Mortgage Buybacks May Cost Banks $106 Billion, FBR’s Miller Says – JPMorgan Chase & Co. and Bank of America Corp. are among U.S. banks that may face $54 billion to $106 billion in costs as more investors demand that issuers of mortgage-backed securities repurchase faulty loans, according to Paul Miller of FBR Capital Markets. Miller estimated in September that underwriters of mortgage-backed securities may face losses of $44 billion to $91 billion. The increase reflects that liabilities will rest with issuers of the securities, the analyst wrote today in a note to investors. Miller also said his new estimate reflected banks disclosing more about possible losses. Analysts have issued differing estimates on how much mortgage buybacks may cost banks, as the government-sponsored enterprises Fannie Mae and Freddie Mac press lenders to repurchase loans that may have been based on inaccurate data. Private investors in mortgage-backed securities are also pursuing claims.
Germany watches with concern as euro falls despite Ireland bailout – Germans braced for even more turmoil in the Eurozone after a multibillion-dollar rescue package for Ireland failed Monday to satisfy financial markets alarmed at the cost of having to bail out heavily indebted partners that share the common currency. With indications that not just tiny Portugal but the large economies of Spain and even Italy may also need rescue deals, some German commentators debated whether the time had come to rethink membership in Europe‘s single currency. Germany was a reluctant participant in the bailout of Greece’s economy in May, when taxpayers here vented their frustration in regional elections at having to throw their weight behind a country perceived to have lived beyond its means for years. When Ireland’s crisis loomed, Germans again balked at the prospect of having to help a country whose per-capita annual income is more than $5,000 higher than Germany’s $40,000.
• In many areas – if the population is increasing – house prices increase slightly faster than inflation over time, so there is an upward slope in real prices.
• Even if real prices are still too high, they are much closer to the eventual bottom than the top in 2005. This isn’t like in 2005 when prices were way out of the normal range.
• With high levels of inventory, prices will probably fall some more. (My forecast earlier this year was for 5% to 10% additional price declines on the repeat sales indexes).
The Impoverished, and Impoverishing, Debate about Fiscal Deficits – It is like living in a dream—a very bad dream. Everything seems at once real and imaginary, serious and deliriously impossible. The language is familiar and incomprehensible. And it seems there is no waking up, ever. I’m talking about the “debate” over America’s fiscal deficits, which is what I stumbled into after a night of much happier visions. Now, according to this morning’s New York Times, the left has weighed in with its own plans to achieve deficit stability. Of course, it is more reasonable than the pronunciamenti of the Simpson-Bowles cabal, with a wiser assortment of cuts and more progressive tax adjustments. Still, it is part of the same bizarre trance, disconnected from the basic laws of income accounting. All you need to know is the fundamental identity. In its financial balance form, it appears as: Private Deficits + Public Deficits ≡ Current Account Balance. If the US runs, say, a 4% CA deficit, the sum of its net public and private deficits must equal 4%. You can’t alter this no matter how you juggle budgets.Add to this one more piece of wisdom, which we should have learned from the past three years, even if we were blind to everything else: private debts matter as much as public ones.
r.j.'s space 