Who Is Responsible for the Financial Crisis?

In the home stretch of the presidential election, sound bites are flying as to who is to blame for the USA's current financial train wreck. Newsweek has a good article that looks at the various arguments and also relies on information from factcheck.org. Personally, I have maintained for over a year that the failure to regain stability in the housing/mortgage market was going to lead to a disaster. Here are some highlights that look at some of the true contributing factors of how things got so screwed up (only by recognizing the real cause - and that lack of regulatory oversight WAS a big factor - can a real solution be achieved.):

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As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:

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The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.

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Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.

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Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.

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Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.

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The Clinton administration, which pushed for less stringent credit and down payment requirements for working- and middle-class families.

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Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.

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Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.

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Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.

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The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.

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An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.

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Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

U.S. Weighs Takeover of Fannie Mae and Freddie Mac; Families Traumatized

If there was any doubt that the U.S. economy and housing market in particular are in dire straits, the numerous news reports of a possible government takeover of Fannie Mae and Freddie Mac like this one ought to strike terror in the hearts and minds of pretty much everyone. These two federally chartered entities more or less ARE the secondary mortgage market. Were they to fail, the residential mortgage market would largely collapse. If any proof was needed that the GOP/Chimperator mantra of "let the markets regulate themselves" was lunacy, this should be "Exhibit A." Not only are foreclosures causing incredible stress on families as discussed further below, the ripple effect of the housing crash keeps on spreading. No matter who I talk with in businesses relating to residential real estate - other than firms doing foreclosure work - everyone is hurting and seeing their revenues drastically reduced. People need to wake up to the fact that a lack of any rational regulation per the GOP mantra has set the stage for this potential economic disaster. Here are highlights on the Fannie Mae and Freddie Mac mess:

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WASHINGTON — Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.

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The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

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Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.

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A conservatorship or other rescue operation would be the second time in four months that the Bush administration has stepped in to engineer a rescue to prevent the financial system from collapsing. Last March, it forced the sale of Bear Stearns to JPMorgan Chase to avert a bankruptcy of that venerable investment house. Officials have also been concerned that the difficulties of the two companies, if not fixed, could damage economies worldwide. The securities of Fannie and Freddie are held by numerous overseas financial institutions, central banks and investors.

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The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing market. Even healthy banks are reluctant to tie up scarce capital by offering mortgages to low-risk home buyers without Fannie and Freddie taking the loans off their books.

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As this USA Today story shows, it is not just adults who are being traumatized by the current economic melt down. It is a frightening situation and will scare some children just as during the Great Depression. Here are highlights:

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Shelby and millions of other young people have become the largely overlooked victims of a real estate crisis that's led to record foreclosures, sinking home prices and rising numbers of families straining to pay mortgage bills as adjustable-rate loans grow more costly and home equity shrinks. Children and teenagers are enduring a variety of consequences — forced to move and say goodbye to friends, leaving behind schools and teachers, and losing the ability to take family vacations or take part in summer camps because of the financial strain.

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Some are giving away family pets or suddenly finding themselves in charge of babysitting siblings because parents can no longer afford child care. In the most drastic cases, some wind up living with relatives or even in temporary shelters for the homeless. "This housing crisis is taking away the innocence of our kids," says Phillip Lovell, vice president of education policy for First Focus, a Washington, D.C.-based bipartisan advocacy group focused on families and children.

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Researchers are beginning to study the impact of the current housing crisis on children, and their findings are bleak: An estimated 2 million children will be directly affected by the subprime mortgage crisis as their families lose their homes to foreclosures, according to an April report by First Focus. That number is considered low, the group says, because the study didn't include families who were renters when they were evicted as a result of foreclosures on their buildings, or families who bought homes with prime mortgages.

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More than 300 school districts in the USA have reported a rise in homeless children because of the foreclosure crisis, according to a soon-to-be-released report by the National Association for the Education of Homeless Children and Youth and First Focus. Areas that are absorbing the biggest surges include Michigan, California, Florida, parts of Illinois and the suburbs around Houston. As of April 1, Cleveland schools enrolled more than 2,100 homeless students, a 30% increase from last year.

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In Los Angeles, the school district has lost 8% of its enrollment over the past few years as many families who can't afford to stay in their homes have moved out of the area, says Monica Carazo, a spokeswoman at the Los Angeles Unified School District. A number of high schools had to let teachers go. Before, schools were so crammed, some children didn't even have desks.

Mortgage Lender Implode-O-Meter

It seems that in every economic crisis there will always be some new idea that allows someone to benefit financially as the economy goes into a nose dive. The New York Times has a story about a new website called the Mortgage Lender Inplode Meter, the brain child of 28 year old Aaron Krowne, a former researcher at Emory University in Atlanta. To date 265 mortgage lenders have failed and gone out of business or suffered severe losses which have placed them on the watch list. Meanwhile, the sites advertising revenues are exploding. Damn, I guess I need to come up with something equally foresighted. Here are highlights from the NYT story:

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The misery in the housing market is registering on the Implode-O-Meter. As millions of homeowners fall behind on their mortgages, a fledgling Web site called the Mortgage Lender Implode-O-Meter is gleefully tallying the number of lenders that run into trouble too. On Monday, the count was 265 — and rising.

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The Implode-O-Meter is the brainchild of Aaron Krowne, a former researcher at Emory University in Atlanta. A computer scientist and mathematician, Mr. Krowne, 28, started the site in 2007, believing that the troubles in the housing market, and by extension the mortgage industry, would worsen. He was right — and the Implode-O-Meter took off. Traffic on the site soared, reaching as many as 100,000 regular visitors, and advertising dollars rolled in. Mr. Krowne quit his day job and hired 10 people for his company, Implode-Explode Heavy Industries.

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The tips usually come anonymously from employees at the troubled mortgage companies. Critics of the site say some of the tips have been more gossip than reality. But the Implode-O-Meter often posts the phone recordings and company e-mail to back up the bad news coming out of places like Merrill Lynch, which in March fired nearly everyone at First Franklin Financial, a business it purchased in 2006.

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The Implode-O-Meter, Mr. Krowne likes to say, has beat out the mainstream media time and again. Case in point, he says, was last October when it broke the news that Michael Jackson faced foreclosure on his Neverland property. Mr. Jackson’s representatives quickly denied the Implode-O-Meter’s story, which Mr. Krowne chalks up to his start-up status. His response? He posted the notice of Mr. Jackson’s defaults.

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“Every company thinks it is different,” Mr. Krowne says. He points to April last year as an example. Employees of SouthStar Funding, a mortgage company in Atlanta, bombarded him with phone calls at his day job, trying to persuade him that the company was fine after he placed it on his Ailing Lender list, he said. After all, the employees told him, they were being sent on a team-building trip to the Bahamas. Soon, Mr. Krowne said, he started getting threats from the company. When SouthStar folded, Mr. Krowne wrote: “I have to say that it is with genuine satisfaction that I post this report of SouthStar’s closure.”

Real Estate Free Fall Continues

In yet another sign that the U. S. housing market melt down is not getting any better, IndyMac Bancorp announced today that it would abandon most home lending and would lay off more than half its 7,200 employees - thus, there will be 3,600 more families at possible financial ruin. I remain convinced that unless and until the residential housing market recovers, any talk of a recovery of the economy is just talking heads blowing smoke up the public's ass. Other than the oil industry, the only business segment I know of that is booming is law firms that do foreclosure work. They are so busy that they can barely keep up with the volume of new matters. Here are some story high points from the Los Angeles Times:

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IndyMac Bancorp said Monday that it would abandon most home lending and would lay off more than half its 7,200 employees in a shuddering acknowledgment that its attempt to reshape itself as an old-fashioned lender had failed. The Pasadena-based savings and loan said it was acquiescing to federal regulators who had booted it from the list of well capitalized banks and required a change in business strategy. The bank lost $184 million in the first quarter of this year and said its second-quarter loss would be still bigger. It lost nearly $615 million last year, the first annual deficit in its 23-year history.

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IndyMac shares, which traded above $30 last July, closed at 71 cents Monday, up 4 cents. IndyMac waited until the close of regular trading to make its announcement; the stock was moving lower in after-hours trading. IndyMac will have just 3,400 workers when it is through shutting nine regional loan offices, including four in California, that made loans through independent brokers, and about 150 direct-to-customer retail offices in the West and Northeast. It wouldn't break out where the job cuts would be.

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IndyMac was started by Countrywide Financial Corp. founders Angelo Mozilo and David Loeb in 1985. It announced its cuts less than a week after Countrywide, the largest independent home lender, was taken over by Bank of America Corp., which in January stepped in as reports swirled that Countrywide might have to file for bankruptcy protection.

Mortgage Debt Is Snowballing

Several commentators have argued that the Democrats need to do more to tie the home mortgage debacle sweeping the country to the GOP and its policies of decreasing regulation, apparently believing that the fox would properly police the hen house. I believe they are correct and someone needs to get the blame for this disaster which is dragging down the entire economy and pushing more and more businesses to the brink financially. As this New York Times story indicates, the problem of loan defaults and plummeting home values is getting worse - much worse. It is becoming a downward spiral that keeps going as values fall and more homeowners find themselves owing more on their mortgages than their homes are now worth. Also note, that it is the Republicans who are opposing legislation to try to help the very bad situation. It their view, it is fine to bail out the fat cats on Wall Street, but to Hell with regular Americans (Senators DeMint and Bunning from the South probably think the borrowers in distress are members of minorities, so why help them. Only white evangelicals count). Here are some highlights:

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When Congress started fashioning a sweeping rescue package for struggling homeowners earlier this year, 2.6 million loans were in trouble. But the problem has grown considerably in just six months and is continuing to worsen. More than three million borrowers are in distress, and analysts are forecasting a couple of million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.

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Those stark numbers not only illustrate the challenges for the lawmakers trying to provide some relief to their constituents but also hint at what the next administration will be facing after the election. While the proposed program would help some homeowners, analysts say it would touch only a small fraction of those in trouble — the Congressional Budget Office estimates it would be used by 400,000 borrowers — and would do little to bolster the housing market.

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“It’s not enough, even in the best of circumstances,” said Mark Zandi, chief economist of Moody’s Economy.com. The number of people who will be helped “is going to be overwhelmed by the three million that are headed toward default.” The bill would let lenders and borrowers refinance troubled mortgages into more affordable 30-year fixed-rate loans that are backed by the government. Democratic leaders say Congress could send something to the president next month. The White House, which initially threatened to veto the measure, has indicated that it is open to supporting the bill if certain provisions are removed.

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Representative Barney Frank, Democrat of Massachusetts and a central force behind the legislation, said on Friday that recent reports about falling home prices have rallied support for the plan. But he acknowledged that the plan may not do enough to help homeowners or the housing market. Mr. Frank, chairman of the House Financial Services Committee, said that even after a bill like this, “you may need more.”

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But not everyone supports government interventions. Some Republicans, like Senators Jim DeMint of South Carolina and Jim Bunning of Kentucky, say the proposal would use government subsidies to bail out reckless lenders and borrowers. They suggest that the housing market will correct itself more quickly if Congress does not intervene.

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[O]thers forecast that two million to three million mortgages will default — beyond the three million in trouble now — and economists at Lehman Brothers say home prices nationally may drop 15 percent by the end of 2009. That may force policy makers to consider further interventions.

The Recession Is Just Beginning

For some time now (probably since last August or earlier) I have been predicting that a bad current economic downturn was coming due to the collapse of the U.S. Housing market and that despite all the statements from the Pollyanna set, that it was going to be long and ugly. Now, Washington Post business columnist, Steve Pearlstein is saying the same thing. In my view, until housing begins to turn around - or at least stabilize - things are only going to get worse. Despite this, Congress has yet to really wake up to the magnitude of the problem. In addition to homeowners on the verge of losing their homes, the impact of the housing collapse is having an ever wider ripple effect. Ask anyone in a business related to real estate and they will tell you that things are dire indeed. here are some highlights from Pearlstein's column:

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So much for that second-half rebound. Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal. It ain't gonna happen. Not this summer. Not this fall. Not even next winter. This thing's going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We're caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.

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In explaining why that second-half rebound never occurred, the Fed and the Treasury and the Wall Street machers will say that nobody could have foreseen $140 a barrel oil. As excuses go, blaming it on an oil shock is a hardy perennial. That's what Jimmy Carter and Fed Chairman Arthur Burns did in the late '70s, and what George H.W. Bush and Alan Greenspan did in the early '90s. Don't believe it.

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American Express and Discover warn that customers are falling further behind on their debts. UPS and Federal Express report a noticeable slowdown in shipments, while fuel costs are soaring. According to the Case-Shiller index, home prices in the top 20 markets fell 15 percent in April from the year before, and Fannie Mae and Freddie Mac report that mortgage delinquency rates doubled over the same period -- and that's for conventional home loans, not subprime.

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You know things are bad when middle-class Americans have to give up their boats and Brunswick, the nation's biggest maker of powerboats, is forced to close 10 plants and lay off 2,700 workers. For much of the year, optimists took comfort in the continuing strength of the technology sector and exports to fast-growing countries around the world. But even those bright spots have dimmed.

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Like the rain-swollen waters of the Mississippi River, this sudden surge of downbeat news has now overflowed the banks of economic policy and broken through the levees of consumer and investor confidence. At this point, there's not much to do but flee to safety, rescue those in trouble and let nature take its course. And don't let anyone fool you: It will be a while before things return to normal.

Homes in Foreclosure Top 1 Million

For more than six months I have been commenting on what's happening in the residential real estate market and the news seems to only get worse overall. This new grim statistic means that there will be continued downward pressure on home sale prices and further drops in the market values of homes which in turn will leave even more homeowners with no equity and loan balances that significantly exceed what they can realistically hope to get if they are lucky enough to find a buyer. Given this fact, such homeowners have the choice of (1) walking away from the property or (2) trying to negotiate a "short sale" whereby the mortgage lender agrees to accept a less than full payoff amount and hopefully avoid having to take the property to foreclosure sale where no buyer is willing to pay enough to retire the loan in full.

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The benefit of a "short sale" is that the lender does not end up owning a property which it cannot sell, yet must maintain and pay taxes on. For the homeowner, provided the motgage lender will waive seeking a deficienct judgment, a "short sale" may provide a way to start over. I have a whole article and information and form packet on short sales (anyone interested in a copy should e-mail me). Until housing begins to recover, no one should expect the economy to turn around. Here are highlights from CNN:

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NEW YORK (CNNMoney.com) -- More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb.

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The seasonally-adjusted rate of homeowners behind on their mortgage payments also hit a record high. Nearly 3 million home loans, or 6.4%, have missed at least one payment, while about 737,000 are at least three months past due, but not yet in foreclosure.

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"It's the same story we've been seeing for a while now - we had too much reckless lending, and buyers who got over-extended," he said. "We've had an unprecedented decline in home prices on a nationwide basis, which is public enemy number one for mortgage loans. And now you've got an overall economy that has slowed adding to this toxic stew."

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Prime fixed-rate loans, which are considered very low risk, have also seen sharp increases in their delinquency and foreclosure rates, although they are performing far better than the riskier loans on the market. The report showed about 1.2 million prime mortgages are now a month or more past due, a seasonably adjusted rate of 3.7% of those loans. That's up from a rate of 2.6% a year ago.

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Nearly half of the homes in foreclosure are concentrated in six states. But those states are undergoing two very different types of housing meltdowns. California, Florida, Arizona and Nevada have been hit by a hangover after a home building boom in the middle of the decade, which was fueled by rising home prices and investors snatching up real estate using risky mortgages. Those four states have nearly 400,000 homes in foreclosure, or a third of the nationwide total. Roughly 3.6% of all of the loans in these states are now in foreclosure. "Clearly things in California and Florida are going to get worse before they get better," said Brinkman. The other two states that are ground zero for the crisis - Michigan and Ohio - have been hit by the more traditional economic woes stemming from rising job losses, particularly in the automotive sector.

Home Sales Continue to Fall

The country's economic picture continues to sour as homes sales - both for new and existing homes - continue to fall with drops in home values accompanying the lower sales levels. In this area, the volume of sales has plummeted. Thankfully, prices have remained relatively stable - especially compared to other parts of the country. Personally, until the housing industry revives and revenues derived from it that have a tremendously wide ripple effect increase, I do not see any hope for an improved overall economy. Around these parts, mortgage lenders, realtors, contractors, title insurance companies and real estate law firms, and many others are really hurting. Naturally, the Chimperator hasn't yet figured out that the country is in a recession (the man is an utter moron). Here are highlights from MSNBC:

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WASHINGTON - Sales of new homes plunged in March to the lowest level in 16½ years as housing slumped further at the start of the spring sales season. The median price of a new home in March compared to a year ago fell by the largest amount in nearly four decades. The median price of a home sold in March dropped by 13.3 percent compared to March 2007, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970.

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The dismal news on new home sales followed earlier reports showing that sales of existing homes fell by 2 percent in March. Housing, which boomed for five years, has been in a prolonged slump for the past two years with sales and home prices falling at especially sharp rates in formerly boom areas of the country. For March, sales were down in all regions of the country, dropping the most in the Northeast, a decline of 19.4 percent. Sales fell by 12.9 percent in the Midwest, 12.5 percent in the Midwest and 4.6 percent in the South.

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President Bush on Tuesday said the economy was not in a recession but a period of slower growth. However, economists who believe the country has fallen into a recession pointed to the string of declines in manufacturing orders to support their view.

Voters ARE Bitter - GOP Economic Policies Hit Home

I continue to wonder what planet Hillary Clinton has be sojourning on if she thinks voters are happy and full of mirth. My day to day dealings with real estate investor clients indicate that many ARE bitter about what has happened to them and the larger economy. This is confirmed by a new Associated Press-AOL Money & Finance poll that found that 60 percent of those surveyed said they definitely won't a buy a home in the next two years. Obviously, that means dire things for the already devastated domestic housing market. In addition, many voters are worried about their ability to continue making mortgage payments. The GOP economic policies of no regulation and delusion have wreaked havoc on the USA. Worse yet, with the cautious if not down right defeated mindset of the public, no upturn seems to be at hand. I can vouch for the fact that the real estate market is utterly dead in this area. Moreover, many real estate investors find themselves financailly strapped and/or are considering filing for bankruptcy protection. Prices have not fallen, but at the same time, very little is selling; Here are some story highlights:

WASHINGTON (AP) -- One in seven mortgage holders worry they may soon fail to make their monthly payments and even more fret that their home's value is shrinking, according to a poll showing widespread stress from the nation's housing crisis. In an ominous snapshot of how the sagging real estate market and sour economy are intersecting, the Associated Press-AOL Money & Finance poll also found that 60 percent said they definitely won't a buy a home in the next two years.

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In today's economic climate, even holding onto what they already have is a challenge and source of distress for significant numbers of homeowners. Nearly three in 10 said they are concerned their home's value will decline over the next two years, while 14 percent of mortgage holders expressed worry that they might miss payments in the next six months.

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One nervous homeowner is Daniel Gallego, a warehouse worker in Stockton, Calif., who said in a followup interview that he may have to sell his house at a big loss. "We may have to move in with my wife's parents or my parents," said Gallego, 30, who has two young children. "I could pay off some debt, then we could rent, and maybe buy another house in a few years."

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The number envisioning falling prices in their area has grown to one in four, while four in 10 think prices will rise, a decrease from two years ago. Expectations for rising prices are highest in the South, with Westerners likeliest to predict they will drop.

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The public anxiety is in reaction to an economy that is veering toward recession and losing jobs even as the housing market sputters badly. Foreclosures have soared to record highs, mortgage rates have increased, sales of existing and new homes have fallen and home values have dropped. Gus Faucher, director of macroeconomics for Moody's Economy.com, a consulting firm, estimated that 9 million homeowners owe more on their home than its worth. He said his company believes home sales are at or near bottom and home values will continue to fall until early next year.

Officials Worried About a Deep Recession

As a number of other bloggers have noted, the Democrats need to be talking 24/7 about how the Chimperator/GOP economic policies and anti-regulation mantra are largely to blame in the rapidly sinking U. S. economy. Instead of gay bashing and working to pass marriage amendments, minding the economic store would have been far more prudent. Now, all will suffer as a result of wingnut homophobia and GOP voodo economics. The latest economic indicators seem to pointing downward and the USA may well drag down other economies with it. Here are highlights from a less than optimistic Yahoo News story (http://news.yahoo.com/s/ap/20080408/ap_on_bi_ge/fed_minutes):

WASHINGTON - Worries about a deep recession — not a shallow one — drove Federal Reserve policymakers to slash a key interest rate last month, meeting minutes show. "With the uncertainties in the outlook for both economic activity and inflation elevated, members noted that appropriately calibrating the stance of (interest-rate) policy was difficult," the minutes stated. On the one hand, the Fed has been urgently moving to prevent the trio of economic woes — housing, credit and financial_ from plunging the country into a deep recession. On the other hand, with soaring energy prices and high food costs, policymakers realize that they can't afford to let inflation get out of control, either.

The government reported last week that the economy lost jobs for the third month in a row in March. All told, the nation has lost 232,000 jobs in just three months — stark evidence of just how much the employment market has buckled under the weight of the economy's woes.

Besides cutting rates, the Fed has taken a number of unconventional steps recently to ease a dangerous credit crisis. Under one new program, the Fed has been letting big investment firms borrow super-safe Treasury securities and put up more risky investments, including certain shunned mortgage-backed securities as collateral. The Fed said it would make as much as $200 billion worth of Treasuries available through weekly auctions. The goal is to make investment houses more inclined to lend to each other. It also is aimed at providing relief to the distressed market for mortgage-linked securities. Questions about their value and dumping of these securities have driven up mortgage rates, aggravating the housing crisis.

USA 2008: The Great Depression

The above caption is the actual headline from an article (http://www.independent.co.uk/news/world/americas/usa-2008-the-great-depression-803095.html) in The Independent, a newspaper in the UK. While today is April 1st, the article is not an April Fool's joke, but rather reports on what is happening to the USA's economy notwithstanding the delusional denial on the part of The Chimperator and those in the GOP who have been his enablers for the last 7+ years. Perhaps if they had paid more attention to issues that really matter and less time dividing the country, gay-bashing and endeavoring to intrude into the private lives of citizens, we'd not be in the mess that is overtaking the counrty.

Just the collapse of the residential real estate market has had a huge impact with a broadening ripple effect: home values are dropping, realtors, title insurance companies, appraisers, residential lenders, real estate law practices, construction material suppliers, etc., have all seen revenues plunge and have reduced work forces and expenditures. In some cases, companies have completely gone out of business. As all of this happens, consumer spending drops further. Add to this the loss of manufacturing jobs, the massive layoffs by financial firms and the exporting of jobs oversears and one gets a very toxic mix. Here are some story highlights:

We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.

Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s.

Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country's economic health, food stamp usage may not be perfect, but can certainly tell a story.

Michigan has been in its own mini-recession for years as its collapsing industrial base, particularly in the car industry, has cast more and more out of work. Now, one in eight residents of the state is on food stamps, double the level in 2000. But the trend is not restricted to the rust-belt regions. Forty states are reporting increases in applications for the stamps, actually electronic cards that are filled automatically once a month by the government and are swiped by shoppers at the till, in the 12 months from December 2006. At least six states, including Florida, Arizona and Maryland, have had a 10 per cent increase in the past year.

California freefall: Home prices down 26% in February

While McCain blathers about economic jargon he does not even understand and Hillary Clinton keeps trying to knee cap Barack Obama - who I suspect Bill and Hillary refer to in private as that "uppity nigger" - the country is going to Hell in a hand basket quickly, as shown by what is happening to home prices in California. I truly wish that for the good of the country Hillary would close down her campaign, stop trying to blackmail Nancy Pelosi and the U. S. House of Representative Democrats, and slink off somewhere to spend the $30+ million she and Bill have accumulated in a little over 3 year's time. Here are highlights on the housing free fall in California that has to be leaving many homeowners with mortgage balances well in excess of what their homes are now worth (http://latimesblogs.latimes.com/laland/2008/03/california-free.html):

Signs of distress are piling up in the California housing market, where prices are falling at three times the national rate of decline. Statewide, median sales prices fell by a stunning 26% from year-ago levels in February, with home prices dropping at a rate of nearly $3,000 a week, the California Association of Realtors reports. Further, the CAR says the Fed's interest rate-cutting campaign "will have little near-term direct effect on the housing market."

In the San Fernando Valley, losing a home to foreclosure is now almost as common for families as buying a home. The L.A. Daily News: "During January and February, there were 1,084 foreclosures and 1,335 sales of houses and condos in Valley communities from Glendale to Calabasas, according to the San Fernando Valley Economic Research Center at California State University, Northridge."

On a percentage basis, the California price meltdown is more than three times as severe as the national decline of 8.2% in median prices reported this week by the National Association of Realtors. On an absolute basis, the California meltdown is even more severe: Nationally, prices fell over the past year at a rate of $338 per week; in California, prices fell at a rate of $2,788 per week.

Wall Street Firms Cut 34,000 Jobs; Home Prices Drop the Most in 40 Years

While Hillary Clinton doggedly refuses to admit that she has lost the Democratic Party nomination and prefers to destroy the Democratic Party to satisfy her own ego, the GOP economic program just keeps on giving campaign issues that are being lost in all of the noise Billary is generating. We have plunging home prices (http://www.bloomberg.com/apps/news?pid=20601087&sid=atzjOWZh4RUU&refer=home) combined with more big lay offs (http://www.bloomberg.com/apps/news?pid=20601103&sid=aTARUhP3w5xE&refer=news). Meanwhile, the Chimperator has not been out of his bubble suffieciently and still doesn't understand the economic free fall and McCain "doesn't understand the economy." Instead of fighting off Hillary's deadhand grasp for the nomination, the Democrats should be running with these issues. On the housing front, where those who put 5% down on a purchase are now underwater, here are some story highlights:

The median price of single-family homes dropped 8.7 percent from February 2007, the most in four decades of record keeping. ``It looks like this may be a temporary pause,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``The price declines have helped, and people are still getting financing, though not on the good terms they could before. We're still a long way from a recovery in housing.''

Inventories may remain at elevated levels as foreclosures rise, continuing to pressure prices down, Briefing.com economist Timothy Rogers said. The Realtors group has said a five to six months' supply is needed to stabilize the market. Home foreclosure filings jumped 60 percent and bank seizures more than doubled in February from the same month last year as rates on adjustable mortgages rose and property owners were unable to sell or refinance, according to RealtyTrac Inc., a seller of foreclosure data.

On the employment front, the news of more big layoffs certainly will not help the economy rebound and likely will only add to the number of people unable to make their mortgage payments:

March 24 (Bloomberg) -- Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months. ``This crisis is much worse than 2001 and we don't know how long it's going to last,'' said Jo Bennett, a partner at executive search firm Battalia Winston International in New York. Job cuts ``could be more than 100,000 in a few years.''

Securities firms started eliminating positions in mortgage departments as early as last July, when rising delinquencies on home loans to borrowers with poor credit histories led to a decline in the prices of bonds tied to the loans. Between July and December, almost 17,000 jobs were lost, according to data compiled by Bloomberg.

The bursting of what Glenn Reynolds of CreditSights Inc. has called the ``securitization bubble'' is affecting other industries. Lawyers who helped create mortgage-backed bonds, realtors who sold more houses as home ownership in the U.S. rose and mortgage brokers who found new customers as lending standards were relaxed are now looking for work, according to Jeanne Branthover, a managing director at Boyden Global Executive Search in New York. Some firms haven't fully disclosed their job cuts because they don't want to appear financially weak, according to Battalia Winston's Bennett. ``They're all dribbling people out the door, so the numbers don't show the true extent of the problem yet,'' said Bennett.