government spending only thing keeping economy alive

[harleyrider1978]

http://www.msnbc.msn.com/id/34521128/ns/business-economy_at_a_crossroads/

Home sales surge, boosting recovery hopes

thats the headline read the story its all govmnt debt spending,thats where bernake has spent the last 12.3 trillion this year to date. january will bring the commercial real estate market collapse figures........let alone the 7 million homes going into foreclosure right now.Which the story authors so selectivly chose not to mention......


WASHINGTON - The recovery may have gotten off to a slow start in the third quarter, but a surge in home sales last month could presage a more robust end to the year.

Sales of existing homes rose in November to the highest level in nearly three years, reflecting an extraordinary level of federal support that has pulled the housing market back from its worst downturn since the Great Depression.

The National Association of Realtors said sales rose 7.4 percent to a seasonally adjusted annual rate of 6.54 million from a downwardly revised pace of 6.09 million in October.

Sales had been expected to rise to a pace of 6.25 million, according to economists surveyed by Thomson Reuters.

"Things are stabilizing," said Pete Flint, chief executive of real estate Web site Trulia.com. "There is a significant amount of buyer interest out there."

A rebound in housing could help give the nascent recovery a boost in the fourth quarter after it got off to a weaker-than-expected start in the third quarter.

President Obama, speaking after a meeting at the White House with chief executives of community banks Tuesday, said business have a great opportunity now to start growing and hiring again if they can get the credit they need.

"We feel very optimistic that the worst is behind us," the president said.

The Commerce Department reported Tuesday that the economy grew at a 2.2 percent pace in the July-to-September quarter, slower than the 2.8 percent rate estimated just a month ago. Economists were predicting the figure wouldn't be revised in the government's final estimate on third-quarter GDP.

The main factors behind the downgrade: Consumers didn't spend as much, commercial construction was weaker, business investment was a bit softer and companies cut back more on inventories, according to Tuesday's report.

Despite the lower reading, the economy managed to finally return to growth during the quarter, after a record four straight quarters of decline. That signaled the deepest and longest recession since the 1930s had ended and the economy had entered into a new fragile phase of recovery.

Many analysts believe the economy is on track for a better result in the current quarter.

"We expect a better performance in the fourth quarter, but the core problems for the economy — bust banks and a massively overleveraged consumer — have not gone away," said Ian Shepherdson, chief economist at High Frequency Economics.

The economy is probably growing at a rate of nearly 4 percent in the current quarter, analysts say. If they're right, that would mark the strongest showing since 5.4 percent growth in the first quarter of 2006 — well before the recession began. The government will release its first estimate of fourth-quarter economic activity Jan. 29.

Yet even such growth wouldn't be enough to quickly drive down the unemployment rate, now at 10 percent. High unemployment and tight credit for both consumers and businesses are expected to continue to weigh on the economic recovery. Many economists predict the economy's growth will slow to a pace of around 2 or 3 percent in the first three months of 2010.

Growth in the final quarter is expected to be driven by companies restocking depleted inventories. Stocks of goods were slashed at a record pace during the recession. So even the smallest pickup in customer demand will force factories to step up production and boost overall activity.

Stronger exports, as well as spending by U.S. consumers and businesses, also will help underpin fourth-quarter growth.

It's been a wild ride for the economy this year. In the first three months, it shrank at a pace of 6.4 percent — its worst downhill slide in 27 years.

The recession eased in the second quarter, with the economy dipping at a pace of 0.7 percent. The economy returned to growth in the third quarter.

But much of the third quarter's growth was supported by government stimulus. The "Cash for Clunkers" rebates and an $8,000 tax credit for first-time home buyers buoyed sales of cars and homes. The clunkers program ended in August, though the tax credit has been extended and expanded beyond first-time buyers.

Government stimulus certainly had a hand in helping November home sales. Buyers were racing to complete their sales before the original expiration date of a tax credit for first-time buyers that was scheduled to end Nov. 30. Last month, Congress decided to extend and expand the credit to ensure the housing market could sustain its recovery.

Besides the existing tax credit of up to $8,000 for first-time buyers, homeowners who have lived in their current properties for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, buyers must sign a purchase agreement by April 30.

Foreclosure rates remain a strong drag on the housing market and the economy, however. Employers continue to cut jobs, which is not good news for the record 14 percent of homeowners with a mortgage that is either behind on payments or in foreclosure.

The government makes three estimates of GDP, which measures the value of all goods and services produced in the United States, for a given quarter. Each estimate is based on more complete data. The government's initial estimate for the third quarter was more energetic, showing the economy's growth at a 3.5 percent pace. Subsequent estimates, however, showed the recovery was actually slower.

A trouble spot for the economy — the commercial real-estate market — was clearly visible in Tuesday's report.

Builders slashed spending on commercial building projects at an annualized pace of 18.4 percent in the third quarter. That was sharper than the 15.1 percent pace previously estimated and contributed to the GDP downgrade.

It's unclear how the recovery will fare once the government withdraws stimulus programs put in place to combat the financial crisis and the recession. If consumers pull back on spending, the economy could tip back into recession.

Against that backdrop, the Federal Reserve pledged last week to keep interest rates at a record low to help the recovery gain traction.

Faced with the prospects of high unemployment well into the 2012 presidential election year, President Barack Obama wants the government to take further steps to put Americans back to work. The House last week passed some provisions that Obama has pushed to aid job growth. But it didn't include new tax breaks for small businesses that hire.

The administration credits its $787 billion package of tax cuts and increased government spending with improving employment, though Republicans argue it did not help much.

[harleyrider1978]

Fannie And Freddie Receive Unlimited Future Funds To Stay Afloat


NEW YORK — The government has handed its ATM card to beleaguered mortgage giants Fannie Mae and Freddie Mac.

The Treasury Department said Thursday it removed the $400 billion financial cap on the money it will provide to keep the companies afloat. Already, taxpayers have shelled out $111 billion to the pair, and a senior Treasury official said losses are not expected to exceed the government's estimate this summer of $170 billion over 10 years.

Treasury Department officials said it will now use a flexible formula to ensure the two agencies can stand behind the billions of dollars in mortgage-backed securities they sell to investors. Under the formula, financial support would increase according to how much each firm loses in a quarter. The cap in place at the end of 2012 would apply thereafter.

By making the change before year-end, Treasury sidestepped the need for an OK from a bailout-weary Congress.

While most analysts say the companies are unlikely to use the full $400 billion, Treasury officials said they decided to lift the caps to eliminate any uncertainty among investors about the government's commitments. But the timing of the announcement on a traditionally slow news day raised eyebrows.

"The companies are nowhere close to using the $400 billion they had before, so why do this now?" said Bert Ely, a banking consultant in Alexandria, Va. "It's possible we may see some horrendous numbers for the fourth quarter and, thus 2009, and Treasury wants to calm the markets."

Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans from lenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, or about half of all mortgages. Without government aid, the firms would have gone broke, leaving millions of people unable to get a mortgage.

The biggest headwind facing the housing recovery has been the rise in foreclosures as unemployment remains high. The two companies, facing mounting losses from mortgage defaults, were taken over by the government in September 2008 under the authority of a law Congress passed in the summer of 2008.


So far the government has provided $60 billion to Fannie Mae and $51 billion to Freddie Mac. The assistance is being provided in exchange for preferred stock paying a 10 percent dividend. The Bush administration first pledged up to $100 billion in support for each company, an amount that was doubled to $200 billion for each by the Obama administration in February.

Treasury officials will provide an updated estimate for Fannie and Freddie losses in February when President Barack Obama sends his 2011 budget to Congress. Though the administration has yet to disclose its long-term plans for the two companies, they are unlikely to return to their former power and influence.

The news followed an announcement Thursday that the CEOs of Fannie and Freddie could get paid as much as $6 million for 2009, despite the companies' dismal performances this year.

Fannie's CEO, Michael Williams, and Freddie CEO Charles "Ed" Haldeman Jr. each will receive $900,000 in salary, $3.1 million in deferred payments next year and another $2 million if they meet certain performance goals, according to filings with the Securities and Exchange Commission.

The pay packages were approved by the Treasury Department and the Federal Housing Finance Agency, which regulates Fannie and Freddie.

That pay is far less than what their predecessors earned. Former Fannie CEO Daniel Mudd received $10.2 million in 2008 and former Freddie CEO Richard Syron pocketed $13.1 million. Both execs were ousted when federal regulators seized the companies in September 2008. The federal government blocked exit packages for the pair worth up to $24 million.

The chief executives' pay could spark new criticism about the government's numerous bailouts, but that may be unfounded, said Mark Borges, principal with management consulting firm Compensia.

Haldeman and Williams each could command between $5 million and $10 million in a similar position in the private sector, Borges estimated, and without the notable challenges and public scrutiny they face at these companies.

"I doubt too many people would look at these jobs and say, 'Gosh, I would love to go there for my next career move,'" Borges said. "The government is getting top notch executives to solve problems that are not easy to solve."

The bulk of their pay is also not guaranteed, Borges said, so these executives can't pocket and run and must meet certain long-term goals or risk giving some of it back.

Freddie Mac's board sets the performance goals for the chief executive, which won't be disclosed until next year. Fannie Mae's filing outlined its corporate goals including "being a recognized leader in the housing recovery," "protecting taxpayers," and "managing risk more effectively."

Fannie Mae and Freddie Mac declined to offer further details on CEO performance goals.

Public anger over Wall Street pay boiled over earlier this year. In response, the Obama administration imposed pay curbs on banks that received government bailouts. All the major banks have since repaid their federal money, largely to escape caps on executive pay.

Former Bank of America Corp. CEO Ken Lewis, for example, agreed to forgo his salary and bonus this year under pressure from the government. Last year, he pocketed more than $9 million in total compensation. Bank of America received $45 billion in government assistance, which it has since repaid.

Freddie Mac hired Haldeman, a former mutual fund executive, in July. At the time, the company disclosed his annual salary of $900,000 but did not disclose other incentive payments. In September, the company hired a new chief financial officer, Ross Kari, and said his pay package would be worth up to $5.5 million.

Williams, formerly Fannie Mae's chief operating officer, took over as CEO in April after the first government-appointed CEO, Herbert Allison, took a job at the Treasury Department. Williams earned a base salary of $676,000 last year, plus a retention award of $260,000.

Washington-based Fannie Mae was created in 1938 in the aftermath of the Great Depression. It was privatized 30 years later to limit budget deficits during the Vietnam War. In 1970, the government formed its sibling and competitor McLean, Va.-based Freddie Mac.

___

AP Real Estate Reporter Alan Zibel and AP Economics Writer Martin Crutsinger in Washington contributed to this report.

http://www.huffingtonpost.com/2009/12/24/fannie-mae-and-freddie-ma_0_n_403413.html

[harleyrider1978]

While most analysts say the companies are unlikely to use the full $400 billion, Treasury officials said they decided to lift the caps to eliminate any uncertainty among investors about the government's commitments.
Interesting thought process here: analysts say they won't need it, treasury lifts the cap to eliminate uncertainty among investors?? How about the Treasury install confidence and LOWER the cap and state things are better and they won't need it ????????? (just more MOPE)!!!!.
Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans from lenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, or about half of all mortgages.
statistics would prove whoever is holding the other "half" would be suffering the same affliction.
Without government aid, the firms would have gone broke, leaving millions of people unable to get a mortgage
This statement proves the only entity "buying" mortgages is the government. This would also prove the world's dis-taste for American financial instruments, something I believe is the most damaging to us and shows our reputation is probably permanently tarnished.
I would guess with the Option-ARM and ALT-As resetting over the next few years, the Government is taking a Pro-Active stance. This is going to cost us TRILLIONS!!!
Wouldn't we have been better off letting the TB2F to collapse, offer "some" governmental assistance to local S&Ls and Credit Unions in an attempt to return to sound lending practices, face to face?

[harleyrider1978]

http://www.youtube.com/watch?v=RRUbwnkEPqc

[Nightshade]

What would people have the gov't to do? Dry up all the money supply and throw the nation , and the world, into a full blown depression?

Some people need to think before the speak about a subject a complex as economies.
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[Azmac]