U.S. Economic/Financial News

Bush Homeownership Gimmick Will Compound the Crisis

Aug. 31 (EIRNS)—No doubt pushed by the force of the rapidly unraveling economic situation, President Bush today unveiled a "plan" for helping people in danger of losing their homes. Flanked by Treasury Secretary Hank Paulson, undoubtedly one of the authors of the scheme, and Alfonso Jackson, the Secretary of Housing and Urban Development, Bush presented his proposal. The fairyland nature of Bush's grasp of what he's dealing with, was revealed as soon as he opened his mouth, again describing the "strength" of the American economy. "Economic growth is healthy," the President said. In Bush's world, "Wages are rising, unemployment is low, exports are up, and steady job creation continues."

"The markets," he noted, "are in a period of transition, as participants reassess and re-price risk. But the overall economy will remain strong enough to weather any turbulence," he assured his listeners, who were few and far between, as most of the White House press corps apparently didn't think he would have anything notable to say, and seemed to have stayed home.

Bush's plan involved "modernizing" the Federal Housing Administration by lowering down-payment requirements and increasing loan limits, giving another one of his tax breaks to homeowners whose home values have declined, and a "foreclosure avoidance initiative" to allow homeowners to refinance their homes. Lyndon LaRouche noted when he heard the President's proposal, "The Bush measures will make the crisis worse."

As Bush was leaving the podium, EIR's Bill Jones shouted to him, "Sir, what about the hedge funds and banks that are overexposed on the subprime market? That's a bigger problem. Have you got a plan?" Still well within earshot, Bush and his two advisors ignored the question, obviously, because they had no answer.

California Counties Face Empty Coffers in Housing Collapse

Sept. 1 (EIRNS)—According to Forbes of Aug. 25, four of the ten U.S. cities with the most over-valued real estate prices are in California. Many property owners are paying high property taxes, which are based on the inflated assessments of their homes.

Because of Proposition 13, passed in 1978, real estate taxes cannot change more than 2% in any year unless a house has just changed hands. However, because of Proposition 8, passed the next year, if market-based housing values decline versus the assessed valuation for Jan. 1 of any year, the county assessor may lower taxable values for that year, to reflect the true market value of the house.

It is unclear how often this mechanism is being used this year to give tax relief to property owners in California, but in at least one large county—San Bernardino—County Assessor Bill Postmus is on the ball. According to the Daily Press of Aug. 14, so far this year Postmus has lowered the assessments on over 11,000 parcels, decreasing taxable valuations of county residents by $238 million. He lowered the taxable value for 2,000 parcels in the Victor Valley area alone, where property values had plunged by 20-30%. "This is my constitutional duty as assessor," said Postmus. He predicts much worse in the area in the coming year, commenting: "I would say the numbers next year would be in the hundreds of millions, if not billions."

This is good news for the millions of California residents with currently over-priced homes, but it bodes ill for the California tax base. If other county assessors are as dedicated as Postmus, considering how hard-hit many areas of California have been by the housing bubble collapse, the county coffers be empty, as their main revenue source dries up, leaving California local governments in even worse shape than they already are, unless.

Wal-Mart, Home Depot, Now Sears: U.S. Retail Collapsing

Aug. 31 (EIRNS)—Offering steep discounts didn't stop sales from falling for the second quarter this year at two more big discount chains in the United States. On Aug. 30, Sears announced that its sales had fallen 4.3% in the last quarter, and that K-Mart's fell by 3.8%. As a result, Sears' profits fell by 40% in the quarter, the second quarter in a row they declined.

So much for billionaire hedge fund honcho Edward Lampert's promise when he merged Kmart and Sears Roebuck Co. in March 2005, that he would generate great profits for its shareholders by cutting costs and jobs.

Two other retail chains, Wal-Mart and Home Depot, announced two weeks earlier that their sales had declined.