Macro Effects of the Housing Slump
Wall Street Losses Cut Tax Bill, Sap New York Revenue. “Mayor Michael Bloomberg: Wall Street's mortgage losses have grown so large that some firms may pay little or no taxes for years, widening NYC and state deficits and challenging their ability to provide services. Some companies are seeking refunds from the city on taxes they prepaid, saying losses have cut their tax liability to zero. The banks pay tax on 110% of earnings in advance as a “safe harbor,'' protecting against penalties for underpayment… State Comptroller Thomas DiNapoli: The tax drain is particularly serious in
Speculators Blamed For Mortgage Defaults Around San Francisco. “Subprime mortgage defaults are soaring in the northern Californian city of Merced and angry local officials are placing much of the blame for the rout on property speculators from the nearby San Francisco bay area… who, [officials say,] used subprime loans [or] low "teaser" rates on the loans to buy homes in the city, but ran into difficulty when the rates were reset at higher levels. The resulting defaults are causing no small measure of hardship in the city. In some cases, officials say people renting homes from these investors have been evicted as lenders prepare the properties for resale.” (Financial Times, Aug. 12)
Cost-Cutting in New York and London, a Boom in India. “Wall Street’s losses are fast becoming
Casinos Use Technology to Combat Downturn. “Bruce Barfield, president of The Rainmaker Group, which produces profit optimization software on gaming industry changes: “Customers [don’t have] as much disposable cash as they once had. Gas prices have affected driving traffic to
Whitney: Credit Crunch Far From Over. “Oppenheimer & Co. analyst Meredith Whitney's current concern is that banks aren't slashing costs and cutting losses in their loan portfolios fast enough. On the cost side, banks have yet to come to terms with the disappearance of the securitization market, which she believes will stay in hibernation for the next three years. Why does this matter? From 2001-2005, for every dollar of bank capital used to make mortgage loans, ten were supplied via investors in mortgage securities. All that secondary-market capital is now sidelined, but the staffing levels of bank lending departments don't yet reflect it. By Whitney's reckoning, banks have laid off about 7% of their employees; she thinks the cuts need to reach 25%.” (Fortune via CNN Money, Aug. 5)
Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.
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