Financial news – Mar-05-2009

Thursday, March 5, 2009, AM | Leave Comment

20% Of Homeowners Underwater
From CNBC this morning, we get this cheerful statistic: One in five U.S. homeowners with mortgages owe more to their lenders than their homes are worth, and the rate will increase as housing prices drop in states that have so far avoided the worst of the crisis, a new study shows. About 8.31 million properties had negative equity at the end of the year, up 9 percent from 7.63 million at the end of September, according to the study released Wednesday by First American CoreLogic. The percentage of “underwater” borrowers rose to 20 percent from 18 percent over that time. Housing Doom

Man Accused of Mortgage Fraud Now Indicted for Ponzi Scheme
Sharmon Wade did business out of a Park Avenue office suite, where he ran a company called the Covenant Equity Group. The company solicited investors by promising them astronomical returns in real estate investments — 50 to 100 percent within two months.

But Mr. Wade was a con man, Manhattan prosecutors said, and for the second time in two weeks he was charged with real estate fraud.

In an indictment announced on Tuesday, District Attorney Robert M. Morgenthau accused Mr. Wade of taking investors’ money and spending it at nightclubs, restaurants, hotels and spas, among many other places, rather than on real estate ventures, The New York Times’s John Eligon reports. New York Times

The Benjamin Button Economy
Last night, the Dow closed at its lowest level since 1996. The day before, it closed at its lowest since 1997. Today it seems to be up a little, but who knows? This afternoon, we could be back to 1995. You could say this is a bad thing, that we are hurtling fast towards Depression and war and pestilence and the END of the United States as we know it and, hey, is our nose bleeding a little? But life is like a prism, friends: you can look at it from many different angles. New York News & Features

Fast-Moving Wall Street Adjusts to Slow-and-Steady D.C.
The later years of Bill Clinton’s presidency and the middle years of George W. Bush’s presidency defined the axiom about markets enjoying gridlock out of the nation’s capital. With the exception of then-Fed chairman Alan Greenspan, most chatter from Washington was either ignored or used for short-term trading purposes.

No longer. In the last several months, when investors discuss market fundamentals, they’re talking about developments in Washington. And the generally unhurried pace of action in D.C. has clashed with the scatter shot, frenetic pace of Wall Street, which has a seeming need to be satiated with cheery news — if only of a plan, much less action — to solve the nation’s crises of housing, excessive leverage, and financial-sector deterioration. Market Beat

The Down turnaround Kills Its Idols
“When you create a derivative you don’t add to the sum total of risk in the financial world; you merely create a means for redistributing that risk … the most striking thing about the growing derivatives markets is the stability that has come with them.”

This observation was published in January 2007, and you may be wondering what became of the moron who made it. Is an angry mob parading through the streets somewhere with his head on a stick? you ask hopefully, knowing full well that he’s probably more gainfully employed than you are. New York News & Features

Explaining the U.S. Tax System to Stupid Reporters
Yesterday, Jonathan Chait wrote a piece about an article at ABCNews.com that alleged a “trend” toward families making $250,000 trying to get their incomes down to just below that figure, so they would fall under the income amount at which Pres. Obama’s proposed budget would increase their taxes. As Jonathan pointed out, the reporter passed along this supposed astute financial strategy without debunking the false premise behind it : Now, the obvious objection here is that the tax code doesn’t work that way. A tax increase affects the marginal dollar that a person gains. COMMENTS FROM LEFT FIELD

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