"Wall Street Got Drunk": 'Banned' Bush Video Surfaces
The Disgrace of Wall Street
Read the transcript and comment | Watch the video
June's decline is more than double what had been expected
WASHINGTON - Sales of existing homes fell more sharply than expected in June as the housing industry continued to be bruised by the worst slump in more than two decades.
The National Association of Realtors reported that sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units. That was more than double the decline that had been expected and left sales 15.5 percent below where they were a year ago.
The downward slide in sales depressed prices, too. The median price for a home sold in June dropped to $215,100, down by 6.1 percent from a year ago. That was the fifth largest year-over-year price drop on record.
The drop in sales pushed inventories of unsold single-family homes and condominiums to 4.49 million units, up by 0.2 percent. That represented a 11.1 month supply at the June sales pace, the second highest level in the past 24 years.
Sales dropped in all regions of the country except the West, which posted a 1 percent sales increase. Sales fell by 6.6 percent in the Northeast, 3.4 percent in the Midwest and 3.1 percent in the South.
Analysts said that until the inventory level is reduced to more normal levels, the slump in housing is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures, however.
Seeking to address the housing crisis, Congress is moving to pass a sweeping package of rescue measures. The plan includes support to keep as many as 400,000 homeowners from losing their homes to foreclosure and a federal lifeline to bolster troubled mortgage giants Fannie Mae and Freddie Mac.
The House passed the bill Wednesday and the Senate is expected to pass the proposal in coming days, sending it to President George W. Bush. The president on Wednesday dropped a veto threat over a portion of the bill.
Lawrence Yun, chief economist for the Realtors, said that the housing rescue bill should play a major role in helping the housing market to rebound. He said an especially significant feature is a tax break worth up to $7,500 for first-time home buyers who purchase between April 9 of this year and July 1, 2009.
Yun estimated that up to 3 million first-time home buyers could qualify for that tax break, providing a significant boost to sales at a critical time.
"I think we are very near to the end of the housing downturn," Yun said.
Other private economists are not as optimistic. They worry that the relief supplied by Congress will not be enough to relieve the pressure weighing on housing and the overall economy now.
The Tulsa, Okla., company filed for Chapter 11 bankruptcy protection Tuesday, citing among other financial woes a loss of at least $2.4 billion in crude-oil futures. Changes in its hedging strategies coincided with big moves in oil recently.
The company had taken out short positions, or bets that crude prices would fall, as a hedging strategy for oil it intended to move through a subsidiary's pipelines and sell to refiners, according to an affidavit filed in Delaware bankruptcy court by Terrence Ronan, SemGroup's senior vice president, finance.
Then, when oil prices rose, SemGroup moved to "cover" its short positions by taking out equivalent long positions, or bets that oil prices would rise.
Eventually, SemGroup was unable to put up collateral for its swelling bets and sold its futures account to Barclays Capital on July 16, according to the affidavit...
One theory making the rounds in the market is that as SemGroup's long positions snowballed, so did the oil rally. SemGroup's rapid exit from the market removed a force for upward momentum when the market, under siege from negative U.S. economic indicators, needed it most.
"In the three days surrounding that transfer" to Barclays, crude futures "plunged $15.89...thus, with SemGroup removed from the market, crude oil has been free to fall," wrote Stephen Schork, editor of the Schork Report, a newsletter tracking the oil market.
The linkage isn't entirely clear. Some traders note that SemGroup's activity dried up well before July 16, and there is no indication of what Barclays did with SemGroup's positions once it took control.
Now that SemGroup is toast, we'll know in the next couple of weeks.
Read the full SemGroup article on WSJ >
Let's Add More Debt To the National Total
Hale "Bonddad" Stewart
From a story talking about the new housing bill:
The package could also come at a significant cost to the U.S. government, which would be authorized to invest billions of dollars in troubled mortgage giants Fannie Mae and Freddie Mac, as well as insure up to $300 billion in refinanced mortgages. As a result of the bill, Congress will raise the national debt ceiling to $10.6 trillion from $9.8 trillion. It will also give Fannie Mae and Freddie Mac a new, tougher regulator.
Let's just add more debt to the total, shall we? After all, we don't have enough debt. And we certainly wouldn't want to do anything that remotely resembles fiscal responsibility. That might send the wrong message to the markets about the US government's intentions.
Let's review. First, here is the yearly total of total US government debt outstanding at the end of each federal fiscal year.
09/30/2007 $9,007,653,372,262.48
09/30/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/30/2001 $5,807,463,412,200.06
09/30/2000 $5,674,178,209,886.86
Why are these figures important? Because they indicate there is a systemic problem with the US government's budgeting system. Since the end of fiscal year 2002, the federal government has added at least $500 billion dollars of net new debt per year every year. That indicates the budget has never even come close to being balanced over the last 7 years -- despite rampant claims to the contrary. "But Bonddad -- the national press says the budget deficit is small!" Right -- that's why we're borrowing all that money -- because we're balancing the books of the federal government. Anyone who is reporting the federal government's books are balanced should resign from the financial press right now because they have no idea what they are talking about.
But there are three deeper and far more important reasons why this continual raising of the debt ceiling is so incredibly dangerous.
- The first is psychological. At the national level the federal government has continued to abdicate fiscal responsibility. The US went to war and didn't raise taxes to pay for it. The US increased domestic spending and didn't increase taxes to pay for it. Instead, we acted as though the debt didn't matter and that tax cuts pay for themselves. As a result we are left with an ever-increasing mountain of debt which we continue to kick down to road. By not making tough choices now we make it easier to not make tough choices tomorrow.
- The second reason is far more practical. As the debt load of the US has increased, the value of the dollar has dropped. Although the US economy was in an expansion from November 2001, the value of the dollar continually dropped. Why? An expanding economy should attract investment which in turn bids up its currency. Yet the dollar dropped. Some of the reason for this is interest rate policy which is an important determinant in currency valuation. However, the US -- which is the world's largest economy -- was seeing the value of its currency continue to decline. This has lead to inflationary pressures because commodities are priced in dollars. A drop in the value of the currency a good is priced in amounts to a de facto price increase in the good. In other words, one of the primary reasons for the spike in oil prices is the dollar's long-term drop in value. And we can thank fiscal irresponsibility as a primary reason for that.
- The third reason why this development is important is it continues to push the national economic foundation closer to the edge. At some point all of this debt may cause very serious problems. Suppose that US creditors (bondholders) looked at the US' books and said, "I don't think you're going to be able to repay this loan I'm making to you. I need a higher interest rate as compensation for the risk I'm taking by lending you money." At that point, US interest rates increase. Imagine if that happened right now when the economy is at the beginning of a recession. In other words, we're creating a situation that is rife with possible future problems. And some of these problems are serious -- as in they could lead to the financial system freezing from a random world event.
"But Bonddad. We've been doing business like this for almost 30 years and nothing bad has happened! It must be OK to do things things this way." Fine. Try smoking a pack a day for 30 years. You may not get cancer. But your chances of contracting it are a whole lot higher. That's why doctors will always advise you to quit.
Posted July 22, 2008 | 04:50 PM (EST)
An ABC-TV outlet in Houston, and now the Houston Chronicle, have posted a video taken at a political fundraiser for Pete Olson, featuring George W. Bush last week -- capturing some embarrassing/revealing moments after, he noted, he had asked cameras to be turned off.
The first moments form the July 18 event find him speaking almost incoherently in admitting, for once, that his friends in big business had screwed up: "There's no question about it. Wall Street got drunk ---that's one of the reasons I asked you to turn off the TV cameras -- it got drunk and now it's got a hangover. The question is how long will it sober up and not try to do all these fancy financial instruments."
Then, making light of the foreclosure crisis, he said: "And then we got a housing issue... not in Houston, and evidently not in Dallas, because Laura's over there trying to buy a house. [great laughter] I like Crawford but unfortunately after eight years of sacrifice, I am apparently no longer the decision maker."
No one is saying how ABC's Miya Shay got the video or how it emerged. UPDATE: The YouTube version of the video is now axed, but it is easily viewed at ABC site here:
http://politicalblog.abc13.com/