Friday Links Gain Protection, but Lose Benefits

A Closer Look at the Second Leg Down in Housing – Barry Ritholtz

Today, residential real estate confronts numerous headwinds: Credit, once given to anyone who could fog a mirror, is now tight. Hence, demand is far below what it was during the past decade. Home prices are still unwinding from artificially high levels, and remained over-priced. Inventory is elevated. Unemployment remains high. A huge supply of shadow inventory is out there: Speculators and flippers who overpaid but have held onto their properties await modestly higher prices to sell. Bank owned real estate (REOs) continues to increase. We are barely halfway through a decade long foreclosure surge.

Q1 GDP revised down to 2.7% – CR

The “Change in private inventories” was revised up to a contribution of 1.88% from the previous estimate of 1.65%. So inventory adjustment accounted for over two-thirds of the GDP growth in Q1 – and the inventory adjustment appears over. This is a weak third estimate.

From Card Fees to Mortgages, a New Day for Consumers – NYT

Other rules include a ban on prepayment penalties for people with adjustable rate and other more complex types of mortgages. Mortgage brokers and bank employees will no longer be able to earn bonuses based on the type of loan they put you in. That will presumably eliminate any incentive to push high-interest loans on borrowers (who might otherwise qualify for a better deal) to inflate bank profits.

Beyond the false growth vs austerity debate – Mohamed El-Arian

As a general rule industrial countries need to adopt both fiscal adjustment and higher medium-term growth as twin policy goals. The balance between the two will vary. Some, like Greece, need immediate fiscal retrenchment. Others, like Germany, the US and Japan have more room for manoeuvre. But no one should pursue just one of these objectives.

To begin to achieve both, countries must quickly implement what were once known in the emerging market lexicon as “second generation structural reforms”. Basically these involve enhancing the longer-term responsiveness of western economies that have had their comparative advantages eroded, and now see their populations stranded on the wrong side of significant global changes.

What might history tell us about the Greek crisis? – Michael Pettis

The Greek crisis may in many ways seem unprecedented, but of course it isn’t.  I think by now everyone already knows that Greece has spent much of the past 200 years – more than half by some counts – in default or in one form or another of debt restructuring, but in fact there are plenty of other periods of sovereign default and restructuring that can tell us something about what is happening and what will happen.  I would suggest that there at least five things we can “predict” with some degree of confidence from looking at historical precedents…

Underwater and the Strategic Default PR Campaign, 2: FHA and the problem of a definition – Mike Konczal

Debt collectors and mortgage servicers will not think you need to have some sort of quality of lifestyle. They’ll think you should be eating rice and getting a third job in order to pay, whatever it takes, and they won’t engage borrowers unless they have the full payment. Is this the mindset that our government needs to be legislating?

Lennar: We’ve Hit “Rocky and Sloppy” Housing Market Bottom – WSJ

“This is going to be a rocky and sloppy bottom,” Chief Executive Stuart Miller said during a conference call with analysts and investors. “It is natural that as we go from stimulus to free-market conditions taking over responsibility for that stabilization process, it gets uncomfortable. The handoff is not an easy or comfortable transition.”

Record low new-home sales could lead to another tax credit – Zach Fox

“On the one hand, I know that the phones are ringing off the hook in D.C. right now for people clamoring for a new tax credit,” Widner said. “So the shock value of an all-time low is going to be a lot of people saying: ‘Oh my God, we gotta do more to stimulate housing.’ … And on the other hand, you’re going to get people, who frankly I side with more, saying: ‘You know, look, obviously the tax credit did nothing but pull demand forward, and in the wake of the tax credit you see the void left behind.’

Some See a Tough Law, Others Little Change – NYT

For instance, he pointed to last year’s credit card bill, which led banks to push up rates pre-emptively or reduce customers’ credit limits.

“You’re going to get a letter from your bank saying you now have to pay $1 to $15 a month to pay for this bill,” he said. “The banks are going to get the money back because the consumer is going to pay for the bill, and that’s the killer for the consumer.”

Regarding a provision that limits banks’ investments in hedge funds or private equity funds to no more than 3 percent of a fund’s capital, Mr. Bove said: “Who cares? They don’t put more than 3 percent anyway.”

Factbox – Winners and losers in the U.S. financial bill – Reuters

Below are some of the likely winners and losers under the regulation bill…

Jobless Bill Dies Amid Deficit Fears – WSJ

Spooked by concern about deficits, the Senate shelved a spending bill that included an extension of unemployment benefits, suddenly cutting off a federal cash spigot opened by President Barack Obama when he took office 18 months ago.The collapse of the wide-ranging legislation means that a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week. It will also leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid costs.

China’s housing boom spells trouble for boyfriends – LA Times

Many women won’t marry a man who doesn’t own a home. This recent shift, along with soaring real estate prices, has created a woefully frustrated class of bachelors.