June 23, 2024

Archives for March 2009

Chinese Likely To Halt Purchases Of US Treasury Debt

Nervous Times In China

The Chinese are learning the hard way about an old American banking story. The man who owes the bank $50,000 dollars on a secured loan may lay awake at night worrying about how he can repay the loan. If the same man owes the bank $5,000,000 of unsecured debt, it is probably the banker who is awake all night wondering if he is going to get paid.

Chinese Premier Wen sounds like he is having some sleepless nights worrying about whether or not the US will be able to repay the $700 billion that China invested in US treasury securities. In a remarkable statement, Premier Wen publicly stated that he is “worried” about the ability of the US to pay back its huge debts to China. As reported in Bloomberg, Wen is asking for assurances from the US that the debt is safe.

“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today after the annual meeting of the legislature. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

U.S. Secretary of State Hillary Clinton urged China, while visiting officials in Beijing on Feb. 22, to continue buying U.S. debt, which she called a “safe investment.”

“China is worried that the U.S. may solve its problems with the fiscal deficit and banks by printing money, which will stoke inflation,” said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the country’s second-biggest lender. “If the U.S. can make sure this won’t happen, then China will continue to invest.”

Delegates of China’s legislative advisory body suggested that the biggest foreign holder of U.S. debt diversify away from Treasuries into more risky assets at the annual meeting that started on March 3.

Jesse Wang, executive vice president of China Investment Corp., said on March 4 that his $200 billion sovereign wealth fund may invest in “undervalued” commodity assets. Zhang Guobao, head of the National Energy Administration, said China should invest more in commodities instead of hoarding the U.S. dollar, the official Xinhua News Agency reported on March 7.
China should seek to “fend off risks” as it diversifies its $1.95 trillion in foreign-exchange reserves and will safeguard its own interests, Wen said. Chinese investors held $696 billion of U.S. Treasuries as of Dec. 31, an increase of 46 percent from the prior year.

Chinese Concerns Justified

China is justified in worrying about its large US treasury investment, despite the worthless assurances from our Secretary of State. Congress is blithely spending money by the trillions, as Chairman Bernanke continues to speak of buying mortgage backed securities and long term treasuries. One of the major constraints on Chairman Bernanke’s desire to print money (via the purchase of US government debt) has, no doubt, been the worry about a potential backlash from China, the biggest buyer of US debt.

The heretofore mutually beneficial arrangement of China purchasing US debt with trade surpluses generated by American purchases of Chinese goods is drawing to a close. China’s trade surplus has all but evaporated, eliminating the need or ability of China to purchase additional US debt. In addition, the Chinese have made it clear that their national interests are best served by diversifying into commodities and other real assets, the value of which is not contingent upon an overleveraged debtor nation.
End Game Clear

As long as China continues to purchase US debt, Bernanke is constrained from blatantly printing money. As China throttles way back on its purchase of US debt, America will have three choices – 1. Borrow and spend less 2. Raise taxes tremendously or 3. Print money. Based on what we have seen so far, it will be some of number 2 and a lot of number 3.

The odds are that China will ultimately get its money back, but the value of what they receive will be far less than what they gave.

Does The FHA Owe You A Refund?


Any one who has paid off an FHA mortgage loan may be entitled to a refund of a portion of the mortgage insurance premium (MIP) that was paid by the borrower upfront when the loan was taken out.

The MIP is the mortgage insurance that is paid upfront when a borrower takes out an FHA loan.  In 2009 the MIP amounts to 1.75% of the loan amount.  Prior to 2009, the MIP was 1.5% of the mortgage loan.  The insurance premiums can be large.  For example, on a $200,000 loan taken out in 2008, a borrower was charged $3,000 in upfront premiums.  This upfront premium is in addition to the monthly mortgage insurance premium that is paid with each month’s mortgage payment.  A borrower may be unaware that the MIP was paid since it is not due in cash, but rather is added to your original loan amount.

Who Is Entitled To A Refund?

When an FHA loan is paid off through a refinance or sale, your mortgage company notifies HUD of the termination of the FHA mortgage insurance and any refund due should thereafter be automatically sent to the borrower.   Although this process usually works well, mistakes can happen.   If you have paid off an FHA loan either through a refinance or sale of your home and have not received an MIP refund, here’s an easy way to check if you are entitled to a refund.

Does HUD Owe You A Refund?

If you had an FHA-insured mortgage, you may be eligible for a refund from HUD/FHA.

Search our database to find out if you are due a refund

  • Enter your last name or
  • Enter your FHA case number (first 3 digits, a dash and the next 6 digits, example, 051-456789).

Case #:

You do not need to pay another person or firm to assist you in collecting your refund or share payment. If you need help with this form, call our support center at 1-800-697-6967 or email us at sf_premiums@hud.gov:

The above calculator is on the HUD website and can be accessed by clicking this HUD link.   It is a quick and easy way to find out if you are owed an MIP refund.

Some Basic MIP Refund Facts

The amount of a potential MIP HUD refund from a paid off FHA loan will vary based on the loan amount, the date the loan was taken and how many months that mortgage payments were made on the loan.   Restrictions have increased over the years on the amount of the refund due.  For example, for FHA insured loans closed on or after January 1, 2001, no refund is due after the fifth year of insurance.  For loans closed after December 8, 2004, no refund is due the homeowner unless the homeowner refinanced to a new FHA insured loan and no refund is due after three years of insurance.

Since HUD makes public the information on MIP refunds that remain unpaid, you may be contacted by a commercial organization offering to obtain your refund for a fee.  There is absolutely no reason to pay anyone for this service, since the refund can easily be obtained by contacting HUD.

Obama Approves 8,500 Earmarks While Vowing To Fight Them – What?

Obama Says: Hear What I Say, Don’t Watch What I Do

After campaigning on promises to reform Washington, it was easy to be confused by the Washington Post article – Obama Signs Spending Bill, Vowing To Battle Earmarks. The president vowed to fight earmarks and wasteful spending while simultaneously signing a spending bill that approves spending almost $8 billion dollars on 8,500 earmarks.  Was this a very poor attempt to please all sides or does it suggest something deeper about the president’s leadership abilities?

Logical minds understand that actions speak louder than words, and not the other way around.  This latest surrender to special interest groups, especially after signing a “stimulus” bill with hundreds of $billions of special interest spending certainly suggests that Mr Obama is saying one thing but doing another.

Trust Me, No More Special Interest Handouts

Washington Post – President Obama’s call to rein in the use of earmarks was met with derision yesterday even from some of his past reformer allies, dealing an early blow to his attempt to change how business is done in Washington.

Obama signed what he called an “imperfect” $410 billion measure to fund most government agencies through September. He used the occasion to criticize the more than 8,500 projects, costing more than $7.7 billion, that lawmakers inserted into the bill, and he declared that “this piece of legislation must mark an end to the old way of doing business and the beginning of a new era of responsibility and accountability that the American people have every right to expect and demand.”

But as he vowed to press Congress to shun earmarks in the future, a bipartisan collection of lawmakers said the proposals he offered yesterday would do little to curb the practice and would do nothing to address the appearance of a connection between campaign contributions and spending programs ordered up by lawmakers.

Earmark supporters and opponents alike said Obama’s words would carry little weight unless he also vowed to veto critical legislation that is full of spending projects.

“Absent a genuine veto threat, he’s just spittin’ in the wind,” said Rep. Jeff Flake (R-Ariz.), an earmark opponent who walked through the House chamber yesterday carrying almost 100 pages of approved spending requests from a lobbying firm that is under federal investigation.

The connection between earmark recipients and the lobbyists who made campaign donations to lawmakers to secure their passage was central to criminal investigations that landed former lobbyist Jack Abramoff and former congressman Randall “Duke” Cunningham (R-Calif.) in federal prison.

Rep. Henry A. Waxman (D-Calif.), who as commerce committee chairman is quarterbacking much of Obama’s agenda, said of the earmarks: “I think they’re completely out of hand, completely out of control. Most of them are driven by lobbyists.”

How Obama Missed The Opportunity To Inspire

Mr Obama, you campaigned on promises of hope, change, reform and the beginning a new era of responsibility and accountability.  This could have been your shining moment to seize the initiative and prove to the American public that you mean what you say.  Signing the bill as you criticized it is not change or a reason for hope; it is just the same old way of doing business in Washington.

Criticizing an action while legally approving it makes no sense.  Vowing to end earmarks while you are approving them is like a drunk who wants “just one more” drink before he quits.   This could have been your shining moment to inspire us.  The country cries out for a visionary leader who will stand up and fight the special interest groups that have plundered our country and collapsed our economy.

Actions Speak Louder Than Words

The Marines have a saying – “follow, lead  or get out of the way”.  From my perspective, I am not sure if you followed or got out of the way, but you certainly did not lead.

Greenspan Makes A Fool Of Himself – Again

It Wasn’t My Fault

Alan Greenspan insists on setting the record straight, proclaiming that his ultra easy monetary policies had nothing to do with causing the world financial crisis.  This was about as convincing as his past statements that the housing bubble could not have been recognized until after it burst.

Alan, I previously suggested that you simply fade away to enjoy your large unearned government pension.   Unfortunately, you continue to publicly deny all culpability for the financial Armageddon that you have created.   Your latest interview with the Wall Street Journal has resulted in near unanimous derision of your statements; you should have taken my advice.

Greenspan Forgets Where He Put His Asset Bubble

Even if one missed the headline (“The Fed Didn’t Cause the Housing Bubble”) and the byline (Alan Greenspan) on the op-ed in yesterday’s Wall Street Journal, there could be no confusion over authorship: That “Master of Garblements” and former Federal Reserve chairman was back to defend his legacy.

Greenspan lays out his case that the Fed’s easy money policies can’t possibly be to blame for “the U.S. housing bubble that is at the core of today’s financial mess.” It is long-term interest rates that determine “the prices of long-lived assets,” such as housing, he writes. And those rates, which stayed low as a result of a “global savings glut,” are out of the Fed’s control.

Greenspan’s op-ed is full of explanations, correlations and obfuscations. He defends himself against accusations by “my good friend,” Stanford economist John Taylor, who has argued that “monetary excesses” were the main cause of the boom and resulting bust.

No Mea Culpa

He also ignores the literature on asset bubbles.

“Greenspan is a student of history,” Kasriel says. “Surely he’s read (Charles) Kindleberger’s book on asset price bubbles.”

One element common to all bubbles, according to “Manias, Panics and Crashes,” is cheap credit. With so much cheap credit coming from abroad, Greenspan didn’t need to add to it.

And that’s the point. If he’s satisfied with his explanation of a savings glut — the idea that there was too much credit being supplied from the rest of the world — why not reduce the supply of Fed credit? That raises the price and reduces the quantity demanded.

Victim isn’t a role Greenspan plays particularly well, especially when it’s an attempt to exonerate himself from responsibility.

Alan Greenspan Still Hasn’t Got A Clue

On the same day that his successor signaled dramatic policy changes that would see the Federal Reserve “take away the punchbowl” before inflating yet another asset bubble, radically altering the way financial market regulators operate in the process, former Fed chairman Alan Greenspan was readying yet another in a long series of op-ed pieces aimed at defending his legacy.

He didn’t cause the housing bubble, or so he says.

After yesterday’s commentary by David Leonhardt at the New York Times about how the central bank had been played like a fiddle by big financial firms who took on “excessive risk” knowing that the government would be there to bail them out, you’d have thought that maybe there would be some reluctance to go forward with the editorial.

Apparently not.

Maybe what the smartest economists in the world thought was “sustainable growth” wasn’t sustainable at all and all that “risk taking” was just a way for bankers to enrich themselves.

Greenspan A Glutton For His Own Punishment

Why Greenspan continues to try and defend his deplorable record as Fed Chairman is unknown.  What is known is that the once powerful Sir Alan has seen his reputation steadily deteriorate to a level not much higher than laughing-stock. Here is what Greenspan had to say in his most recent commentary:

Perhaps it is time that Mr. Greenspan stops trying to quarantine discussion of the bubble and, at minimum, acknowledge that undermining the desired availability of subprime credits would have been an excellent idea (an idea Greenspan ignored). Astonishingly, and after yet another ‘don’t blame me for the bubble’ rant, Greenspan – almost – admits exactly this:

In other words, Greenspan knew the housing mania was supporting an unsustainable increase in consumption**, he knew that the subprime complex was ridden with fraud, and he knew that the Federal Funds rate was no longer dictating mortgage rates. But even with this knowledge Greenspan still did absolutely nothing because, in his words, it “would have been a huge effort”.  Surely the exhausted Fed Chairman Bernanke, who has adopted innumerable new policy efforts since taking over, can not be impressed as Greenspan inexplicably reminisces about his effortless tenure as Fed boss.

Alan, give yourself a break and stop giving these foolish interviews; you can’t change the facts and no one believes your ridiculous statements.  You were instrumental in causing the financial meltdown but you are certainly not a part of the solution.  It’s time to just fade away.

Economists Give Obama Grade Rating of F – An Ugly Ending

The First Test Results Are In

Obama, Geithner Get Low Grades From Economists

U.S. President Barack Obama and Treasury Secretary Timothy Geithner received failing grades for their efforts to revive the economy from participants in the latest Wall Street Journal forecasting survey.

The economists’ assessment stands in stark contrast with Mr. Obama’s popularity with the public, with a recent Wall Street Journal/NBC poll giving him a 60% approval rating. A majority of the 49 economists polled said they were dissatisfied with the administration’s economic policies.

However, economists’ main criticism of the Obama team centered on delays in enacting key parts of plans to rescue banks. “They overpromised and underdelivered,” said Stephen Stanley of RBS Greenwich Capital. “Secretary Geithner scheduled a big speech and came out with just a vague blueprint. The uncertainty is hanging over everyone’s head.”

Mr. Geithner unveiled the Obama administration’s plans Feb. 10, but he offered few details, and stocks sank on the news. The Dow Jones Industrial Average is down almost 20% since the announcement, as multiple issues have weighed on investors’ confidence.

Despite spending and borrowing trillions of taxpayer dollars in the past two months, Mr Obama has failed to inspire confidence in the business community.  Investors have expressed a resounding vote of no confidence as seen by the ugly 20% slide in stock prices since the new administration took over.   At the current pace of events, the country will be insolvent and the Dow at 800 by year end 2009.

Investment Adviser In Chief Fuels Despair

The Obama Administration finally seems to have noticed that all of their policy announcements so far have only fueled economic despair, not alleviated it. So President Barack Obama took the rare opportunity yesterday of offering some investment advice to the American people: “What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it.” In other words, Obama wants Americans to Buy! Buy! Buy!

But before you rush out and follow President Obama’s investment advice, consider this: last week Obama’s Treasury Department announced that the government would take a 36% stake in Citigroup by converting $25 billion of its preferred shares into common stock. The Treasury paid $3.25 a share for the stock last week, which after a weekend’s worth of government nationalization rumors fell to $1.20 by Monday. So to recap, President Obama managed to lose billions of taxpayer invested dollars in just a few days. But that’s not even the worst part. So far the government has poured $50 billion into Citigroup. Meanwhile, Citi’s market capitalization is only $6.54 billion. In other words, taxpayers could have bought Citi eight times over already for all the money they have thrown at it already.

What the Citi story does highlight though, are the perils and conflicts that make massive and intrusive government intervention in the economy a disaster for all involved. Congress has no idea how to run a bank, and that is why all the political posturing in the House and Senate is completely undermining the stabilization of the banking sector. Meanwhile, the private sector has no incentive to create jobs since they are facing a $1.3 trillion tax hike in the coming decade. Then there is the $646 billion tax hike every American will see in their energy bills from President Obama’s promised carbon capping plans. It is no wonder that nobody is taking Obama’s investment advice.

The only sector of the economy that is sure to grow under Obama is the public sector. Our own Center for Data Analysis estimates that President Obama’s budget will require over 250,000 new government employees. Other expert estimates put the number at 100,000. Another big winner under Obama’s big government: lobbyists. Democratic staffers are now commanding $350,000 to $450,000 salaries at prestigious K Street lobbying firms. At least somebody is benefiting from this Obama economy.

Investors don’t invest precious cash on hope – they invest money based on viable plans that will lead to future economic growth and prosperity.   So far, all that investors have seen are plans for massive spending related to “tax rebates” and increased social spending.

Logical minds have questioned why so much of the “stimulus” plan spending would be directed to social spending and wealth transfer expenditures, when critical sectors of the American economy (banking, insurance, manufacturing, etc.) are effectively insolvent and on the edge of collapse.  An interesting theory that makes sense comes from Michael Boskin, economic professor at Stanford University. (Courtesy of financialsense.com)

“New and expanded refundable tax credits would raise the fraction of taxpayers paying no income taxes to almost 50% from 38%. This is potentially the most pernicious feature of the president’s budget, because it would cement a permanent voting majority with no stake in controlling the cost of general government.’

“Have Nots” The New Majority – courtesy financialsense.com

First off, let’s start with comments on the new Barack “Pinocchio” Ob@ma Administration and the public servants inside the beltway of WASHINGTON DC. Several words and comments come to mind: Morally and fiscally bankrupt and absolutely corrupt. Their betrayal of doing what is good for their constituents/country and creating the conditions for economic growth versus doing what is good for their political ambitions and power over the economy is on PLAIN display in their activities and proposals.

Contrary to their words, their actions can only lead to one conclusion: They are PURPOSELY driving the economy off a cliff to gather power in the UNFOLDING crisis by destroying every corner of what is still working at the public’s expense and MISERY. Please notice how they IMMEDIATELY jump on any public figure who murmurs anything contrary to the headline illusions.

The only reason they are reducing the deduction for charity for those earning over $250,000 dollars, at a time when we need charity more than in the last 70 years, is so the people relying on charity will have to rely on government.

As I mentioned in previous newsletters, the stage is set for the emergence of a new dictator, and my bet is that we shall see Ob@ma and the gang of 535 morph into it over the next two years. Two recent articles have caught my eye, both are about Narcissism; one is by Dr.Ali Sina entitled “Understanding Ob@ma: The Making of a Fuehrer at http://www.faithfreedom.org/obama.html

Is it possible that the economic well being of the country is being sabotaged so that the ruling elite in Washington can maintain their seats of power?  When the “have nots” outnumber those able to sustain them, massive social upheaval will follow.   America’s failed experiment to create wealth through debt may be laying the groundwork for a future that few of us dare to contemplate.

Common Sense Banned In Washington

Words of Wisdom

None of the following quotes would make any sense to the ruling elite in Washington.

1.  “You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else.  When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is the beginning of the end of any nation. You cannot multiply wealth by dividing it.”
Adrian Rogers, 1931

2. The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.  — Winston Churchill

3.  I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

Winston Churchill

4. Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.
Frederic Bastiat, French Economist (1801-1850)

5. Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
Ronald Reagan (1986)

6. If you think health care is expensive now, wait until you see what it costs when it’s free!
— P.J. O’Rourke

7. In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other.
— Voltaire (1764)

    Here’s a quote from one of our founding fathers that Washington’s elite fully understands:

A government big enough to give you everything you want, is strong enough to take everything you have.

Thomas Jefferson

Major Lenders Publish FHA Loan Limit Increases

CitiMortgage, along with other major lenders published their FHA loan limit increases.  The higher temporary FHA loan limits were authorized as part of the Economic Stimulus Act of 2008.  CitiMortgage will begin accepting FHA loan registrations as of March 17, 2009.  The higher loan limits will remain in effect until December 31, 2009.

Economic Stimulus Package Update

Fannie Mae, Freddie Mac and FHA have released requirements resulting from the Economic Stimulus Act of
2008, which include loan limit availability by Metropolitan Statistical Area (MSA), Area Median Income (AMI) and
eligible products. CitiMortgage is diligently working to implement changes as quickly as possible.

FHA Loans:
As a result of the recently released HUD Mortgagee Letter 2008-06, we are pleased to announce we will begin accepting FHA loan registrations at the new temporary loan limits as of Monday, March 17.
New Maximum Conforming Loan Limit: Lesser of 125% of the area median home price or $729,750; the FHA
maximum loan amount shall not be less than $271,050 (for 1st lien single family residence). Revisions to local limits are listed below by unit:
Revisions to lowest local limits by unit:
1-Unit: $271,050 3-Unit: $419,400
2-Unit: $347,000 4-Unit: $521,250
“High Cost” local limits by unit:
1-Unit: $729,750 3-Unit: $1,129,250
2-Unit: $934,200 4-Unit: $1,403,400

The higher FHA loan limits had been announced by HUD on February 24, 2009, in Mortgagee Letter 2009-07.

Revisions to Current Limits:
Under ARRA, the revised FHA loan limits for 2009 will be set at the higher of the loan
limits established for 2008 under the Economic Stimulus Act of 2008 (ESA) or those established for
2009 under the Housing and Economic Recovery Act of 2008 (HERA).

Loan Limits and Pricing

To determine the higher loan limits for your county, it is best to check directly with your lender.  Exact pricing and adjustments for the higher loan balance FHA loans is still being resolved.   It is expected that investors will demand  .5% higher pricing on these high balance loans.