A string of Federal Reserve officials on Tuesday indicated the central bank will soon offer further monetary stimulus to the economy, with one saying $100 billion a month in bond buys may be appropriate.

While internal differences on the unconventional policy are still evident, the consensus view at the Fed appears to be that the economy is weak enough to warrant further support, most likely through increased purchases of Treasury debt.

The U.S. economy is expected to have grown just 1.9 percent in the third quarter, a level considered too low to bring down unemployment. The debt purchases would help lower long-term interest rates in the hope of boosting demand.

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In recent times economics has been a religion ”“ and a remarkably silly one ”“ rather than a type of intellectual inquiry, and now that this cheap little creed has been exposed by events it is worth asking what genuine faiths can do to increase our understanding of economic life. In one form or another, this is the question addressed by all the contributors to this timely volume.

Larry Elliott introduces Crisis and Recovery with a wide-ranging analysis of the historical context of the crash, making it clear that: “There is no more chance of ‘business as usual’ than there was of the war that started in August 1914 being all over by Christmas.” The long Edwardian summer of the 1990s and early 2000s, which passed in the shade of the crumbling edifice of American power, is definitely over. History is on the move, and the crude beliefs about how human beings think and act that prevailed in recent times are no longer viable.

The Archbishop of Canterbury, Rowan Williams, makes the point that the contribution of theology to the debate is not just to add another dimension to the world of fact ”“ rather, it is to expose the assumptions that are hidden underneath our existing understandings. Simple-minded conceptions of rational choice are pretty useless in most areas of life, so why should anyone think these crude notions could enable us to understand markets? The answer is that human agency has been reduced to a process of calculation, leading to an ethically impoverished and deeply unrealistic view of society.

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Tomorrow, a bank””not your bank, but any bank””could evict you from your home. Even if you didn’t know the bank was foreclosing. Even if your mortgage is paid off. Even if you never had a mortgage to begin with. Even if the bank doesn’t hold a single piece of paper that you signed. And major banks not only know this fact, but have spent millions of dollars to defend it in court. Why? The answer starts with a Jacksonville homeowner named Patrick Jeffs.

In 2007, Deutsche Bank sued Jeffs for his home, which is a necessary step in the process of foreclosing on a homeowner in the state of Florida. Curiously, despite the fact that he immediately hired a law firm to defend his property when he found out about the foreclosure, neither Jeffs nor his attorneys were at the trial. That’s because it had already happened. Deutsche won by default because Jeffs wasn’t able to travel backwards in time to attend, even though the trial featured a signed affidavit indicating that he had been served his court summons.

The only problem with the summons Jeffs supposedly received was that it had been conjured out of thin air.

Read it all.

The house that set off the national furor over faulty foreclosures is blue-gray and weathered. The porch is piled with furniture and knickknacks awaiting the next yard sale. In the driveway is a busted pickup truck. No one who lives there is going anywhere anytime soon.

Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible.

It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break….

Read it all.

The conventional wisdom has it that the Financial Crisis Inquiry Commission ”” the bipartisan group of wise men and women charged with uncovering what caused our recent economic meltdown and telling us what should be done to prevent a recurrence ”” is woefully out-of-touch and out-of-date. A Times article last month suggested that “an exodus of senior employees” from the commission and “internal disagreements” among those remaining could hamper efforts to produce a meaningful and useful report, which is due to be published in December.

But the conventional wisdom is often wrong, and this time will be no exception. I predict that not only will the commission’s report ”” and accompanying documents ”” reveal numerous causes of the crisis that others have overlooked, but also that it will have a significant impact on the regulations that still must be written by the Securities and Exchange Commission and the Treasury as part of the implementation on the Dodd-Frank financial reform law. In fact, the inquiry commission may have already played an essential role in beginning to bring fraudsters to justice.

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Homeowners like Nicole West now threaten to slow that system, Florida’s so-called rocket docket, to a crawl. West, who has been fighting to save her Jensen Beach house from foreclosure, has leveled a new allegation in her three-year battle: the entire process is based on fraud.

West said her case is rife with the kind of flawed mortgage documents that have caused lenders including Bank of America Corp. and JPMorgan Chase & Co. to stop the process of foreclosures and evictions across the country. The banks said they are investigating homeowner charges like West’s that signatures were forged and documents were backdated.

“It’s not right,” said West, 40, who lives about an hour’s drive north of West Palm Beach. “It’s like lying to the judge. It’s like lying about what’s really going on.”

Read it all.

And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids.” In many cases, the banks outsourced their foreclosure operations to law firms like that of David J. Stern, of Florida, which served clients like Citigroup, GMAC and others. Mr. Stern hired outsourcing firms in Guam and the Philippines to help.

Read it all.

Americans say they have weathered the worst of the longest recession in seven decades, even as they are pessimistic about prospects for their retirement years, according to a Bloomberg National Poll.

Three in five respondents to the Oct. 7-10 poll say their economic condition has improved recently or they are confident it will get better. One in three say things have gotten worse or aren’t likely to improve anytime soon.

“I see some hope, but not a lot,” says poll respondent Brian Ridlon, 34, an out-of-work resident of Green Mountain, Arkansas, who wants to learn how to become a barber. “There are some avenues to improve yourself, but we need more.”

Read it all.

Attorneys general from all 50 states have put on a “bi-partisan multistate group” to investigate if faulty procedures were used to sign foreclosures which lead to evictions, as the foreclosure freezes extend with GMAC, one of the largest mortgage providers, deciding to review its procedures at a nationwide level. Bank Of America has already imposed a “freeze” on all of its foreclosures.

Read it all.

In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage-servicing departments hired hair stylists, Wal-Mart floor workers and people who had worked on assembly lines and installed them in “foreclosure expert” jobs with no formal training, a Florida lawyer says.

Ugh–read it all.

This is not what a recovery is supposed to look like.

In Atlanta, the Bank of America tower, the tallest in the Southeast, is nearly a fifth vacant, and bank officials just wrestled a rent cut from the developer. In Cherry Hill, N.J., 10 percent of the houses on the market are so-called short sales, in which sellers ask for less than they owe lenders. And in Arizona, in sun-blasted desert subdivisions, owners speak of hours cut, jobs lost and meals at soup kitchens.

Less than a month before November elections, the United States is mired in a grim New Normal that could last for years. That has policy makers, particularly the Federal Reserve, considering a range of ever more extreme measures, as noted in the minutes of its last meeting, released Tuesday. Call it recession or recovery, for tens of millions of Americans, there’s little difference.

Read it all.

“The immaculate lawns and beautiful homes are a sort of facade that covers a growing loss of certainty in the future….”

–Robin Boyle, a professor of urban planning at Wayne State University, speaking to Time Magazine about the real situation in Grosse Pointe, Michigan, a suburb of Detroit for a cover story in September entitled “Real Moms of Grosse Pointe”

A halt in home foreclosures at the largest U.S. mortgage firms may sideline buyers worried about legal issues, further depressing sales at a time when distressed properties account for almost a quarter of all transactions.

Revelations of mistakes in foreclosure proceedings are causing buyers to have misgivings about property titles, the right of home possession, said Richard DeKaser, chief economist at Woodley Park Research in Washington. Confidence in the legality of repossessions will cut foreclosure sales more than a reduction of available properties because the market already is flooded with repossessed homes, he said.

“The legal problems we’re seeing will hit sales as people worry about the legitimacy of the process,” DeKaser said. “The implications are that there’s been shoddy work.”

Read it all.

… if, as appears to be the case, the overwhelming majority of homeowners facing foreclosure have fallen far behind on their payments, then it is a good deal harder to summon up the same moral outrage over reports that the banks and loan service companies cut corners, failed to keep the right documents and engaged in shoddy and even fraudulent practices. Just because the banks and servicers have screwed up doesn’t mean they and their investors are no longer entitled to get their money back.

Certainly banks and servicers should, at their own expense, be sent back to do things right. Those who engaged in fraud should be punished. And if there are legitimate questions about who owns a loan, those will need to be resolved before the proceeds of any foreclosure are distributed.

But none of that changes the basic reality that there are millions of Americans who took out mortgages they could not support on houses they could not afford. It may be necessary to postpone their day of reckoning for a few months to get the paperwork in order and ensure that all the proper procedures are followed, but the reckoning is inevitable.

Read it all.

(This post begins with a video interview (length just under 4 1/2 minutes) with Ex-Ginnie Mae CEO Joseph Murin on housing and illegal foreclosures which is well worth the time.)

[The interview continues an] Excellent [level of] detail. Murin says he expects foreclosure delays of between 6-18 months due to the moratorium, which is much longer than most current estimates of 30-90 days.

Here’s the nightmare scenario for banks — more homeowners start to challenge the ownership of their mortgage, and choose to stop paying in the interim, destroying bank profits and balance sheets while they wait for resolution from Congress or the courts. Could get ugly. Quickly.

Both Janet Tavakoli and Chris Whalen said Thursday it could necessitate a 2nd-round of bank bailouts. The outcry from taxpayers would be deafening….

Read it all and please follow the links to the Tavakoli and Whalen comments.

(Please note the above title is from the print edition–KSH).

A snapshot of the problems can be seen at the real estate agency that sold Ms. [Amanda] Ducksworth her home, Marc Joseph Realty, based in Fort Myers.

The agency had 35 deals that were supposed to close this month. As of Thursday, Fannie [Mae] had postponed 11 of them. Another handful of homes that did not have offers or were being prepared for market had also been withdrawn.

“If this wipes out half my inventory, that’s a scary thing,” said Bill Mitchell, the agency’s closing coordinator.

As he spoke, his computer pinged and another message from Fannie [Mae] came through about withdrawing a house. It had the subject line, “Unable to Market Notice.”

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Loans in foreclosure made up about 4% of all mortgages in August vs. the 1995-2005 average of just 0.53%, according to LPS Applied Analytics, which tracks the mortgage market.

“This is unprecedented,” said Herb Blecher, senior vice president at LPS. “In the size and the scope of the problem we’re dealing with now, there is no historical comparison I’ve come across.”

When loans with at least one past due payment are added in, the combined percentage of problem loans rose to nearly 14% of the total outstanding in the second quarter, said the Mortgage Bankers Association.

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Now government statistics are emerging to confirm just how dramatically life has changed for the middle class ”” roughly defined as that half of all U.S households making between $25,000 and $80,000 a year. The economic dead center is represented by households earning the median income of $49,777, according to a recent report from the Census Bureau. Of the 117 million households in the U.S. today, half make more than that amount, and half make less.

Consider these recent government statistics:

In 2009, median household income decreased in 34 states and increased in only one: North Dakota.
Nearly 4 million people fell out of the middle class last year and now live below the federal poverty line. More than 14 percent of the population is under that line, set at about $11,000 annual income for one person or $22,000 for a family of four.
In 2009, enrollment in Medicaid, the medical insurance program for low-income Americans, exceeded 48 million, or a record 15.7 percent of the U.S. population.
As of June, more than 41 million people were collecting food stamps. That was up by 6.4 million, or 18 percent, from the previous year.

Read or listen to it all.

Middle-class Americans made their deepest spending cuts in more than two decades, slashing spending on such discretionary items as restaurant meals and alcohol during the recession.

Households in the middle fifth of the population sliced their average annual spending to $41,150 in 2009, the Labor Department said Tuesday in its annual spending breakdown. That was down 3.1% from 2007 and 3.5% from 2008, the steepest one-year drop since records began in 1984. The drop came even as those households’ after-tax income remained relatively stable over the two years, at an average $45,199.

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The flawed practices that GMAC Mortgage, JPMorgan Chase and Bank of America have recently begun investigating are so prevalent, lawyers and legal experts say, that additional lenders and loan servicers are likely to halt foreclosure proceedings and may have to reconsider past evictions.

Problems emerging in courts across the nation are varied but all involve documents that must be submitted before foreclosures can proceed legally. Homeowners, lawyers and analysts have been citing such problems for the last few years, but it appears to have reached such intensity recently that banks are beginning to re-examine whether all of the foreclosure papers were prepared properly.

In some cases, documents have been signed by employees who say they have not verified crucial information like amounts owed by borrowers. Other problems involve questionable legal notarization of documents, in which, for example, the notarizations predate the actual preparation of documents ”” suggesting that signatures were never actually reviewed by a notary.

Other problems occurred when notarizations took place so far from where the documents were signed that it was highly unlikely that the notaries witnessed the signings, as the law requires.

Read it all.

In previous recessions, there has been widespread pessimism about the overall economy. But this recession was the first since the survey began in 1967 when more people expected their own incomes to fall.

Before this recession, no survey ever showed as few as 15 percent of Americans optimistic about their own prospects. But since October 2008, when the financial crisis intensified after the failure of Lehman Brothers, the figure has been below 15 percent. Similarly, the proportion of pessimists had never been as high as 15 percent before the financial crisis, but it has been above that figure for the last two years.

At the height of the financial crisis, in March 2009, less than 8 percent of Americans expected their incomes to improve, while about 24 percent anticipated a decline. The figures released this week showed about 10 percent were optimistic about their incomes, while about 16 percent still expected a fall.

Read it all.

Economic experts may believe the recession is over, but try telling that to the public.

Seventy-four percent of Americans believe the economy is still in a recession, according to a new CNN/Opinion Research Corporation poll. Only 25 percent think the downturn is over.

Read it all.

Winston Churchill once moaned about the long, dishonourable tradition in politics that sees commerce as a cow to be milked or a dangerous tiger to be shot. Businesses are the generators of the wealth on which incomes, taxation and all else depends; “the strong horse that pulls the whole cart”, as Churchill put it. No sane leader of a country would want businesspeople to think that he was against them, especially at a time when confidence is essential for the recovery.

From this perspective, Barack Obama already has a lot to answer for. A president who does so little to counter the idea that he dislikes business is, self-evidently, a worryingly negligent chief executive. No matter that other Western politicians have publicly played with populism more dangerously, from France’s “laissez-faire is dead” president, Nicolas Sarkozy, to Britain’s “capitalism kills competition” business secretary, Vince Cable (see article); no matter that talk on the American right about Mr Obama being a socialist is rot; no matter that Wall Street’s woes are largely of its own making. The evidence that American business thinks the president does not understand Main Street is mounting

Read it all.

Two years after the peak of the financial crisis, the federal government swooped in to stabilize a crucial part of the credit-union sector battered by losses on subprime mortgages.

Regulators announced Friday a rescue and revamping of the nation’s wholesale credit union system, underpinned by a federal guarantee valued at $30 billion or more. Wholesale credit unions don’t deal with the general public but provide essential back-office services to thousands of other credit unions across the U.S. The majority of retail credit unions are sound, but they will have to shoulder the losses through special assessments over the next decade.

Friday’s moves include the seizure of three wholesale credit unions, plus an unusual plan by government officials to manage $50 billion of troubled assets inherited from failed institutions. To help fund the rescue, the National Credit Union Administration plans to issue $30 billion to $35 billion in government-guaranteed bonds, backed by the shaky mortgage-related assets.

Officials said the plan won’t cost taxpayers any money. Still, it marks the latest intervention by the U.S. government into a financial system weakened by the real-estate bust….

Read it all.

“It’s like the American dream in reverse.” That’s how President Barack Obama, ten days after taking office last year, described the plight of Americans hit by the faltering economy. His catchy description fell short ”” the dream has turned into a nightmare for tens of millions.

So much so that an opinion poll this week showed that 43 percent of those surveyed thought that “the American Dream” is a thing of the past. It “once held true” but no longer does. Only half the country believes the dream “still exists,” according to the poll, commissioned by ABC News and Yahoo against a background of dismal statistics on growing poverty, inequality, unemployment, and Americans without health insurance.

Before turning to the gloomy numbers, a brief detour to the meaning of the phrase “the American Dream,” long a familiar part of the U.S. (and international) lexicon. The survey defined it as “if you work hard, you get ahead.” That’s neat shorthand for the concept that the American social, economic and political system makes success possible for everyone….

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Few people need a census report to tell them that more people are living in poverty during this recession, but there it is: nearly one of every seven people in the United States was living in poverty last year.

It was the highest rate of poverty since 1994, and the largest number of people living in poverty, 43.6 million, since the government began keeping track 51 years ago.

The U.S. Census Bureau also reported stagnant incomes and rising numbers of people without health insurance, both of which contribute to poverty and a national trend of a declining middle-class standard of living that began in 2000.

“These are very tough times,” said East Cooper Community Outreach Executive Director Jack Little. “People are hurting who have never hurt before.”

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….given the combination of the expiration of the home buyer tax credit and the increasing number of loans moving to final foreclosure, we knew that home prices overall would take a hit, but it would take a while.

Well we’re here.

Two new reports out today prove the consequences of oversupply of organic inventory (12.5 months on existing homes in July according to the National Association of Realtors) and the shadow inventory of foreclosed properties (estimates vary widely and wildly). CoreLogic’s Home Price Index shows home prices “flat” in July as transaction volume continues to decline. “This was the first time in five months that no year-over-year gains were reported,” according to the release. In June, prices were up 2.4 percent year over year. In addition, “36 states experienced price declines in July, twice the number in May and the highest number since last November when prices nationally were still declining.”

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The speed at which house prices fall over the next few months could depend less on mortgage rates and Americans’ appetite for home buying than on how banks decide to manage the huge number of foreclosed homes they own or may take from delinquent borrowers in the near future.

Unlike home owners, banks often are much quicker to slash prices to unload properties quickly.

The upshot is that, the more homes being sold by lenders, the faster prices tend to fall. That pattern was clear over the past two years: Price declines that began four years ago accelerated rapidly in 2008 as banks dumped foreclosed properties at fire-sale prices. By January 2009, the share of distressed sales had soared to 45% of all sales nationally; it was even higher in hard-hit markets such as Phoenix, according to analysts at Barclays Capital.

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The diversity of the United States’ population has been well-documented: a multi-ethnic mixture of more than 310 million people, comprised of individuals from a wide range of educational and economic backgrounds. Providing effective leadership for such a country is exceedingly challenging. The range of worldviews, faith perspectives, and personal dreams and expectations held by Americans makes it difficult for a national leader to possess a comprehensive and coherent point-of-view that a majority of the public will support. The latest national survey by The Barna Group underscores the breadth of opinions and concerns that Americans possess.

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Pundits are restless, an election looms ”“ so this week, President Barack Obama is proposing yet another round of special favors, aimed at improving the economy. Prominent columnist Paul Krugman wants the plans to be “bold” and to involve huge amounts of money. Here’s a contrasting view: government should stop declaring recovery plans, bold or otherwise.

Maybe the constant announcing of new plans ”“ especially plans backed by borrowing or tax cuts ”“ is, itself, an impediment to economic growth.

Read it all.