U.S. Economic/Financial News

U.S. Housing Plunge Accelerating

March 23 (EIRNS)—New home sales in the United States practically ground to a halt in February, shocking the "experts" by dropping another 17% from January's record-low rate (301,000/year) to February's 250,000/year. This is 28% down from February 2010.

Meanwhile, sales of existing homes fell by nearly 10% from January to February, and 40% of the national sales were of foreclosed homes. The median price dropped another 3%, to about $155,000. At the bubble's peak in late 2006, this median figure was $220,000, so it has dropped 40%, with no end in sight.

As a result, the median new home sale price of $217,000—which presumably bears some general relationship to the costs of constructing these homes—is now 40% above the median existing home price; normally, this gap is about 15%. Thus, new homes have become practically unsalable, since their value, like that of new cars, is expected to drop 10-15% just while the buyer's household is moving in.

FDIC, State AGs Propose Banks Proceed with Illegal Foreclosures

March 25 (EIRNS)—The Federal Deposit Insurance Corporation (FDIC), state attorneys general, the U.S. Departments of Justice and Treasury, the Consumer Financial Protection Bureau, and other regulators, held a private meeting with the five biggest mortgage servicer banks this week, chaired by FDIC head Sheila Bair. Bair reportedly proposed that mortgage servicer banks be allowed to proceed with foreclosures, if they pay a $21,000 incentive to 90-day-delinquent homeowners to leave their homes, the Financial Times reported today.

Foreclosures by the large banks, such as Bank of America, Citigroup, and Wells Fargo, were halted when courts ruled that various electronic mortgage "documents" did not give the banks legal title to the homes, because of the use of "robo-signers," the lack of any basis in law for the Mortgage Electronic Registration System (MERS), and other illegal flim-flam.

Instead of adopting LaRouche's Homeowners and Bank Protection Act (HBPA) to halt evictions, while foreclosed homeowners paid fair market rent, and letting the value of the home settle as the mortgage bubble deflated, while the government supported banks engaged in commercial activity and closed those investment banks which were bankrupt because of speculative losses, now the state attorneys general are trying to find a way to allow the speculators to resume foreclosures. One proposal was that the banks, which have no legitimate title to the homes, would pay up to $21,000 to the homeowner to "turn over the keys." This would cost Freddie Mac, Fannie Mae, and banks holding the illegal mortgages about $20 billion. Another proposal was to use this penalty money to write down the debt of struggling homeowners.

Questioned by EIR on the discussion at the meeting, FDIC spokesman David Barr replied, "We do not comment on closed meetings."

Murder in the Name of Austerity

March 20 (EIRNS)—On March 17, the Costa Mesa city government, in Orange County, Calif., began handing out layoff notices to about 213 public employees (out of a total of 472), in a plan to replace all public employees, including firemen, with outsourced contractors. Before all the notices could be delivered, one skilled maintenance employee, 27-year-old Huy Pham, had jumped to his death from the fifth floor of the Civic Center. Described as an outstanding carpenter, electrician, and builder, Pham had worked for the city of Costa Mesa for four and a half years.

The mass firing took place following a City Council vote on March 4 to fire half of the workforce to deal with a $1.4 million deficit this year. The Council, largely Republican, had decided to take their wrath out on the public employees in order to welch on the payment of pensions. But one 16-year veteran of the City Council, Wendy Leece, a Republican, fought against the City Council decision, trying to rescind the vote, and open up dialogue between the government and workers to deal with the deficit.

On March 4, just after she failed to convince the Council to rescind its decision, Leece wrote on her blog, "There is a condescending attitude toward our residents and employees.... What's the rush? We have a standard budget process. I do not believe our situation is as dire as others believe. We are not running out of money.... Outsourcing could be more expensive.... I don't think we should put the blame on our employees...."

The Orange County and Costa Mesa Employees Associations organized vigils in honor of Huy Pham, which were attended by hundreds of people, including Councilwoman Leece.