Subprime Collapse

The housing market continued to plunge in the first quarter of 2008, as single-family sales dropped 22% from their year-ago pace, to 4.95 million annually. Bloomberg reports that the median home price is off 7.7% from a year ago, to $196,300, as foreclosed properties drag down values. Meanwhile, US retail sales were off in April, mainly because of a big drop in autos. More »

Subprime losses at Crédit Agricole’s Calyon investment bank are likely to prompt the French company to raise $9.17 billion in capital, reports the Wall Street Journal. A hit of $1.87 billion reduced its first quarter net profit to $1.38 billion from $1.82 billion the previous year. The bank, whose shares were down 5% this morning in Paris, will decide tomorrow whether to move forward with the capital boost. More »

Stagnant pools bursting with mosquitoes have become a byproduct of the housing crisis, turning into breeding grounds for diseases like West Nile virus. But, the Wall Street Journal reports, there is a solution: Gambusia affinis , a natural predator, also known as the mosquito fish, that's hardy enough to police abandoned watering holes from Florida to California. More »

The House today shrugged off a veto threat from President Bush and passed a wide-ranging rescue plan for US homeowners, Reuters reports. The centerpiece of the legislation would allow people to trade in risky, fast-rising mortgages for more stable government loans. The $300 billion measure would help an estimated 500,000 homeowners at risk of foreclosure. More »

President Bush said today that he would veto the Democratic housing bill being worked on in the House of Representatives. Bush claims the bill would unfairly bail out "speculators and lenders," the Washington Post reports. "I will veto the bill that's moving through the House today if it makes it to my desk," he promised. More »

The US is emerging from the credit woes triggered by the turmoil over subprime mortgages—despite the continuing wave of foreclosures across the nation, according to Treasury Secretary Henry Paulson. Paulson, in the most positive comments yet from the White House on the nation's economic troubles, in part credited the federal bailout of Bear Stearns, reports the Wall Street Journal. More »

Fannie Mae lost a worse-than-expected $2.2 billion this quarter, forcing it to cut its dividend and seek $6 billion in capital. The news is especially troubling as Fannie and Freddie Mac, the companies Washington relies on to keep the housing market functioning, are under unprecedented pressure, the New York Times reports. Many are now worried that one or both of them, after stepping in to rescue a torrent of troubled mortgages, may soon need bailouts themselves. More »

UBS will cut 5,500 jobs, slightly fewer than expected, by the middle of 2009 as part of a major restructuring effort, the troubled Swiss bank said today in announcing an $11-billion first-quarter loss. Some 2,600 of the layoffs will be among investment bankers, mostly in London and New York. UBS will also sell off $15 billion in mortgage-backed securities to BlackRock and plans further sales of its mortgage holdings in the future. More »

Federal Reserve Chairman Ben Bernanke yesterday called for government intervention to halt home foreclosures, warning that to do nothing could "destabilize communities, reduce property values of nearby homes, and lower tax revenues." Bernanke said in a speech in New York that a million Americans were already three months behind in mortgage payments at the beginning of this year, threatening dire consequences for the future of the economy, reports the Los Angeles Times . More »

Swiss banking giant UBS will lay off some 10% of its 83,000 workforce and scale back its investment banking arm in an attempt to reassure shareholders that it's taking actions to curtail losses associated with the subprime debacle, reports Bloomberg. Switzerland's largest bank says it will detail a further $11.4 billion in first-quarter writedowns in its earnings report tomorrow—bringing the total to $38 billion over the past three quarters. More »

Linens 'n Things filed for bankruptcy protection today, MarketWatch reports, and plans to close 120 stores nationwide as other operations continue. "The significant deterioration in the mortgage, housing and credit markets and the resulting impact on the retail marketplace, particularly the home sector, has overwhelmed the operating and merchandising improvements that we have made over the past two years," the company's new chairman said. More »

It can happen to the rich and famous, too: Jose Canseco's mansion is in foreclosure, and he's had to move into more modest digs, Inside Edition reports. Canseco owed more than $2.5 million on the California property his neighbors called the "hotel." He made $30 million in baseball and wrote two best-sellers, but it wasn't enough to save him from becoming a high-profile statistic of the housing collapse. More »

As expected, the Federal Reserve cut a key US interest rate today, the Wall Street Journal reports, trimming its overnight rate a quarter-point to 2%. Seven consecutive cuts have the rate down from 5.25% in September as the Fed attempts to keep the economy from stalling under credit woes. "Economic activity remains weak," today's statement says, and markets "remain under considerable stress." More »

A plan to federally subsidize the refinancing of troubled mortgages has in fact helped relatively few of the most at-risk borrowers, the New York Times reports. Though Bush administration officials said FHA Secure has benefited 150,000, federal statistics show that only 1,729 of those mortgages were delinquent. “They came to us before they got into trouble,” one official said. More »

As the Federal Reserve moves toward stricter lending rules, mortgage providers are firing back, calling the rules too broad and arguing that they could limit loans to borrowers who don't have credit problems, the New York Times reports. Regulation, bankers say, could raise the price of mortgages by increasing paperwork and the risk of lawsuits. The outcry has pushed the Fed to consider narrowing the number of mortgages the rules would apply to. More »

Economist, writer, actor, and lawyer Ben Stein follows up his December excoriation of Goldman Sachs' contribution to the subprime crisis with a look in today's New York Times into how Wall Street executives can get away with reckless behavior at the expense of the public. This time he targets the SEC, which has been so weakened in the Bush administration it quietly loosened the capital requirements for investment banks and "told Wall Street to police itself to save on regulatory costs."   More »

The slumping economy will pummel state budgets in the next fiscal year, leaving them at least $26 billion short, according to a survey from the National Conference of State Legislatures. Payrolls fell drastically in March and consumer confidence is low, a double whammy for state tax revenue. "With a few exceptions, state finances are deteriorating, in some cases considerably,” the survey said. More »

Consumer confidence fell to a 26-year low in April, as the public fretted over inflation and housing, Reuters reports. The index fell to 62.6, surpassing the 63.2 analysts had predicted. Nearly 90% said the economy is in recession. Respondents also said they were unlikely to spend their stimulus or tax-rebate checks, planning instead to save them or pay down debt. More »

Treasury is putting its rebate money where its mouth is—ahead of schedule, Reuters reports, with the first wave of checks going out Monday. “We're a little bit ahead of schedule, so we will start right on Monday with direct deposits," Henry Paulson tells Reuters. The Treasury secretary is happy to get cash into Americans’ pockets a little quicker, in order to stave off worsening economic conditions. More »

New-home sales fell yet again in March, the Wall Street Journal reports, with single-family sales off 8.5% to an annual rate of 526,000, the lowest level since 1991. Analysts had expected a drop of only 1.9%. The median price, meanwhile, plummeted 13.3%, to $227,600. With an 11-month supply of homes available—the most since 1981—prices will likely continue to fall. More »