex and Markit.
The U.S. government takeover of Fannie and Freddie triggered a technical default on credit default swaps of the failed mortgage finance giants. About $ 200 billion to more than $1 trillion in CDS are estimated to have been written on the agencies' senior and subordinated debt.
When a CDS is deemed to be in default, settlements can be physical, where the defaulted bond is exchanged for the par amount of the bond, or in cash, where the protection-seller pays investors the difference between the face value and the market value of the bonds.
Since Fannie and Freddie debt have rallied since the two firms were placed under conservatorship, sellers of CDS were expected to have only limited payouts to their counterparties.
There were 651 participants in the auctions, according to trade group International Swaps and Derivatives Association, which published the procedures for them.
Next up for the CDS market is settling contracts written on Lehman Brothers (LEHMQ:$0.1450,$-0.0250,-14.71%) , which filed for bankruptcy last month. That auction is tentatively scheduled for Friday. The auction for Washington Mutual (WAMUQ:$0.1300,$-0.0250,-16.13%) is tentatively scheduled for Oct. 23.
-By Romy Varghese, Dow Jones Newswires; 201-938-4287; romy.varghese@ dowjones.com
(Emily Barrett and Serena Ng of the Wall Street Journal contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=p6N7fvxBgNVlFcXE2xeYCg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-06-081106ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Initial Results Out On Agency Credit Default Swaps Auctions
10/06 11:06 AM
NEW YORK (Dow Jones)--Initial results of auctions Monday morning to settle credit default swaps on Fannie Mae (FNM:$1.0700,$-0.2700,-20.15%) and Freddie Mac (FRE:$1.2300,$-0.2600,-17.45%) are pegging prices between 92 and 94 cents on the dollar.
Initial settlement prices on CDS written on Freddie Mac (FRE:$1.2300,$-0.2600,-17.45%) senior and subordinated debt are higher than those written on Fannie Mae (FNM:$1.0700,$-0.2700,-20.15%) . For Freddie Mac (FRE:$1.2300,$-0.2600,-17.45%) , the price on the senior debt is 93.75 cents on the dollar and on the subordinated, 93.8 cents. On Fannie's senior debt the initial settlement price is 92.4 cents on the dollar, and for the subordinated debt, 92.65 cents.
Final results will be published by 4 p.m. EDT on www.creditfixings.com by auction administrators Creditex and Markit.
The U.S. government takeover of Fannie and Freddie triggered a technical default on credit default swaps of the failed mortgage finance giants. About $ 200 billion to more than $1 trillion in CDS are estimated to have been written on the agencies' senior and subordinated debt.
When a CDS is deemed to be in default, settlements can be physical, where the defaulted bond is exchanged for the par amount of the bond, or in cash, where the protection-seller pays investors the difference between the face value and the market value of the bonds.
Since Fannie and Freddie debt have rallied since the two firms were placed under conservatorship, sellers of CDS were expected to have only limited payouts to their counterparties.
There were 651 participants in the auctions, according to trade group International Swaps and Derivatives Association, which published the procedures for them.
Next up for the CDS market is settling contracts written on Lehman Brothers (LEHMQ:$0.1450,$-0.0250,-14.71%) , which filed for bankruptcy last month. That auction is tentatively scheduled for Friday. The auction for Washington Mutual (WAMUQ:$0.1300,$-0.0250,-16.13%) is tentatively scheduled for Oct. 23.
-By Romy Varghese, Dow Jones Newswires; 201-938-4287; romy.varghese@ dowjones.com
(Emily Barrett and Serena Ng of the Wall Street Journal contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=p6N7fvxBgNVlFcXE2xeYCg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-06-081106ET
Copyright (c) 2008 Dow Jones & Company, Inc.
I will tell you later,lol...
Initial Freddie Mac Senior Debt Settlement At 93.75
10/06 11:11 AM
(MORE TO FOLLOW) Dow Jones Newswires
10-06-081111ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Initial Freddie Mac Subordinated Debt Settlement At 93.8
10/06 11:11 AM
(MORE TO FOLLOW) Dow Jones Newswires
10-06-081111ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Initial Fannie Mae Senior Debt Auction Settlement At 92.4
10/06 11:07 AM
(MORE TO FOLLOW) Dow Jones Newswires
10-06-081107ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Initial Fannie Mae Subordinated Debt Settlement At 92.65
10/06 11:07 AM
(MORE TO FOLLOW) Dow Jones Newswires
10-06-081107ET
Copyright (c) 2008 Dow Jones & Company, Inc.
US Stocks Plunge; DJIA Below 10000 For First Time Since '04
10/06 10:30 AM
NEW YORK (Dow Jones)--For the first time in almost four years, the Dow Jones Industrial Average dipped below 10000 early Monday as the U.S. government's $700 billion rescue plan and more Federal Reserve liquidity measures failed to halt a global banking crisis.
The plan to buy bad loans was supposed to loosen up short-term lending and stop a domino-run of bank failures and bailouts by alleviating pressures on banks' solvency. So far, no dice. Over the weekend, the Italian government stepped in to bail out a bank there, and Germany agreed to issue a "blanket" guarantee to head off any bank runs from depositors. In addition, Holland nationalized the Dutch operations of Fortis (FRTSF:$23.2300,$0.0000,0.00%) , and a new EUR50 billion financing package was reached for Germany'sHypo Real Estate Holding (HREHY:$10.4900,$0.0000,0.00%) .
Even domestically, there were few buy signals. Short-term overnight interbank lending rates rose, indicating that the immediate problem in getting loans for corporations and some U.S. states wasn't helped by the plan, either.
"You're not going to be able to cure all aspects of (this crisis) in one fell swoop," said Peter McCorry, senior equity trader at Keefe Bruyette & Woods. " Confidence is the main thing right now, and that's the foundation of all we're doing."
Early Monday, the Dow fell 376 points, or 3.7%, to 9948. The last time the Dow closed below 10000 was on Oct. 26, 2004, when it closed at 9888.48, and it hadn't dipped below that mark during a session since Oct. 29, 2004.
Meanwhile, the broad Standard & Poor's 500 lost 50, or 4.5%, to 1050, trading at its lowest level since 2003; the Nasdaq Composite lost 94, or 4.8%, to 1855.
Commenting on the selling Monday, Phil Roth, chief technical strategist for Miller Tabak, said the push on stocks has been a "panicky kind of decline." Even veteran traders say the current market is the toughest they have traded.
Illustrating the elevated fear levels, the CBOE Volatility Index, which reflects premiums paid for protection against market swings, jumped 17% to 52.77, surpassing levels from the worst of the technology bust to hit a record high.
Overseas, the Shanghai Composite fell 5.2% despite the government's pledge to protect against short-sellers. The FTSE 100 recently declined 6% in London, and the Nikkei 225 closed 4.2% lower in Tokyo.
Another reason for stocks weakness recently: A perception that the credit crisis has pushed economies beyond a tipping point and a U.S. recession is breaking the stride of fast-growing economies in Asia and Europe. Oil futures, a barometer of global growth expectations, tumbled $3, or 3.2%, to $91.09 a barrel - within $4 of its 2008 low.
Amid the decline in both stocks and commodities prices in the past month, part of the decreases has come from successive waves of mass selling by long-term holders cutting their losses and retreating to the safety of bonds.
"You reach a pain threshold," said McCorry.
-By Geoffrey Rogow, Dow Jones Newswires; 201-938-5360; geoffrey.rogow@ dowjones.com
-By Rob Curran, Dow Jones Newswires; 201-938-5176; robert.curran@dowjones.com
(Steve Goldstein and Keith Jenkins contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=p6N7fvxBgNVlFcXE2xeYCg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-06-081030ET
Copyright (c) 2008 Dow Jones & Company, Inc.
US Stocks Plunge; DJIA Below 10000 For First Time Since '04
10/06 10:30 AM
NEW YORK (Dow Jones)--For the first time in almost four years, the Dow Jones Industrial Average dipped below 10000 early Monday as the U.S. government's $700 billion rescue plan and more Federal Reserve liquidity measures failed to halt a global banking crisis.
The plan to buy bad loans was supposed to loosen up short-term lending and stop a domino-run of bank failures and bailouts by alleviating pressures on banks' solvency. So far, no dice. Over the weekend, the Italian government stepped in to bail out a bank there, and Germany agreed to issue a "blanket" guarantee to head off any bank runs from depositors. In addition, Holland nationalized the Dutch operations of Fortis (FRTSF:$23.2300,$0.0000,0.00%) , and a new EUR50 billion financing package was reached for Germany'sHypo Real Estate Holding (HREHY:$10.4900,$0.0000,0.00%) .
Even domestically, there were few buy signals. Short-term overnight interbank lending rates rose, indicating that the immediate problem in getting loans for corporations and some U.S. states wasn't helped by the plan, either.
"You're not going to be able to cure all aspects of (this crisis) in one fell swoop," said Peter McCorry, senior equity trader at Keefe Bruyette & Woods. " Confidence is the main thing right now, and that's the foundation of all we're doing."
Early Monday, the Dow fell 376 points, or 3.7%, to 9948. The last time the Dow closed below 10000 was on Oct. 26, 2004, when it closed at 9888.48, and it hadn't dipped below that mark during a session since Oct. 29, 2004.
Meanwhile, the broad Standard & Poor's 500 lost 50, or 4.5%, to 1050, trading at its lowest level since 2003; the Nasdaq Composite lost 94, or 4.8%, to 1855.
Commenting on the selling Monday, Phil Roth, chief technical strategist for Miller Tabak, said the push on stocks has been a "panicky kind of decline." Even veteran traders say the current market is the toughest they have traded.
Illustrating the elevated fear levels, the CBOE Volatility Index, which reflects premiums paid for protection against market swings, jumped 17% to 52.77, surpassing levels from the worst of the technology bust to hit a record high.
Overseas, the Shanghai Composite fell 5.2% despite the government's pledge to protect against short-sellers. The FTSE 100 recently declined 6% in London, and the Nikkei 225 closed 4.2% lower in Tokyo.
Another reason for stocks weakness recently: A perception that the credit crisis has pushed economies beyond a tipping point and a U.S. recession is breaking the stride of fast-growing economies in Asia and Europe. Oil futures, a barometer of global growth expectations, tumbled $3, or 3.2%, to $91.09 a barrel - within $4 of its 2008 low.
Amid the decline in both stocks and commodities prices in the past month, part of the decreases has come from successive waves of mass selling by long-term holders cutting their losses and retreating to the safety of bonds.
"You reach a pain threshold," said McCorry.
-By Geoffrey Rogow, Dow Jones Newswires; 201-938-5360; geoffrey.rogow@ dowjones.com
-By Rob Curran, Dow Jones Newswires; 201-938-5176; robert.curran@dowjones.com
(Steve Goldstein and Keith Jenkins contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=p6N7fvxBgNVlFcXE2xeYCg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-06-081030ET
Copyright (c) 2008 Dow Jones & Company, Inc.
I wholeheartedly and admittedly biasedly agree...
Some house hunters are getting cold feet: Real estate experts say slow going on bailout isn't helping [Houston Chronicle]
10/01 03:27 PM
Oct. 1--Tracie Staten has everything she needs to buy a house: a down payment, great credit and a job. But with the nation's economy in turmoil, she lacks the one thing required to move forward -- confidence.
"I don't want to get this house and all of a sudden things go downhill in our economy," said Staten, a 25-year-old insurance adjuster. "I don't know what the next few months will hold."
The government's struggle to reach an agreement on a $700 billion bailout package, a tightening credit market and lingering effects of Hurricane Ike are adding to the woes of Houston's already softening real estate market.
"Right now there's a general pervasive attitude that everything is going down: 'I don't want to buy a home now because prices may go down. I don't want to invest my money because all my friends just lost thousands of dollars in their 401(k) yesterday,' " said Jim Gaines, an economist at the Real Estate Center at Texas A&M University.
Houston-area home sales have fallen each of the past 12 months, making their biggest drop in August when they plunged 20 percent. September figures are still being tallied.
Housing experts said the failure of Congress to complete a financial bailout has only worsened the problem.
Sellers have begun pulling homes off the market as they wonder if it is the right time to sell, said Steve Barnes, president and chief operating officer for the Houston region of Coldwell Banker United, Realtors.
Though perceptions about the economy can be blamed for part of it, some is hurricane-related. Insurance companies are requiring buyers to have homes reappraised, reinspected and recertified.
"With Hurricane Ike, coupled with no bailout, consumer confidence has got to be at an all-time low," Barnes said.
Despite the uncertainty, Houston could be in a better position to weather the storm.
The area housing market has outperformed many others because of energy-related job growth. While sales have been slipping, inventory hasn't gotten out of whack, and prices have remained stable.
That's not to say the credit crunch hasn't affected Houstonians. For months, buyers have been subject to tougher lending standards from banks burned by defaulting borrowers.
Builders have scaled back, too, and some are having a hard time getting loans themselves.
There's little or no money available for land development loans, also known as "ADC loans," which stands for acquisition, development and construction, Gaines said.
For those who sell real estate for a living, volumes are down -- hurting some more than others.
"Our business has just fallen off a cliff," said Shad Bogany of ERA Bogany Properties. "We were doing OK until the bailout. It's almost like the phones have stopped ringing."
Though buyers are skittish and lenders more cautious, it hasn't gotten so bad here that it's halted mortgage lending.
"They're still in business. And if nothing happens, they won't make any money," Gaines said about the lenders.
Complicating matters for would-be buyers, mortgage rates are up over the past week.
In Texas, rates for 30-year mortgages were 5.94 percent at the end of last week, up from 5.75 percent the week before, according to Zillow, a real estate Web site that tracks home prices and mortgage rates.
Still, that doesn't necessarily mean they're on an upward trend, said David Zugheri of First Houston Mortgage.
Rates went down when the government said it was taking over Fannie Mae (FNM:$1.6587,$0.1287,8.41%) and Freddie Mac (FRE:$1.87,00$0.16,009.36%) , he noted.
"The one thing we all know and can agree upon is the government is fully committed to the housing market," he said.
Consumer sentiment should improve when the government agrees on a plan that's expected to put more liquidity in the market, experts said.
Staten, while concerned about her taxes going to rescue banks, is craving some sort of solution. She's been saving for more than a year and is ready to sign a contract on a three-bedroom Humble-area house.
"To at least have something in place, I would feel a little bit better," she said.
nancy.sarnoff@chron.com
To see more of the Houston Chronicle, or to subscribe to the newspaper, go to http://www.HoustonChronicle.com.
Copyright (c) 2008, Houston Chronicle
Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
Some house hunters are getting cold feet: Real estate experts say slow going on bailout isn't helping [Houston Chronicle]
10/01 03:27 PM
Oct. 1--Tracie Staten has everything she needs to buy a house: a down payment, great credit and a job. But with the nation's economy in turmoil, she lacks the one thing required to move forward -- confidence.
"I don't want to get this house and all of a sudden things go downhill in our economy," said Staten, a 25-year-old insurance adjuster. "I don't know what the next few months will hold."
The government's struggle to reach an agreement on a $700 billion bailout package, a tightening credit market and lingering effects of Hurricane Ike are adding to the woes of Houston's already softening real estate market.
"Right now there's a general pervasive attitude that everything is going down: 'I don't want to buy a home now because prices may go down. I don't want to invest my money because all my friends just lost thousands of dollars in their 401(k) yesterday,' " said Jim Gaines, an economist at the Real Estate Center at Texas A&M University.
Houston-area home sales have fallen each of the past 12 months, making their biggest drop in August when they plunged 20 percent. September figures are still being tallied.
Housing experts said the failure of Congress to complete a financial bailout has only worsened the problem.
Sellers have begun pulling homes off the market as they wonder if it is the right time to sell, said Steve Barnes, president and chief operating officer for the Houston region of Coldwell Banker United, Realtors.
Though perceptions about the economy can be blamed for part of it, some is hurricane-related. Insurance companies are requiring buyers to have homes reappraised, reinspected and recertified.
"With Hurricane Ike, coupled with no bailout, consumer confidence has got to be at an all-time low," Barnes said.
Despite the uncertainty, Houston could be in a better position to weather the storm.
The area housing market has outperformed many others because of energy-related job growth. While sales have been slipping, inventory hasn't gotten out of whack, and prices have remained stable.
That's not to say the credit crunch hasn't affected Houstonians. For months, buyers have been subject to tougher lending standards from banks burned by defaulting borrowers.
Builders have scaled back, too, and some are having a hard time getting loans themselves.
There's little or no money available for land development loans, also known as "ADC loans," which stands for acquisition, development and construction, Gaines said.
For those who sell real estate for a living, volumes are down -- hurting some more than others.
"Our business has just fallen off a cliff," said Shad Bogany of ERA Bogany Properties. "We were doing OK until the bailout. It's almost like the phones have stopped ringing."
Though buyers are skittish and lenders more cautious, it hasn't gotten so bad here that it's halted mortgage lending.
"They're still in business. And if nothing happens, they won't make any money," Gaines said about the lenders.
Complicating matters for would-be buyers, mortgage rates are up over the past week.
In Texas, rates for 30-year mortgages were 5.94 percent at the end of last week, up from 5.75 percent the week before, according to Zillow, a real estate Web site that tracks home prices and mortgage rates.
Still, that doesn't necessarily mean they're on an upward trend, said David Zugheri of First Houston Mortgage.
Rates went down when the government said it was taking over Fannie Mae (FNM:$1.6587,$0.1287,8.41%) and Freddie Mac (FRE:$1.87,00$0.16,009.36%) , he noted.
"The one thing we all know and can agree upon is the government is fully committed to the housing market," he said.
Consumer sentiment should improve when the government agrees on a plan that's expected to put more liquidity in the market, experts said.
Staten, while concerned about her taxes going to rescue banks, is craving some sort of solution. She's been saving for more than a year and is ready to sign a contract on a three-bedroom Humble-area house.
"To at least have something in place, I would feel a little bit better," she said.
nancy.sarnoff@chron.com
To see more of the Houston Chronicle, or to subscribe to the newspaper, go to http://www.HoustonChronicle.com.
Copyright (c) 2008, Houston Chronicle
Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
Credit troubles not so distant: Some projects for city, state could be delayed [Houston Chronicle]
10/01 02:11 PM
Oct. 1--The list of casualties stemming from the credit crisis is about to get longer.
Local governments, long dependent on debt as a bedrock financing mechanism, could be forced to put off or even scrap plans for new schools, sports stadiums, even road and bridge projects as credit markets continue to dry up.
While Houston has one of the strongest regional economies in the nation, as well as a high credit rating, the region's public entities may not be spared the troubles rippling through municipalities around the country.
"Market circumstances right now are extremely difficult for any entity to navigate," City Controller Annise Parker said.
She added that some public improvement projects may have to be postponed in the coming months, although it is too soon to tell which.
Amid the failure of lawmakers in Washington to pass legislation authorizing a $700 billion rescue plan for the country's wounded financial markets, the City Council today will take up several measures intended to shore up city finances already hit hard by Hurricane Ike.
They include borrowing up to $95 million to deal with hurricane-related costs, restructuring nearly half a billion dollars' of debt and shifting funds to pay for capital expenditures that ordinarily would be bought with bond monies.
Still, analysts and city officials said, the Houston area likely will weather the crisis well.
Many other cities, counties, school districts, transit authorities and states -- already roiled by sagging sales and property tax revenues in the economic downturn -- may not.
Some states have made sharp cutbacks to public services, and some cities, such as Philadelphia and New York, have initiated hiring freezes that extend to police officers. Being cut off from credit could make matters worse.
But cities like Houston or states like Maryland, both of which have high credit ratings, will be able to borrow, said Robert Inman, professor of finance at the University of Pennsylvania'sWharton School.
"For at least the next year or so, there may be a significantly lower quality of services," said Inman, who specializes in public finance.
Money will be tight, but few municipalities will be bankrupted because of regulations that govern how they can borrow and invest money, said Robert L. Bland, chairman of the Department of Public Administration at the University of North Texas.
Chief among them in Texas, he said, is the Public Funds Investment Act, passed by the Legislature in 1989 to protect municipalities from poor investments.
"We're not immune, and not so arrogant as to say we'll never suffer a loss," Bland said. "But we have provisions so that we only incur losses if there's total incompetence. And that's not likely to happen."
Around the region, elected leaders are keeping an eye on the credit markets. Budgets are busting with rising fuel and utility costs and steep tax revenue drops caused by housing foreclosures or lower consumer spending.
Harris County financial officials said there would be serious repercussions locally if Congress fails to inject liquidity into the markets. If the market to finance short- or long-term construction debt collapses, it could be difficult for the county to tackle expensive capital projects, officials said.
"I don't think that's going to happen," said Financial Services Director Edwin Harrison. "But it could." The county has $3.8 billion in debt outstanding in principal alone. The Harris County Toll Road Authority is responsible for about $2.1 billion of that.
The Woodlands Township, a special district that collects sales throughout the master-planned Montgomery County community, has struggled to find a buyer for $17 million in bonds it needs for payments to Houston and Conroe under regional agreements.
The township may have to resort to a short-term loan, its board chairwoman said.
Houston Independent School District officials said they did not expect an immediate impact, although they are closely following the credit markets.
The district still must sell about $400 million in bonds approved by voters in November.
In the city of Houston's$2 billion investment portfolio, finance officials already have begun to capitalize on some of the problems other areas are facing. In the past week, they have invested millions in bonds from the Broward County, Fla., Airport System and the Harris County Flood Control District. Interest rates in both cases hovered around eight percent, city officials said.
Today, City Council will vote on whether to refinance $423 million in public improvement bonds in an effort to get a lower interest rate. Council also will consider opening a line of credit for Ike-related expenses, a tab that already has hit $30 million.
Houston officials said those steps should ensure enough cash is available to run the city before the state releases property and sales tax revenues at the beginning of 2009. The city's efforts to keep cash flowing are not unusual: municipalities often try to save money by adjusting high short-term interest rates or borrowing against anticipated tax revenues.
But because interest rates have remained high, city officials have had to delayed issuing some bonds or restructuring other debt used for planned improvements in airport and utility infrastructure.
The city currently has about $12 billion in debt, about $4 billion of which is supported by property tax revenues. The remainder is backed by airport and utility fees, and hotel occupancy taxes.
Sooner or later, Parker said, the city may have to pay higher interest rates for many of these projects, leaving less money for everything else.
"These are things we do on a routine basis," she said. "The timing is a factor and the amount of money may be bigger because of market issues and Ike, but this is not yet an emergency situation."
Chronicle reporters Liz Austin Peterson, Ruth Rendon, Eric Hanson, Renee C. Lee and Ericka Mellon contributed to this report.
bradley.olson@chron.com
To see more of the Houston Chronicle, or to subscribe to the newspaper, go to http://www.HoustonChronicle.com.
Copyright (c) 2008, Houston Chronicle
Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
Credit troubles not so distant: Some projects for city, state could be delayed [Houston Chronicle]
10/01 02:11 PM
Oct. 1--The list of casualties stemming from the credit crisis is about to get longer.
Local governments, long dependent on debt as a bedrock financing mechanism, could be forced to put off or even scrap plans for new schools, sports stadiums, even road and bridge projects as credit markets continue to dry up.
While Houston has one of the strongest regional economies in the nation, as well as a high credit rating, the region's public entities may not be spared the troubles rippling through municipalities around the country.
"Market circumstances right now are extremely difficult for any entity to navigate," City Controller Annise Parker said.
She added that some public improvement projects may have to be postponed in the coming months, although it is too soon to tell which.
Amid the failure of lawmakers in Washington to pass legislation authorizing a $700 billion rescue plan for the country's wounded financial markets, the City Council today will take up several measures intended to shore up city finances already hit hard by Hurricane Ike.
They include borrowing up to $95 million to deal with hurricane-related costs, restructuring nearly half a billion dollars' of debt and shifting funds to pay for capital expenditures that ordinarily would be bought with bond monies.
Still, analysts and city officials said, the Houston area likely will weather the crisis well.
Many other cities, counties, school districts, transit authorities and states -- already roiled by sagging sales and property tax revenues in the economic downturn -- may not.
Some states have made sharp cutbacks to public services, and some cities, such as Philadelphia and New York, have initiated hiring freezes that extend to police officers. Being cut off from credit could make matters worse.
But cities like Houston or states like Maryland, both of which have high credit ratings, will be able to borrow, said Robert Inman, professor of finance at the University of Pennsylvania'sWharton School.
"For at least the next year or so, there may be a significantly lower quality of services," said Inman, who specializes in public finance.
Money will be tight, but few municipalities will be bankrupted because of regulations that govern how they can borrow and invest money, said Robert L. Bland, chairman of the Department of Public Administration at the University of North Texas.
Chief among them in Texas, he said, is the Public Funds Investment Act, passed by the Legislature in 1989 to protect municipalities from poor investments.
"We're not immune, and not so arrogant as to say we'll never suffer a loss," Bland said. "But we have provisions so that we only incur losses if there's total incompetence. And that's not likely to happen."
Around the region, elected leaders are keeping an eye on the credit markets. Budgets are busting with rising fuel and utility costs and steep tax revenue drops caused by housing foreclosures or lower consumer spending.
Harris County financial officials said there would be serious repercussions locally if Congress fails to inject liquidity into the markets. If the market to finance short- or long-term construction debt collapses, it could be difficult for the county to tackle expensive capital projects, officials said.
"I don't think that's going to happen," said Financial Services Director Edwin Harrison. "But it could." The county has $3.8 billion in debt outstanding in principal alone. The Harris County Toll Road Authority is responsible for about $2.1 billion of that.
The Woodlands Township, a special district that collects sales throughout the master-planned Montgomery County community, has struggled to find a buyer for $17 million in bonds it needs for payments to Houston and Conroe under regional agreements.
The township may have to resort to a short-term loan, its board chairwoman said.
Houston Independent School District officials said they did not expect an immediate impact, although they are closely following the credit markets.
The district still must sell about $400 million in bonds approved by voters in November.
In the city of Houston's$2 billion investment portfolio, finance officials already have begun to capitalize on some of the problems other areas are facing. In the past week, they have invested millions in bonds from the Broward County, Fla., Airport System and the Harris County Flood Control District. Interest rates in both cases hovered around eight percent, city officials said.
Today, City Council will vote on whether to refinance $423 million in public improvement bonds in an effort to get a lower interest rate. Council also will consider opening a line of credit for Ike-related expenses, a tab that already has hit $30 million.
Houston officials said those steps should ensure enough cash is available to run the city before the state releases property and sales tax revenues at the beginning of 2009. The city's efforts to keep cash flowing are not unusual: municipalities often try to save money by adjusting high short-term interest rates or borrowing against anticipated tax revenues.
But because interest rates have remained high, city officials have had to delayed issuing some bonds or restructuring other debt used for planned improvements in airport and utility infrastructure.
The city currently has about $12 billion in debt, about $4 billion of which is supported by property tax revenues. The remainder is backed by airport and utility fees, and hotel occupancy taxes.
Sooner or later, Parker said, the city may have to pay higher interest rates for many of these projects, leaving less money for everything else.
"These are things we do on a routine basis," she said. "The timing is a factor and the amount of money may be bigger because of market issues and Ike, but this is not yet an emergency situation."
Chronicle reporters Liz Austin Peterson, Ruth Rendon, Eric Hanson, Renee C. Lee and Ericka Mellon contributed to this report.
bradley.olson@chron.com
To see more of the Houston Chronicle, or to subscribe to the newspaper, go to http://www.HoustonChronicle.com.
Copyright (c) 2008, Houston Chronicle
Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
US mortgage aid program opens doors, if slightly
10/01 02:07 PM
WASHINGTON, Oct 1 (Reuters) - A federal program to refinance up to $300 billion in troubled U.S. mortgages began accepting applications on Wednesday but the effort will have only a limited impact on the national foreclosure crisis.
The HOPE for Homeowners program expands the federal government's ability to guarantee home loans for borrowers facing a burdensome interest rate spike or who have seen a drop in the value of their homes.
The program is a "helpful step forward" in stabilizing the housing market and will help keep many families in their homes but it is not a cure-all, said Steve Preston, the Secretary of the Department of Housing and Urban Development which will administer the program.
"It must be part of a larger vision for the future, a vision that will help Americans keep their homes and remain financially secure," Preston told reporters as he officially unveiled the plan.
Preston encouraged troubled borrowers to contact their lender or otherwise seek advice about whether the program would be suitable for them.
When the mortgage plan was enacted in July, it was the most sweeping Congressional action yet to arrest a mounting crisis of falling home values and a rising foreclosure rate.
In coming days, Congress is expected to vote on an even bolder plan that would authorize the Treasury Department to purchase up to $700 billion in soured mortgage investments.
LIMITED IMPACT
The HOPE for Homeowners program has some requirements that will shield the government from losses but will also limit its impact.
Mortgage lenders or servicers must erase 10 percent of the home's current value before the government will backstop the mortgage. The applicant must have made at least six monthly payments in the past and the new payments cannot amount to more than roughly a third of his monthly income.
As the plan was originally conceived, Fannie Mae (FNM:$1.62,00$0.09,005.88%) and Freddie Mac (FRE:$1.82,00$0.11,006.43%) will underwrite losses but that mechanism could be changed now that the two mortgage finance giants have been nationalized.
The government-sponsored enterprises were seized in early September and within weeks, Washington Mutual Inc (WAMUQ:$0.1300,$0.0480,58.54%) and Wachovia Corp. (WB:$3.45,00$-0.05,00-1.43%) banks had failed as the worst housing crisis since the Great Depression tightened its grip. (Reporting by Patrick Rucker; Editing by Theodore d'Afflisio)
US mortgage aid program opens doors, if slightly
10/01 02:07 PM
WASHINGTON, Oct 1 (Reuters) - A federal program to refinance up to $300 billion in troubled U.S. mortgages began accepting applications on Wednesday but the effort will have only a limited impact on the national foreclosure crisis.
The HOPE for Homeowners program expands the federal government's ability to guarantee home loans for borrowers facing a burdensome interest rate spike or who have seen a drop in the value of their homes.
The program is a "helpful step forward" in stabilizing the housing market and will help keep many families in their homes but it is not a cure-all, said Steve Preston, the Secretary of the Department of Housing and Urban Development which will administer the program.
"It must be part of a larger vision for the future, a vision that will help Americans keep their homes and remain financially secure," Preston told reporters as he officially unveiled the plan.
Preston encouraged troubled borrowers to contact their lender or otherwise seek advice about whether the program would be suitable for them.
When the mortgage plan was enacted in July, it was the most sweeping Congressional action yet to arrest a mounting crisis of falling home values and a rising foreclosure rate.
In coming days, Congress is expected to vote on an even bolder plan that would authorize the Treasury Department to purchase up to $700 billion in soured mortgage investments.
LIMITED IMPACT
The HOPE for Homeowners program has some requirements that will shield the government from losses but will also limit its impact.
Mortgage lenders or servicers must erase 10 percent of the home's current value before the government will backstop the mortgage. The applicant must have made at least six monthly payments in the past and the new payments cannot amount to more than roughly a third of his monthly income.
As the plan was originally conceived, Fannie Mae (FNM:$1.62,00$0.09,005.88%) and Freddie Mac (FRE:$1.82,00$0.11,006.43%) will underwrite losses but that mechanism could be changed now that the two mortgage finance giants have been nationalized.
The government-sponsored enterprises were seized in early September and within weeks, Washington Mutual Inc (WAMUQ:$0.1300,$0.0480,58.54%) and Wachovia Corp. (WB:$3.45,00$-0.05,00-1.43%) banks had failed as the worst housing crisis since the Great Depression tightened its grip. (Reporting by Patrick Rucker; Editing by Theodore d'Afflisio)
I think the picture will look much clearer after the fact, therein lies the risk/reward...